A Latent Space Modeling Approach to Interfirm Relationship Analysis

Interfirm relationships are crucial to our understanding of firms’ collective and interactive behavior. Many information systems-related phenomena, including the diffusion of innovations, standard alliances, technology collaboration, and outsourcing, involve a multitude of relationships between firms. This study proposes a latent space approach to model temporal change in a dual-view interfirm network. We assume that interfirm relationships depend on an underlying latent space; firms that are close to each other in the latent space are more likely to develop a relationship. We construct the latent space by embedding two dynamic networks of firms in an integrated manner, resulting in a more comprehensive view of an interfirm relationship. We validate our approach by introducing three business measures derived from the latent space model to study alliance formation and stock comovement. We illustrate how the trajectories of firms provide insights into alliance activities. We also show that our proposed measures have strong predictive power on stock comovement. We believe the proposed approach enriches the methodology toolbox of IS researchers in studying interfirm relationships.

Relational resources, tacit knowledge integration capability, and business performance

Purpose This study aims to investigate how relational resources, such as the buyer’s trust in its suppliers and the level of supplier involvement, affect the level of tacit knowledge integration capabilities (TKICs) of the firm, which, in turn, is hypothesized to affect business performance. Design/methodology/approach Based on the dynamic capabilities theory and the relational view, this paper examines how TKIC, a special case of dynamic capability, influences business performance. The research context is the Brazilian automobile industry, in which firms are currently experimenting with modular production and increasing their interactions with suppliers. Using a sample of automobile suppliers, this investigates how relational resources, such as the buyer’s trust in its suppliers and the level of supplier involvement, affect the level of TKIC, which, in turn, is hypothesized to affect business performance. In addition, this paper examines the moderating effect of various communication media on the TKIC-business performance relationship. The findings confirm the importance of relational resources and TKIC on business performance. Finally, this paper explores various theoretical and managerial implications to encourage future research. Findings The results suggested that the two relational resources (supplier involvement and buyer’s trust) are important drivers of TKICs and that the level of supplier involvement in the production process mediates the relationship between buyer’s trust and TKIC. Moreover, this study found that TKIC leads to superior firm performance, but the degree of media naturalness does not seem to facilitate knowledge transfer. The results confirm that supplier involvement is a pivotal process in that the buying firm’s internal resources and the major suppliers’ resources and capabilities are combined to achieve a competitive advantage – TKIC. Research limitations/implications This study is subject to the typical limitations inherent in cross-sectional research designs using subjective measures. That said, this still has some important implications indicating that relational resources, such as buyer’s trust and supplier involvement, are critical in developing TKIC that “seize” opportunities from interfirm relationships and integrate knowledge across and within firm boundaries. Moreover, while knowledge management tools can resemble face-to-face interactions to the largest extent, the research suggested that it cannot substitute face-to-face communications in transferring tacit knowledge. Practical implications Managers deal with complex interactions and linkages due to tacit knowledge from components, systems and modules, which are critical in developing organizational capabilities. Relational resources are important strategic assets facilitating resource combination and coordination. Managers must coordinate among multiple sources of learning and partner with their suppliers at an earlier stage to develop the relational capabilities and efficiently steer the process of boundary redefinition. Finally, managers must have the ability to manage tacit knowledge within the interface with suppliers using organizational mechanisms (i.e. TKIC) to help them absorb external knowledge from their supplier network and integrate it with specific internal competences. Social implications Recent disruptive technological developments pressure organizations to become more flexible by requiring firms to adapt quickly to constantly changing markets and to have the ability to apply different resources and capabilities to specific unique situations. All this with a huge impact on the firm’s employees and society in general. Thus, interfirm relationships and the role of knowledge integration is especially crucial, given the current industry trend in favor of experimenting with innovative production methods (e.g. flexible manufacturing and modular production) that can help managers to rethink work conditions in a more meaningful and flexible for society. Originality/value While prior research treats integrative capability mainly as a mechanism that explains superior firms’ performance in an interfirm relationship, few research efforts have explicated what shapes TKICs. By examining the relationship between relational resources, TKIC and performance, this study fills this research gap and develops and tests a theoretical framework.

Competing and cooperating globally: how firms’ multimarket contact relates to joint price elevation in coopetition networks

Purpose This study aims to draw attention to the familiarity effect among international multimarket contact (MMC) firms on coopetition in the global container shipping industry and to better understand the contingency model of structural holes and in-degree centrality on joint price elevation actions and subsequent performance. Design/methodology/approach Drawing on competitive dynamics and the literature on networks, a panel data model is developed from 6,489 competitive and 7,146 cooperative actions of the top 21 shipping firms in 18 global arenas with a structured content analysis method being applied. Findings Stronger MMC by firms requires increased levels of cooperative actions to elevate prices. This coopetition relationship is enhanced or weakened when the focal firm occupies a higher level of structural hole or position of competitive in-degree centrality. Practical implications Shipping liners seeking to cooperate with joint action in oligopolistic markets are offered guidelines and strategies to increase their performance through their actions. Originality/value This study contributes to the literature on coopetition networks by further analyzing interfirm relationships and interactions that enhance performance, while exploring network positioning strategies to mitigate risks.

