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Risk assessment and profit sharing in business networks


  • Lo Nigro, Giovanna
  • Abbate, Lorenzo


Nowadays network is the preferred governance form to conduct economic transactions. Network solution allows to reach flexibility maintaining cost and quality level. Since network concept refers to a great variety of organizational hybrids it is possible to choose the one that fits better market requirements. The new trends in inter-organization relationships push towards network solutions: companies are interested in relationships with partners and customers to overcome resource dependence, to enter too risky market or simply differentiate their business portfolio. The proposed research focuses on the network concept aiming at highlighting threats and opportunities to investigate the double nature of the risk concept. Network structures offer flexibility and higher profit as a consequence and business risk sharing opportunity. These two aspects (profit and risk) are strictly related and have to be considered together to depict a complete scenario; this implies that risk assessment and management in network environment cannot neglect profit sharing or, in other words, that profit sharing mechanisms should use risk as driver. In this context our research proposes a methodology to measure risk taking into account network peculiarities; risk estimation is a basic step to evaluate the opportunity cost of capital needed to compute the network Net Present Value (NPV) that is assumed as base in the profit sharing process. The profit sharing process has been tackled using the Shapley value approach that is inspired to the fairness principle while the opportunity cost of capital is assessed using the Capital Asset Pricing Model (CAPM).

Suggested Citation

  • Lo Nigro, Giovanna & Abbate, Lorenzo, 2011. "Risk assessment and profit sharing in business networks," International Journal of Production Economics, Elsevier, vol. 131(1), pages 234-241, May.
  • Handle: RePEc:eee:proeco:v:131:y:2011:i:1:p:234-241

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    References listed on IDEAS

    1. Ojala, Mika & Hallikas, Jukka, 2006. "Investment decision-making in supplier networks: Management of risk," International Journal of Production Economics, Elsevier, vol. 104(1), pages 201-213, November.
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    Cited by:

    1. D’Ignazio, Alessio & Giovannetti, Emanuele, 2014. "Continental differences in the clusters of integration: Empirical evidence from the digital commodities global supply chain networks," International Journal of Production Economics, Elsevier, vol. 147(PB), pages 486-497.
    2. Frank A.G. den Butter & Jelle Joustra, 2014. "The Industrial Organisation of the Dance Industry in the Netherlands: a Transaction Cost Perspective on Hybrid Forms of Organisation," Tinbergen Institute Discussion Papers 14-095/VI, Tinbergen Institute.
    3. Lo Nigro, Giovanna, 2016. "The effect of early or late R&D inbound alliance on innovation," Journal of Business Research, Elsevier, vol. 69(5), pages 1791-1795.
    4. Stranieri, Stefanella & Banterle, Alessandro, 2015. "Voluntary traceability standards: which is the role of risk?," 2015 Conference, August 9-14, 2015, Milan, Italy 212058, International Association of Agricultural Economists.
    5. Arshad, Nur Shahwani, 2017. "Genting plantation berhad performance and risk," MPRA Paper 78640, University Library of Munich, Germany.
    6. Eriksson, Kent & Jonsson, Sara & Lindbergh, Jessica & Lindstrand, Angelika, 2014. "Modeling firm specific internationalization risk: An application to banks’ risk assessment in lending to firms that do international business," International Business Review, Elsevier, vol. 23(6), pages 1074-1085.


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