Cyclic Dependence, Vertical Integration, and Innovation: The Case of Japanese Electronics Sector in the 1990s

Technology Forecasting and Social Change, Forthcoming

29 Pages Posted: 21 Feb 2016 Last revised: 5 Jan 2018

See all articles by Jianxi Luo

Jianxi Luo

Singapore University of Technology and Design (SUTD)

Giorgio Triulzi

Massachusetts Institute of Technology (MIT); Universidad de los Andes, Colombia - School of Management

Date Written: September 1, 2017

Abstract

The architecture of a firm’s network of transactions in its surrounding business ecosystem may affect its innovation performance. Here we proximate a business ecosystem as a transaction network among firms. Specifically, we analyze how the innovation performances of the firms are associated with their network positions and vertical structures in the transaction network, using the data for the Japanese electronics sector in the early 1990s. The results show that, a firm’s participation in inter-firm transaction cycles, instead of sequential transactional relationships, is positively and significantly associated with its innovation performance for vertically integrated firms. Within cycles, vertically integrated firms have better innovation performances than vertically specialized firms. Vertically integrated firms that participate in cycles have the best innovation performances in the Japanese electronics sector. These findings provide strategic implications and guidance for firms to design and manage their vertical structure and transaction network position.

Keywords: Vertical Integration, Innovation, Networks, Transaction, Supply Network

Suggested Citation

Luo, Jianxi and Triulzi, Giorgio, Cyclic Dependence, Vertical Integration, and Innovation: The Case of Japanese Electronics Sector in the 1990s (September 1, 2017). Technology Forecasting and Social Change, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2735482 or http://dx.doi.org/10.2139/ssrn.2735482

Jianxi Luo (Contact Author)

Singapore University of Technology and Design (SUTD) ( email )

8 Somapah Rd
Singapore, 487372
Singapore

Giorgio Triulzi

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Universidad de los Andes, Colombia - School of Management ( email )

Carrera Primera # 18A-12
Bogotá
Colombia

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