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Attenuating the negative effects of network change on innovation: A whole network level analysis of Taiwanese business groups

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Abstract

This paper investigates when and how changes in interorganizational networks affect innovation at a whole-network level. We consider three forms of network change as suggested by prior research on networks: membership change, change in network structure, and tie restructuring. We examine the independent and interactive effects between membership change and other types of network changes on group innovation. Our longitudinal analyses of the intra-group network changes in Taiwanese business groups show that membership change in the intra-group networks has a negative effect on group-level innovation. However, the negative effect is attenuatedwhen the centralization of intra-group networks decreases and when ties involving hub firms are reconfigured. The findings provide implications for both inter-firm network governance and innovation management, especially in the context of business groups.

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Fig. 1: Buyer-supplier network change in a Taiwanese business group: Yang Der Group, 1981–1992.
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Notes

  1. As a robustness check, we also conducted additional analyses with one-year lead dependent variable, finding support for Hypotheses 1 and 3 but not Hypothesis 2.

  2. We chose not to identify hub firms based on their degree centrality in the buyer-supplier network because over 50% of our observations have more than one central firm. By contrast, only around 15% of our observations have more than one hub firm if we refer to the core business in the business group. Thus, the latter approach causes fewer problems.

  3. One standard deviation below mean membership change is equal to −.86. However, membership change can take on only positive values. Therefore, we considered zero instead of one standard deviation below mean for membership change when calculating the effect size.

  4. Note that we measure centralization change as the difference between centralization in the current period and the centralization in the previous period. A negative value implies that decentralization has increased. Thus, a positive moderating effect of decentralization implies that the expected sign of the coefficient of the interaction term is negative.

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Authors and Affiliations

  1. Faculty of Business, Hong Kong Polytechnic University, M907, Li Ka Shing Tower, Hung Hom, Hong Kong

    Shuping Li

  2. Strategy Area, Indian Institute of Management Bangalore, Bannerghatta Road, Bangalore, 560076, India

    Sai Yayavaram

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  1. Shuping Li
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Li, S., Yayavaram, S. Attenuating the negative effects of network change on innovation: A whole network level analysis of Taiwanese business groups. Asia Pac J Manag 38, 151–177 (2021). https://doi.org/10.1007/s10490-018-9621-9

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