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Firm dynamic governance of global innovation by means of flexible networks of connections

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  • Gay, Brigitte

Abstract

Today a plethora of inter-company alliances exists. Firms have networked value chains, disclosing consequently their strategy, which assets are internalized or externalized, and their ability to cope with fast change. The picture of all interfirm alliances in high tech sectors is that of an unstable complex network, or macrostructure, that evolves quickly and into which firms are differently entwined. Structural metrics borrowed from network research in sociology such as centrality and constraint (or lack of “structural holes”) can be used to assess dynamically a firm’s position in the macro structure and therefore the market: does the firm occupy a dominant or dominated position in an industry? How do its partners and competitors perform? Drawing also from recent theories on complex networks developed by statistical physicists, we show that firms are embedded in dynamic complex networks that have a ‘scale-free’ format, with only a few firms or “hubs” controlling the system, as well as a cohesive or ‘small-world’ structure. This small-world structure, which allows rapid diffusion of innovation along very short paths, also constrains firms continuously and can lead to a fast reversal of their position on the market. Taking as an example a major sector of the biopharmaceutical industry, this study offers insights for managers to assess effectively their environment and navigate under constant pressure within these ever-changing networks.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12525.

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Date of creation: Jul 2008
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Publication status: Published in Journal of Innovation Economics 2.2(2008): pp. 63-83
Handle: RePEc:pra:mprapa:12525

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Keywords: Innovation; alliances; structural holes; centrality; complex networks; small world;

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  1. Abdelillah HAMDOUCH, 2008. "Conceptualizing innovation clusters and networks," Working Papers 3, Réseau de Recherche sur l’Innovation. / Research Network on Innovation.
  2. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Gomes-Casseres, Benjamin & Hagedoorn, John & Jaffe, Adam B., 2006. "Do alliances promote knowledge flows?," Journal of Financial Economics, Elsevier, vol. 80(1), pages 5-33, April.
  4. Cowan, Robin & Jonard, Nicolas, 2008. "If the Alliance Fits . . . : Innovation and Network Dynamics," MERIT Working Papers 022, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  5. Joel A. C. Baum & Andrew V. Shipilov & Tim J. Rowley, 2003. "Where do small worlds come from?," Industrial and Corporate Change, Oxford University Press, vol. 12(4), pages 697-725, August.
  6. Cowan,Robin & Jonard,Nicolas, 1999. "Network Structure and the Diffusion of Knowledge," Research Memorandum 026, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  7. Mowery, David C. & Oxley, Joanne E. & Silverman, Brian S., 1998. "Technological overlap and interfirm cooperation: implications for the resource-based view of the firm," Research Policy, Elsevier, vol. 27(5), pages 507-523, September.
  8. Deeds, David L. & Hill, Charles W. L., 1996. "Strategic alliances and the rate of new product development: An empirical study of entrepreneurial biotechnology firms," Journal of Business Venturing, Elsevier, vol. 11(1), pages 41-55, January.
  9. Dan Usher, 1973. "The Measurement of Economic Growth," Working Papers 145, Queen's University, Department of Economics.
  10. Teece, David J., 1992. "Competition, cooperation, and innovation : Organizational arrangements for regimes of rapid technological progress," Journal of Economic Behavior & Organization, Elsevier, vol. 18(1), pages 1-25, June.
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