A multilevel framework of firm boundaries: firm characteristics, dyadic differences, and network attributes

Extending prior firm boundary research that tends to focus on economic explanations and rely on atomistic assumptions, we propose a multilevel framework by bridging the resource‐based view and the social network perspective, with their respective emphases on the importance of firms' internal resource endowments and external resource opportunities. Specifically, we argue that firms' boundary choices can be better understood by considering the tension between the need for external resources and the need for risk controls, affected by internal and external resource factors at three important levels: firm characteristics, dyadic differences, and network attributes. We also explore firms' boundary choices under two conditions: whether to initiate external relationships (non‐partnering vs. partnering) and whether to pursue either alliances or acquisitions if external relationships are needed. Our analyses of the United States computer industry over a nine‐year span largely support our theoretical framework and demonstrate the importance of unique factors at and across individual, dyadic, and network levels in understanding firms' boundary choices. Copyright © 2009 John Wiley & Sons, Ltd.