- Research Summary
Lavie's research bridges the strategic management, organizational learning, and social networks literatures in studying the emerging phenomenon of interconnected firms in the information technology industry. Interconnected firms engage in extensive interfirm collaboration and thus become embedded in alliance networks. Lavie focuses on two fundamental questions: (1) how do alliance networks evolve? and (2) how does the configuration of networks influence value creation and appropriation processes, which in turn contribute to the performance of interconnected firms? In addressing these questions, he challenges the assumptions of traditional theories of the firm and extends the resource-based view.
To study the evolution of alliance networks he has engaged in an extensive field research in the information technology industry. His qualitative work reveals how in successive phases of evolution, technological advancements in the information technology industry guide firms' strategic decisions which in turn determine the composition of partners and the respective nature of alliances in their alliance networks. His findings advance coevolution theory by uncovering the mechanisms by which firms coevolve with their alliance networks. Recently, he has extended this research by examining whether software firms balance tendencies to explore and exploit in their alliance formation decisions, arguing that absorptive capacity and organizational inertia impose conflicting pressures with respect to the value chain function of alliances, the attributes of partners, and partners' network positions. Although path dependencies reinforce either exploration or exploitation within each of these domains, he demonstrates that firms balance their tendencies to explore versus exploit over time and across domains. This study bridges the gap between Jim March's claim that firms would seek to balance exploration and exploitation and behavioral research that observed polar tendencies to engage in either type of learning activity.
Lavie's primary research stream focuses on value creation and appropriation in alliance networks. In his work, he contends that some of the fundamental assumptions of traditional theories of the firm do not hold in networked environments and thus reassess the resource-based conditions of heterogeneity, imperfect mobility, imitability and substitutability, concluding that the nature of relationships may matter more than the nature of resources in such environments. In another extension of the resource-based view, based on observations in the information technology industry, he integrates the Schumpeterian perspective on technological discontinuities with the dynamic capabilities approach to explain how firms reconfigure their capabilities in response to technological change. Lavie extends prior research that claims that firms build dynamic capabilities by uncovering the mechanisms through which firms reconfigure their capability portfolios. He identifies substitution, evolution, and transformation as three mechanisms of capability reconfiguration and links the choice of reconfiguration mechanism to the nature of technological change and to the attributes of capabilities. He concludes that these mechanisms enable firms to overcome cognitive and operational impediments, and thus bridge capability gaps and enhance their performance.
In his current research, Lavie further develops a theory of network configuration with an extensive longitudinal database of alliances in the software industry. In this research he address the "So What?" question: Do alliance networks contribute to the financial performance of firms? Scholars, managers and analysts often assume that alliance networks indeed create value, but prior empirical research falls short of supporting this assumption, showing only limited effects on intermediary performance measures. Studying the implications for firms' financial performance, he demonstrates how the resources and capabilities of partners contribute to the focal firm's performance (value creation) and how its performance declines when these partners also enjoy strong bargaining positions vis-a-vis the firm (value appropriation). He finds that this decline can be mitigated however, when firms facilitate competition among their partners. These insights inform alliance managers in the information technology industry who struggle to gain value from their firms' alliances. In a related study, Lavie further advances his network configuration theory by demonstrating how the composition of partners in the firm's network enhances its profitability and that partnering experience mitigates some of the negative implications of working with distant partners. In another empirical study he demonstrates that prior experience with the same partners provides greater benefits than general partnering experience and that the contribution of partner-specific experience to value creation in alliances depends on the novelty of network resources, the capacity to leverage experience by employing internal resources, and the level of firm-specific uncertainty. Lavie has also investigated the performance implications of firms' involvement in multi-partner alliances, revealing how such involvement enhances firms' reputation and leads to market success, while participation in competing alliances also enhances productivity despite potential efficiency losses. Moreover, whereas the market responds favorably to pioneers, both early and late entrants to the alliance are more productive than intermediate entrants. This study sheds light on the distribution of benefits to partners in multi-partner alliances.
In sum, Lavie's current research extends the resource-based view and capabilities approach and enhances our understanding of how alliance networks promote value creation and appropriation in the information technology industries. His research bridges the gap between the strategic management literature and social networks research by offering a firm-centric perspective on the evolution of alliance networks and their contribution to firm performance. He complements the structural and relational emphases in the existing literature by highlighting the role of network resources and considering the simultaneous implications of competition and collaboration within and across alliances.
Visit Lavie's SSRN page for latest papers: http://ssrn.com/author=488290