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

Brigitte Gay

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Innovation; alliances; structural holes; centrality; complex networks; small world (search for similar items in EconPapers)
JEL-codes: L14 L24 L65 O3 (search for similar items in EconPapers)
Date: 2008-07
New Economics Papers: this item is included in nep-cse, nep-knm, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Journal of Innovation Economics 2.2(2008): pp. 63-83

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:12525

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