Lecture 8A - Networks

Question 1

Structural holes (Granovetter)

Answer 1

The person knowing the different groups, but the groups don’t know each other. A&C knows each other (homogeneous) and likewise for B&D. If these two clusters are unconnected then there exists a structural hole. If E connects B&C then E fills that structural hole and it no longer exists. (Stream of knowledge flow).

Question 2

Embeddedness: definition and types (Beugelsdijk & Hospers 2005; S)

Answer 2

Definition: The quality of being firmly and deeply ingrained or fixed in place.
• Things happen in a context

Types of embeddedness:
1. Cognitive embeddedness refers to the ways in which rational economic action is limited by uncertainty, complexity and the costs of information.
2. Political embeddedness observes that economic action is always carried out in a greater political context.
3. Structural embeddedness refers to the fact that economic exchange always takes place in a larger social structure of ongoing interpersonal relations. It focuses on the social embeddedness of economic action.
4. Finally, cultural embeddedness observes that economic assumptions, rules and rationality are limited and shaped by culture. Collective understandings and norms shape
economic strategies and goals.

Question 3

What is a strategic Network?

Answer 3

The Strategic network is a configuration of “Market” based structure (opposed to hierarchy) in a Non zero-Sum game relationship with Suppliers. It enables specialisation and is a product of Transaction+External Cost

Question 4

What is prerequisite for Strategic Networks?

Answer 4

• Trust is essential for lowering transaction costs. is created through the will to establish and keep a reputation (therefore motivated to deviate from opportunistic behaviour)
• Risk should not be concentrated in either end of the relationships but be shared.
• Trust can be created by having similar values as well.

Question 5

Examples of Strategic Networks

Answer 5

• Japanese firms are good examples of these enterprises that have managed to implement strategic networks  Snow and Hrebinaiak (1980) found that firms concentrating on distinctive competence consistent with their chosen strategy outperformed competitors

Question 6

What are the benefits of strategic networks

Answer 6

Those relationships have most of the characteristics of a “hierarchical” relationship: relatively unstructured tasks, long-term point of view, relatively unspecified contracts. However, the lack of the need for integration represents an advantage as in strategic networks each player can specialise in their core-activities and cultivate their core competencies. Therefore the firms become more efficient.