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Whether and How Network Structure Shapes the Value of Firm Capabilities?

Author

Listed:
  • Ishtiaq Pasha Mahmood
  • Hongjin Zhu

Abstract

This study examines how firm performance is driven jointly by individual firm-specific capabilities and the characteristics of networks in which firms are embedded. By using business groups in emerging economies as the organizational lens and adopting stochastic frontier estimation to measure firm capabilities, we find that the value of a firm’s capability is contingent upon the structure and the content of the intra-group network in which it is embedded. Specifically, we find that a dense intra-group network is likely to make innovative capability more valuable, although this effect varies across different types of network ties. While a dense network of intra-group buyer-supplier ties and equity ties enhances the value of innovative capability, a dense network of intra-group directorship ties does not influence the efficacy of a firm’s innovative capability.

Suggested Citation

  • Ishtiaq Pasha Mahmood & Hongjin Zhu, 2015. "Whether and How Network Structure Shapes the Value of Firm Capabilities?," Review of Economics and Institutions, Università di Perugia, vol. 6(1).
    • Handle: RePEc:pia:review:v:6:y:2015:i:1:n:4
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    File URL: https://rei.unipg.it/rei/article/view/172
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    Cited by:

    1. Sougata Ray & Bikramjit Ray Chaudhuri, 2018. "Business Group Affiliation and Corporate Sustainability Strategies of Firms: An Investigation of Firms in India," Journal of Business Ethics, Springer, vol. 153(4), pages 955-976, December.

    More about this item

    Keywords

    business group; capability; interfirm network; Taiwan;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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