The Roles of Supply Networks and Board Interlocks in Firms' Technological Entry and Exit: Evidence from the Chinese Automotive Industry

Abstract

In this research, we explore how supply networks and board interlocks - as distinct, yet parallel interorganizational networks - jointly influence firms' entry into new technology domains and exit from old technology domains. Drawing from the perspectives of social networks and organizational learning we highlight the relevance of the interdependency between these networks for a firm's technological entry and exit decisions. We argue that a firm that maintains a large number of supplier ties is more likely to enter new technology domains and exit from old technology domains instead. We further find empirical evidence that the degree centrality of a firm in its board interlock network strengthens these effects. Our theoretical arguments are supported through stochastic actor-based modeling analysis for the longitudinal and multilevel networks of 86 firms active in the Chinese automotive during 2011-2015. These findings inform the literature on interorganizational network dynamics as we insert relational pluralism to examine the complexities of organizational relationships as antecedents to a firms' technological entry and exit. Finally, we imagine the implications of our analysis for management as they shed light on how multiple interorganizational relationships affect firms' decisions on new technology entry and old technology exit.