Evolution of Interorganizational Networks: Evidence from Pulp and Paper Industry in 1992–2006

Abstract

Interorganizational alliance and cooperation networks are the backbone of contemporary economy. With concentration on their core competencies, economic actors are increasingly depended on each other. Implications of these networks to individual firms have been widely studied by organizational and management scholars, however, with a connotation of network stability. Studying and understanding evolution of interorganizational networks on a network-level is yet in its infancy, both in terms of research methods and comprehensiveness of results. Intention of this thesis is to develop the discussion space and facilitate future research in this area. Firstly, this study elaborates conceptualization of the phenomenon by depicting it as a function of three variables: scattering / tightening orientation, direction of tightening, and number of actors in the network. Secondly, a theoretical framework for recurrence of network evolution patterns is developed by incorporating outlooks from literature streams of organizational networks and industry evolution. The framework depicts causality of network evolution patterns to changes in operating environment. A set of propositions are derived from the framework. Thirdly, the propositions are examined with a longitudinal dataset from global pulp and paper industry within period of 1992–2006 containing 971 interorganizational ties in a group of 236 industry participants. The study advances the use of both qualitative and quantitative methods in analyzing interorganizational network evolution. The results support the theoretical model and indicate that interorganizational networks evolve on a cyclic manner in tandem with changes in operating environment. It is argued that without changes in the environment central actors of an industry network hierarchy path-dependently become ever more central, while in turbulent periods networks scatter in lack of common vision of the future. Redistribution of comparative resources and initial network actions at the threshold of next incremental period determine the consequent path of industry structure as follows: 1) if turbulence has upraised comparative resources of a peripheral group higher than those of extant central actors and central actors disregard the change in their network actions, following hierarchy accumulation occurs towards the peripheral group, 2) if turbulence has lowered comparative resources of a central cluster below those of the runner-up, the central cluster will disintegrate.