Corporate Strategy and Network Change

Networks change when either the ties or the nodes are modified. Research on interfirm networks has conceptualized network change as driven almost exclusively by modifications in ties (additions and deletions). Yet firms frequently engage in actions that modify the ownership and existence of nodes: acquisitions ‘collapse’ nodes, divestitures ‘split’ nodes, industry entries ‘create’ nodes, and industry exits ‘remove’ nodes. The literatures on corporate strategy and organizational networks have mostly overlooked the implications of node-modifying actions for network change and firm value. We explore those implications in three ways. First, we systematically analyze and compare the network-changing properties of the six node- and tie-changing actions. Second, we link the strategic objectives that boundedly rational firms pursue through each corporate action to changes in their ego network positions (openness, closure, and status). Third, we consider how these local network changes set off ripple effects that ...