The role of endogenous and exogenous mechanisms in the formation of R&D networks

We develop an agent-based model of strategic link formation in Research and Development (R&D)networks. Empirical evidence has shown that the growth of these networks is driven by mechanisms whichare both endogenous to the system (that is, depending on existing alliances patterns) and exogenous (that is, driven by an exploratory search for newcomer firms). Extant research to date has not investigated both mechanisms simultaneously in a comparative manner. To overcome this limitation, we develop a general modeling framework to shed light on the relative importance of these two mechanisms. We test our model against a comprehensive dataset, listing cross-country and cross-sectoral R&D alliances from 1984 to 2009. Our results show that by fitting only three macroscopic properties of the network topology, this framework is able to reproduce a number of micro-level measures, including the distributions of degree, local clustering, path length and component size, and the emergence of network clusters. Furthermore, by estimating the link probabilities towards newcomers and established firms from the data, we find that endogenous mechanisms are predominant over the exogenous ones in the network formation, thus quantifying the importance of existing structures in selecting partner firms

Keeping Steady as She Goes: A Negotiated Order Perspective on Technological Evolution

A central idea in the theory of technology cycles is that social and political mechanisms are most important during the selection of a dominant design, and that eras of incremental change are socially uninteresting periods in which innovation is driven by technological momentum and elaboration of the dominant design. In this essay, we overturn the ontological assumption that social order is inherently stable, drawing on Anselm Strauss's concept of negotiated order to analyze the persistence of a dominant design as a social accomplishment: an outcome of ongoing processes that reinforce or challenge a socially negotiated order. Thus, we shift focus from battles over standards to periods of normal innovation. We extend the technology cycles model to explain social dynamics in periods of incremental change, and to make predictions specifying how contextual conditions in standards-setting organizations affect social interaction, leading to reinforcement or challenge to a socio-technical order

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

How managers can build trust in strategic alliances: a meta-analysis on the central trust-building mechanisms

Trust is an important driver of superior alliance performance. Alliance managers are influential in this regard because trust requires active involvement, commitment and the dedicated support of the key actors involved in the strategic alliance. Despite the importance of trust for explaining alliance performance, little effort has been made to systematically investigate the mechanisms that managers can use to purposefully create trust in strategic alliances. We use Parkhe’s (1998b) theoretical framework to derive nine hypotheses that distinguish between process-based, characteristic-based and institutional-based trust-building mechanisms. Our meta-analysis of 64 empirical studies shows that trust is strongly related to alliance performance. Process-based mechanisms are more important for building trust than characteristic- and institutional-based mechanisms. The effects of prior ties and asset specificity are not as strong as expected and the impact of safeguards on trust is not well understood. Overall, theoretical trust research has outpaced empirical research by far and promising opportunities for future empirical research exist

Learning horizon and optimal alliance formation

We develop a theoretical Bayesian learning model to examine how a firm’s learning horizon, defined as the maximum distance in a network of alliances across which the firm learns from other firms, conditions its optimal number of direct alliance partners under technological uncertainty. We compare theoretical optima for a ‘close’ learning horizon, where a firm learns only from direct alliance partners, and a ‘distant’ learning horizon, where a firm learns both from direct and indirect alliance partners. Our theory implies that in high tech industries, a distant learning horizon allows a firm to substitute indirect for direct partners, while in low tech industries indirect partners complement direct partners. Moreover, in high tech industries, optimal alliance formation is less sensitive to changes in structural model parameters when a firm’s learning horizon is distant rather than close. Our contribution lies in offering a formal theory of the role of indirect partners in optimal alliance portfolio design that generates normative propositions amenable to future empirical refutation

The Online Shadow of Offline Signals: Which Sellers Get Contacted in Online B2B Marketplaces?

This article extends the understanding of what impels buyers to contact particular sellers in online business-to-business (B2B) marketplaces, which are typically characterized by sparse social structures and concomitant limitations in observing social cues. Integrating an institutional perspective with signaling theory, our core argument is that offline seller characteristics that are visible online—in particular, geographic location and legal status—convey credible signals of seller behavior because they provide buyers with information on sellers’ local institutional quality and the institutionally-induced obligations and controls acting on sellers. Using unique data from a large Italian online B2B marketplace between the fourth quarter of 1999 and July 2001, we find that both sellers’ local institutional quality and their legal statuses affect a buyer’s likelihood of contacting a seller. Moreover, consistent with the idea that a buyer’s own local institutional quality generates a relevant reference point against which sellers are evaluated, we find that a buyer is progressively more likely to contact sellers the higher their local institutional quality relative to the buyer. Jointly, our findings imply that in online B2B marketplaces, signals conveyed by sellers’ geographic locations and legal statuses may constitute substantive sources of competitive heterogeneity and market segmentation

Network centrality and organizational aspirations: A behavioral interaction in the context of international strategic alliances

Whereas social network analysis has been associated with organizational aspirations, little is known on how firm's structural positioning, and particularly network centrality, affects organizational aspirations to engage in international strategic alliances (ISA). This study examines the impact of network centrality on firm's internationalization behavior within the ISA domain in response to the performance-aspiration gap. We build on social and behavioral perspectives to predict that network centrality and performance-based aspirations will be associated with the number of ISA the firm engages in. Using a sample of 7760 alliance collaborations from the top 81 global pharmaceutical firms for the period of 1991-2012, we find supporting evidence for most of our arguments