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Network Formation and Strategic Firm Behaviour to Explore and Exploit

  • Muge Ozman

The aim of this paper is to investigate the effect of technological opportunities and knowledge tacitness on inter-firm network formation, under two different industry regimes. In the first regime environment is stable and the aim of firms is to exploit knowledge. In this case, they attribute more value to repeated interactions with geographically close firms. In the second regime, there is environmental turbulence, which increases the value of access to novel information from distant partners for exploration. The question addressed is, under these regimes how do technological opportunities and knowledge tacitness influence structure of networks? The main contribution of the paper different from previous work is that it explicitly models the effect of history between two firms on networks that form. A simulation model is carried out where firms select partners and learn from them, which further shapes their selection process. The results reveal that in both regimes richer technological opportunities and higher tacitness generates local and global star firms depending on the parameter range.

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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2007-07.

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Date of creation: 2007
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Handle: RePEc:ulp:sbbeta:2007-07
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  1. 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.
  2. Cowan Robin & Jonard Nicolas & Özman Müge, 2003. "Knowledge Dynamics in a Network Industry," Research Memorandum 003, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  3. Cowan, R. & Jonard, N., 2003. "The dynamics of collective invention," Journal of Economic Behavior & Organization, Elsevier, vol. 52(4), pages 513-532, December.
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