The interconnected firm: Evolution, strategy, and performance

This dissertation focuses on the study of firms that are embedded in networks of alliances. It develops theory and provides evidence that explain how such interconnected firms evolve and how their alliance networks affect their performance. The network configuration framework is advanced, incorporating relational and structural aspects and highlighting processes of value creation and appropriation in networks. The first essay illustrates the limitations of traditional theories of the firm in explaining the interconnected firm phenomenon. It revisits the resource-based view and considers the impact of network resources on competitive advantage. Distinguishing shared resources from non-shared resources, it identifies new types of rent and illustrates how firm-specific, relation-specific, and partner-specific factors determine the contribution of network resources. It suggests that interconnected firms can benefit not only from relational rents but also from involuntary spillover rents. The conclusions suggest that the nature of relationships may matter more than the nature of resources in establishing competitive advantage in networked environments. The second essay reports a case analysis of the Unisys Corporation and its alliance network. Employing inductive methods, it sheds light on the evolution of the interconnected firm and on the alignment between corporate strategy and its network configuration. The findings indicate how Unisys reactively adjusted its network configuration in response to shifts in strategic focus, encouraging the incorporation of the network configuration in strategy formulation. The third essay fills a gap in the alliance literature, which offered limited evidence on the contribution of networks to the financial performance of firms. It reports a pooled time-series analysis of 367 software firms that engaged in more than 20,000 alliances during 1990-2001. Hypotheses about the contribution of alliance networks to market returns, Tobin's q, revenue growth and ROA, are developed and tested with archival data. The findings reveal the multifaceted contribution of networks. Network size and strategic alliance status produce limited effects; network capabilities significantly enhance performance, while the relative bargaining power of partners undermines performance. Performance is also enhanced by developing balanced networks and by encouraging competition among partners. These insights indicate not only that alliance networks matter but also how they matter.