This research was supported by grants provided to the first author by the Social and Behavioral Sciences Research Institute, University of Arizona, and the Aspen Institute Nonprofit Sector Research Fund and by grants to the second author by the College of Business and Public Administration, University of Arizona. We have benefited from productive exchanges with numerous audiences to whom portions of this paper have been presented: a session at the 1994 Academy of Management meetings, the Social Organization workshop at the University of Arizona, the Work, Organizations, and Markets workshop at the Harvard Sociology Department, the 1994 SCOR Winter Conference at Stanford University, and colloquia at the business schools at the University of Alberta, UC-Berkeley, Duke, and Emory, and the JFK School at Harvard. For detailed comments on an earlier draft, we are extremely grateful to Victoria Alexander, Ashish Arora, Maryellen Kelley, Peter Marsden, Charles Kadushin, Dick Nelson, Christine Oliver, Lori Rosenkopf, Michael Sobel, Bill Starbuck, Art Stinchcombe, and anonymous reviewers at ASQ. We thank Dina Okamoto for research assistance and Linda Pike for editorial guidance. Address correspondence to Walter W. Powell, Department of Sociology, University of Arizona, Tucson, AZ 85721. We argue in this paper that when the knowledge base of an industry is both complex and expanding and the sources of expertise are widely dispersed, the locus of innovation will be found in networks of learning, rather than in individual firms. The large-scale reliance on interorganizational collaborations in the biotechnology industry reflects a fundamental and pervasive concern with access to knowledge. We develop a network approach to organizational learning and derive firm-level, longitudinal hypotheses that link research and development alliances, experience with managing interfirm relationships, network position, rates of growth, and portfolios of collaborative activities. We test these hypotheses on a sample of dedicated biotechnology firms in the years 1990-1994. Results from pooled, within-firm, time series analyses support a learning view and have broad implications for future theoretical and empirical research on organizational networks and strategic alliances.*

https://www.jstor.org/stable/pdfplus/2393988.pdf

Interorganizational Collaboration and the Locus of Innovation: Networks of Learning in Biotechnology.

Exploring the factors that explain the choice of governance structures in interfirm alliances, this study challenges the use of a singular emphasis on transaction costs. Such an approach erroneously treats each transaction as independent and ignores the role of interfirm trust that emerges from repeated alliances between the same partners. Comprehensive multiindustry data on alliances made between 1970 and 1989 support the importance of such trust. Although support emerged for the transaction cost claim that alliances that encompass shared research and development are likely to be equity based, there is also strong evidence that repeated alliances between two partners are less likely than other alliances to be organized using equity.

Does Familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances

1. Introduction and Overview. 2. Detecting Influential Observations and Outliers. 3. Detecting and Assessing Collinearity. 4. Applications and Remedies. 5. Research Issues and Directions for Extensions. Bibliography. Author Index. Subject Index.

Regression Diagnostics: Identifying Influential Data and Sources of Collinearity

This paper introduces a social network perspective to the study of strategic alliances. It extends prior research, which has primarily considered alliances as dyadic exchanges and paid less attention to the fact that key precursors, processes, and outcomes associated with alliances can be defined and shaped in important ways by the social networks within which most firms are embedded. It identifies five key issues for the study of alliances: (1) the formation of alliances, (2) the choice of governance structure, (3) the dynamic evolution of alliances, (4) the performance of alliances, and (5) the performance consequences for firms entering alliances. For each of these issues, this paper outlines some of the current research and debates at the firm and dyad level and then discusses some of the new and important insights that result from introducing a network perspective. It highlights current network research on alliances and suggests an agenda for future research. © 1998 John Wiley & Sons, Ltd.

/pdf/alliances-and-networks-sirimysid3.pdf

Alliances and networks

This article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade, and restates its main tenets. The second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains “a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to MNE activity as well.”

/pdf/the-eclectic-paradigm-of-international-production-a-3rjvhoi2d0.pdf

The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions

This paper presents a transaction costs theory of equity joint ventures. It distinguishes between ‘scale’ and ‘link’ JVs. Scale JVs arise when parents seek to internalize a failing market, but indivisibilities due to scale or scope economies make full ownership of the relevant assets inefficient. Link JVs result from the simultaneous failing of the markets for the services of two or more assets whenever these assets are firm-specific public goods, and acquisition of the firm holding them would entail significant management costs.

https://www.jstor.org/stable/pdfplus/2486271.pdf

A transaction costs theory of equity joint ventures

This paper offers the first large sample empirical study of the factors which influence the choice of Japanese firms between full or partial ownership of their U.S. manufacturing subsidiaries. It studies for the first time the ownership policies of investors of a single home country in a single host country, thus keeping variations within home and host countries constant. One methodological improvement over previous studies is the use as independent variables of the relevant characteristics of the investing firms. These had been proxied in previous studies by data on U.S. industries entered. 
 
The results suggest that the degree of ownership taken by Japanese manufacturing investors in their American subsidiaries is driven by the same general transaction costs variables that determine the choices made by their U.S. counterparts: Japanese parents joint venture when they need to combine with other firms intermediate inputs which are subject to high market transaction costs. An intriguing result, however, is the lack of significance of two variables which, in the U.S. case, strongly push towards full control of foreign subsidiaries. In this study neither the Japanese parent's R&D nor its advertising intensities had any significant impact on their ownership policies.

The transaction costs theory of joint ventures : An empirical study of Japanese subsidiaries in the United States

This paper offers the first large sample empirical study of the factors which influence the choice of Japanese firms between full or partial ownership of their U.S. manufacturing subsidiaries. It studies for the first time the ownership policies of investors of a single home country in a single host country, thus keeping variations within home and host countries constant. One methodological improvement over previous studies is the use as independent variables of the relevant characteristics of the investing firms. These had been proxied in previous studies by data on U.S. industries entered.

The results suggest that the degree of ownership taken by Japanese manufacturing investors in their American subsidiaries is driven by the same general transaction costs variables that determine the choices made by their U.S. counterparts: Japanese parents joint venture when they need to combine with other firms intermediate inputs which are subject to high market transaction costs. An intriguing result, however, is the lack of significance of two variables which, in the U.S. case, strongly push towards full control of foreign subsidiaries. In this study neither the Japanese parent's R&D nor its advertising intensities had any significant impact on their ownership policies.

Jean-François Hennart

Papers

A transaction costs theory of equity joint ventures

The transaction costs theory of joint ventures : An empirical study of Japanese subsidiaries in the United States

The transaction costs theory of joint ventures: an empirical study of Japanese subsidiaries in the united states

A theory of multinational enterprise

Boundaries of the Firm: Insights From International Entry Mode Research