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The Evolving Impact of Combinatorial Opportunities and Exhaustion on Innovation by Business Groups as Market Development Increases: The Case of Taiwan

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  • Ishtiaq Mahmood

    () (NUS Business School, National University of Singapore, Singapore 119245; and IMD, CH-1001 Lausanne, Switzerland)

  • Chi-Nien Chung

    () (NUS Business School, National University of Singapore, Singapore 119245)

  • Will Mitchell

    () (Fuqua School of Business, Duke University, Durham, North Carolina 27708; and Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

Abstract

Business groups are key sources of innovation in emerging market economies, but we understand little about why innovativeness differs across groups and over time. Variation in the density of intragroup buyer--supplier ties, which are common structural linkages among group affiliates, can help explain both cross-sectional and temporal heterogeneity of group innovativeness. We argue that greater buyer--supplier density within a group initially creates combinatorial opportunities that contribute to group innovativeness but ultimately generates combinatorial exhaustion that constrains innovation. Combinatorial exhaustion will set in at lower levels of density as the market environment becomes more developed because the opportunity costs of local search increase. The research introduces a dynamic argument to studies of business-group innovation. This paper was accepted by Bruno Cassiman, business strategy.

Suggested Citation

  • Ishtiaq Mahmood & Chi-Nien Chung & Will Mitchell, 2013. "The Evolving Impact of Combinatorial Opportunities and Exhaustion on Innovation by Business Groups as Market Development Increases: The Case of Taiwan," Management Science, INFORMS, vol. 59(5), pages 1142-1161, May.
  • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:5:p:1142-1161
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    File URL: http://dx.doi.org/10.1287/mnsc.1120.1605
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    References listed on IDEAS

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