Edited by Gary L. Lilien and Rajdeep Grewal
Stefan Wuyts and Christophe Van den Bulte Social networks pervade industries and have an important bearing on individual firms’ actions and outcomes. European retailers, for example, join forces as buyer groups to increase their bargaining position with manufacturers (IGD 2006). Many manufacturers use small-scale networks of exchange relationships with multiple competing suppliers both to protect themselves against opportunistic suppliers and to maintain their flexibility (Wuyts 2007). Firms in high-technology industries build alliance networks both to gain access to technologies and to market new products (Wuyts et al. 2004a). Even traditional distribution channels connecting suppliers to vendors to customers are networks (Wuyts et al. 2004b). The notion that ‘no business is an island’ has long been accepted outside marketing (e.g. Braudel 1985; Granovetter 1985; Macaulay 1963). Yet the current marketing literature does not provide much systematic guidance on the processes and mechanisms through which network structure beyond the focal buyer–seller or manufacturer– distributor dyad affects firm behavior. Particularly for B2B networks, in which the ‘actors’ or ‘nodes’ in the network are intrinsically driven by self-serving motives such as bottom-line performance, it is important to understand how networks can improve inter-organizational governance. When does a network help curb exchange partners’ opportunistic tendencies and generate ‘control benefits’? When does a network help align different actors to achieve synergy and other ‘coordination benefits’? What are the possible disadvantages of being embedded in a network? This chapter provides an overview of various network governance mechanisms in business markets. We do so by discussing the...
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