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


  • Gay, Brigitte


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.

Suggested Citation

  • Gay, Brigitte, 2008. "Firm dynamic governance of global innovation by means of flexible networks of connections," MPRA Paper 12525, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:12525

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    References listed on IDEAS

    1. 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.
    2. David J. Teece, 2003. "Competition, Cooperation, and Innovation Organizational Arrangements for Regimes of Rapid Technological Progress," World Scientific Book Chapters,in: Essays In Technology Management And Policy Selected Papers of David J Teece, chapter 16, pages 447-474 World Scientific Publishing Co. Pte. Ltd..
    3. Abdelillah HAMDOUCH, 2008. "Conceptualizing innovation clusters and networks," Working Papers 3, Réseau de Recherche sur l’Innovation. / Research Network on Innovation.
    4. Dan Usher, 1973. "The Measurement of Economic Growth," Working Papers 145, Queen's University, Department of Economics.
    5. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    6. Cowan, Robin & Jonard, Nicolas, 2004. "Network structure and the diffusion of knowledge," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1557-1575, June.
    7. Robin Cowan & Nicolas Jonard, 2008. "If the Alliance Fits . . . : Innovation and Network Dynamics," Working Papers of BETA 2008-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    8. 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.
    9. 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.
    10. 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.
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    Cited by:

    1. Philippe Bertheau & Gilles Garel, 2015. "Déterminer la valeur de l’innovation en train de se faire, c’est aussi et déjà innover," Post-Print hal-01187115, HAL.

    More about this item


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

    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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