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Friends or Strangers? Firm-Specific Uncertainty, Market Uncertainty, and Network Partner Selection

Friends or Strangers? Firm-Specific Uncertainty, Market Uncertainty, and Network Partner Selection In this study, we address the topic of interorganizational network change by exploring factors that affect the choice of alliance and interlock partners. While many studies have been devoted to investigating various factors driving network partner choice, there is also an interesting and unexplored tension in this body of work. On the one hand, much work emphasizes change in social structure—showing that firms expand networks by forming new relationships with new partners. At the same time, other scholars emphasize stability of social structure—showing that firms tend to choose past exchange partners. We seek to reconcile this tension by proposing that firms form new relationships with new partners as a form of exploration, and form additional relationships with existing partners as a form of exploitation (March 1991). Further, whether exploration or exploitation is chosen depends on the type of uncertainty that firms are facing: whether it is firm-specific or market-level uncertainty. We test our hypotheses using data on both interlock and alliance networks for the 300 largest U.S. firms during the 1988–1993 period. The results provide some evidence that whether networks are stable or changing depends on the type of uncertainty experienced by firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Organization Science INFORMS

Friends or Strangers? Firm-Specific Uncertainty, Market Uncertainty, and Network Partner Selection

17 pages

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Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article
ISSN
1047-7039
eISSN
1526-5455
DOI
10.1287/orsc.1040.0065
Publisher site
See Article on Publisher Site

Abstract

In this study, we address the topic of interorganizational network change by exploring factors that affect the choice of alliance and interlock partners. While many studies have been devoted to investigating various factors driving network partner choice, there is also an interesting and unexplored tension in this body of work. On the one hand, much work emphasizes change in social structure—showing that firms expand networks by forming new relationships with new partners. At the same time, other scholars emphasize stability of social structure—showing that firms tend to choose past exchange partners. We seek to reconcile this tension by proposing that firms form new relationships with new partners as a form of exploration, and form additional relationships with existing partners as a form of exploitation (March 1991). Further, whether exploration or exploitation is chosen depends on the type of uncertainty that firms are facing: whether it is firm-specific or market-level uncertainty. We test our hypotheses using data on both interlock and alliance networks for the 300 largest U.S. firms during the 1988–1993 period. The results provide some evidence that whether networks are stable or changing depends on the type of uncertainty experienced by firms.

Journal

Organization ScienceINFORMS

Published: Jun 1, 2004

Keywords: Keywords : uncertainty ; alliances ; interlocks ; network change

References