Growing with the market : how changing conditions during market growth affect formation and evolution of interfirm ties

Research Summary: Market conditions are known to matter for firm performance and growth. This study explores how changing levels of uncertainty and competition affect interfirm ties of entrepreneurial firms as markets transition from nascent to growth stage. Tracing 6 entrepreneurial game publishers during the growth stage of the US wireless gaming market, the findings reveal that in a growth stage market, as uncertainty decreases, certain ties of entrepreneurial firms are terminated. First, existing partners may cut ties and become competitors after entering the market directly. This is a “winner's curse” as more successful firms are more likely to entice their partners to enter the market directly. Second, ties may be terminated as prominent firms that are “overwhelmed” with too many partners cut ties with low to mediocre performance while their remaining partners enter a positive spiral of tie strength and performance. Finally, as uncertainty decreases, new firms may enter the market as competitors to prominent firms. While entrepreneurial firms with high and low performing ties to prominent partners may find ties with these new entrants attractive, those with mediocre ties to few prominent partners find this move too risky and wait for a first mover to legitimate it. Overall, the findings show that changing levels of uncertainty and competition in growth stage markets can have different consequences for firms due to heterogeneity in their ties and power relative to partners. The findings provide several contributions to literature regarding the relationship between interfirm ties, firm performance, and market evolution. Managerial Summary: Based on interviews at 6 entrepreneurial game publishers in the US and their partners, this study shows how changing levels of uncertainty and competition in growing markets can have different consequences for firms based on the different types of alliances in their portfolio and their power relative to partners. The findings highlight the importance of managing partners differently based on alliance type and goal of the partner. They advocate remaining flexible in alliance management as information asymmetries, intentions and bargaining power of partners can change and lead to abrupt alliance dissolution. They show that alliance portfolio management goes beyond a firm's capability of managing individual alliances, and provide a tool for managers to evaluate their alliance portfolios and take the necessary precautions

Explaining the dynamics of relatedness: The role of co-location and complexity

Relatedness has become a key concept for studying the diversification of firms, regions and countries. However, studies tend to treat relatedness as being time-invariant or, alternatively, consider its evolution as exogenously given. This study argues that relatedness is inherently dynamic and endogenous to technological and economic developments. Using patent data, we test the extent to which relatedness between technologies developed along co-location and differences in technological complexity in 1980–2010. Our results show that co-located technologies are more likely to become related over time. Moreover, our results suggest that co-location and complexity of technologies are conducive to the intensification of relatedness over time

Using Affiliation Networks to Study the Determinants of Multilateral Research Cooperation Some empirical evidence from EU Framework Programs in biotechnology

This paper studies multilateral cooperation networks among organizations and work on a two-mode representation to study the decision to participate in a consortium. Our objective is to explain the underlying processes that give rise to multilateral collaboration networks. Particularly, we are interested in how heterogeneity in organizations' attributes plays a part and in the geographical dimension of this formation process. We use the data on project proposals submitted to the 7th Framework Program (FP) in the area of Life sciences, Biotechnology and Biochemistry for Sustainable Non-Food. We employ exponential random graph models (p* models) (Frank and Strauss, 1986 ; Wasserman and Pattison, 1996) with node attributes (Agneessens et al., 2004), and we make use of extensions for affiliation networks (Wang et al., 2009). These models do not only enable handling variability in consortium sizes but also relax the assumption on tie/triad independence. We obtained some preliminary results indicating institutional types as a source of heterogeneity affecting participation decisions. Also, these initial results point out that organizations take their potential partners' participations in other projects into account in giving their decision ; organizations located in the core European countries tend to participate in the same project ; the tendency to preserve the composition of a consortium across projects and the tendency of organizations with the same institutional type to co-participate are not significant