Alliance Networks: A New Dimension of Diversification
Firm diversification has been studied for many years and a great deal is now known about its impact on the firm. The received view is that if the benefits of housing various functions within the boundaries of the firm lower the costs of communication and coordination, they also come at a cost. At some point, the internal management of increasing variety becomes more expensive than sourcing from outside the firm. Just as an organization learns, so does the supplier network, for example, insofar that suppliers come to substitute for internal production. It is, in fact, the increased knowledge in supplier networks that has forced a radical disaggregation of activities within American auto assemblers (Kogut, 2000). In effect, as knowledge diffuses to a network of suppliers, the need for and viability of diversification of a firm’s businesses is reduced.
KeywordsEconomic Performance International Joint Venturis Transaction Cost Theory Interorganizational Network Alliance Portfolio
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