Leveraging Interfirm Relationships in China: Western Relational Governance or Guanxi? Domestic Versus Foreign Firms

With the growing importance of strategic alliances and supply chains as competitive units, academics and practitioners are interested in understanding the techniques used by firms to leverage interfirm relationships to gain a competitive advantage. Studies conducted in the Western context underline the role of relational governance (i.e., the modern Western way), whereas works in the Chinese context highlight the importance of guanxi (i.e., the traditional Chinese way). Today’s Chinese economy operates as a hybrid of the Western modern business model and traditional Chinese patterns with the coexistence of Western relational governance and guanxi. Therefore, this study addresses two issues: (1) whether these two types of governance interact as substitutes or complements in leveraging interfirm relationships and (2) whether and how foreign firms differ from their Chinese domestic counterparts in the use of these two types of governance to improve performance. Drawing on data collected from 132 third-party logistics providers in China, this study shows that Western relational governance and guanxi function as substitutes in improving performance. Moreover, while guanxi contributes to performance in a similar manner in Chinese domestic firms and foreign firms, Western relational governance is more effective for foreign firms than for Chinese domestic firms. Furthermore, the joint role (i.e., interaction effect) of Western relational governance and guanxi in improving performance also differs: these two forms of governance function as substitutes in foreign firms, whereas they have no significant interaction in Chinese domestic firms.

Managing Digital Transformation: Scope of Transformation and Modalities of Value Co-Generation and Delivery

The diffusion of digital technologies has enabled a notable transformation in the firms’ boundaries, processes, structures, roles, and interactions. It is now clear that digital transformation is not just a traditional IT back-end process; rather it affects the organization as a whole, redefining strategies, entrepreneurial processes, innovation, and governance mechanisms. This permeation has led to the emergence of new ways of organizing firms’ value chains and interfirm relationships, which now increasingly occur in digital ecosystems and marketplaces. The scope of transformation as well as the modalities of value co-generation and delivery are here used to introduce the content of this Special Issue of California Management Review on Digital Transformation.

Investing in IT: a new method for improving the efficiency of contract governance in interfirm relationships

PurposeThis study aims to enhance our understanding of how advanced IT improves the efficiency of contract governance in mitigating partners' opportunistic behaviors in interfirm cooperation and the moderating effects of boundary spanners' personal relationships and cooperative orientation.Design/methodology/approachContract governance is divided into two subdimensions: contract completeness and contract execution safeguards. Then, the hypotheses are examined using partial least squares–based structural equation modeling based on survey data collected from manufacturers in supply chain relationships.FindingsThe results first demonstrate that advanced IT can improve efficiency in both the design of complete contracts and the provision of contract execution safeguards. Second, the results also show that both the personal relationships between boundary spanners and the cooperative orientation of the firm have different moderating effects. Finally, contract execution safeguards are effective in mitigating partners' opportunistic behaviors, whereas contract completeness is not.Originality/valueThis study enriches the contract governance literature in two ways. First, it unveils how advanced IT improves the efficiency of contract governance and the effects of two contingent factors (i.e. personal relationships and cooperative orientation), thus extending the research on contract governance. Second, it reveals the different effects of contract completeness and contract execution safeguards on partners' opportunistic behaviors, thus deepening our understanding of the role of contracts in interfirm cooperation.

How to balance interfirm relationships? A case from high-speed railway industry

Purpose Balancing interfirm relationships is important for firms’ long-term superior performance. However, prior studies mainly focus on interfirm competition or interfirm cooperation separately, ignoring the balance of interfirm relationships. To bridge this gap in knowledge, this study aims to develop a framework to evaluate the balance of interfirm competition and interfirm cooperation and propose strategies to optimize a firm’s interfirm relationships. Design/methodology/approach After an in-depth literature review, a framework was developed for evaluating and optimizing the interfirm relationships. Taking the high-speed railway industry as an example, the proposed framework was implemented. Findings The results of the case confirm that the balancing of interfirm relationships can lead to more superior firm performance. Also, rather than mutual suppression, the interfirm competition and interfirm cooperation present a roughly positive relationship. Originality/value This study would contribute to the existing knowledge body by developing a framework for balancing interfirm relationships. Also, this study can aid practitioners in evaluating and optimizing their interfirm relationship structures.