Firm Scope Experience, Historic Multimarket Contact with Partners, Centrality and the Relationship between Structural Holes and Performance

This study investigates characteristics that affect the relationship between firms' positions in a network of collaborative ties with other firms and their performance. Firms located in similarly structured networks rich in structural holes may obtain different performance results depending on their (1) capacity to absorb heterogeneous information, (2) ability to protect against partner non-cooperation, and (3) bargaining power. In this paper, I argue that firms with wide scope experience have superior absorptive capacity for dealing with heterogeneous information hence such firms will be able to extract performance improvements from network positions rich in structural holes. Furthermore, firms with high level of historic multimarket contact to their partners are able to reduce the risks of partner non-cooperation, hence augmenting their performance as compared to firms in open networks that don't enjoy MMC with their own partners. Finally, firms of low centrality in the industry's network of alliances will extract performance benefits from enhancing bargaining power as a result of exploiting brokerage opportunities in open networks. These arguments are corroborated in a study of relationships formed amongst investment banks' advising on the merger and acquisition transactions in the U.K. between 1992 and 2001