Network Strategy: A Dynamic Approach

Strategy discourse has focused primarily on the individual firm, evolving from an emphasis on industry positioning, to internal resource allocation, and finally, dynamic capabilities and learning. However the strategy discourse concerning networks remains focused on network structural attributes and static resource endowments. We argue that a theory of dynamic capabilities or adaptive behavior is lacking for business networks. We define business networks as organizations with one central player (or focal firm) and highly inter-dependent external players that collaborate in order to meet common objectives. Drawing on the literature of learning and psychology, we define four discrete modes of adaptability; 1) automatic responses, 2) assimilation, 3) accommodation, and 4) environmental enactment, describing how business networks display self-renewal behavior, learning and negotiation with the environment. A cross-case analysis of 2 distinct business networks is presented to substantiate how common patterns of business network adaptability can be applied with; a) either greater scope or breadth across industries, or b) focus and specialization in a single vertical niche. The paper concludes with implications for the theory and management of business networks, as well as limitations of our study and prospects for future research.