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The behavioral theory of the firm rests on empirical observation of economic behavior in organizations, and was motivated by the 'disconnect ' between that observation and prevailing economic theory. We believe that there is a comparable tension between reality and theory with regard to the persistent, systematic relationships between organizations. Observation belies the traditional view that organizations are distinct and autonomous units of action. Instead, it appears that they are very often embedded in organizational groups comprised of close, robust and multidimensional ties that blur hierarchical boundaries (Granovetter 1994; Gulati & Gargiulo 1999; Powell & Smith-Doerr 1994). These groups, which we call interfirms, demand analysis. Why do they exist at all? What processes cause them to take the forms that they do? Under what circumstances are they more or less useful for their constituents? In this chapter we offer answers to these questions. Our approach to explaining interfirms builds on earlier arguments regarding the existence, structure and behavior of firms. First, we explain the existence of interfirms as a response to the transaction costs that emerge under conditions of bounded rationality. This argument locates the interfirm within broader justifications for institutions, which build on Coase’s ([1937] 1988) transaction cost explanation for the firm. Next, we offer an evolutionary process model of the emergence of one type of interfirm, the network organization – a production

Today, many knowledge-based technology applications form a business ecosystem: a set of complex products and services made by multiple firms in which no firm is dominant. For this paper the emerging radio frequency ID (RFID) ecosystem was built based on firms ’ alliance announcements, and propositions around the behavior of large, multi-line technology firms in this network were analyzed. The RFID network is used to empirically show that absorptive capacity, and exploration vs. exploitation theories may explain some behavior of large firms. Specifically, a propensity to form alliances in general makes it more likely large firms will join the RFID ecosystem, and more exploratory firms join earlier. Greater availability of slack resources also leads to the formation of more alliances in the network. The ecosystem perspective and these results may influence alliance decisions of firms entering into high cost technological innovations.

This paper demonstrates the existence of bidirectional relationships between interfirm collaboration and business sales. Controlling for factors that influence whether firms form collaborative relationships, the analysis shows that entry and post-entry collaboration often contribute to superior performance, which in turn attracts more partners. However, the performance influences vary across types of collaborators and collaborations, with differences among entrant and incumbent partners, between marketing and R&D partnerships, by partner size, and across time. The empirical analysis examines businesses that operated in the U.S. hospital software systems industry between 1961 and 1991. Copyright © 2005 John Wiley & Sons, Ltd. Interfirm collaboration and firm performance have a complex relationship, each affecting the other. Economics, organization, and strategy research argue that businesses often benefit from collaborative relationships (e.g., Burt, 1983; Coase, 1937; Dyer and Singh, 1998; Williamson, 1975, 1991), while recent empirical studies have identified some of the conditions under which collaborations are or are not beneficial (Baum, Calabrese, and Silverman, 2000; Khanna, Gulati, and Nohria, 1998; Singh, 1997; Singh and Mitchell, 1996). Nonetheless, the systematic nature of the relationship between collaboration and performance—in particular, for our discussion in this study, sales performance—is not clear. Several studies identify relationships between collaboration and greater sales, but do not establish whether greater business sales induce collaborative relationships or

Bridging the resource-based view and the institutional perspective, this study explores the performance consequences of firms ’ alliance partner selections by examining the interactions of resource complementarity and institutional associations (reflected through both societal and network status) between the firm and its partners. The integrative framework suggests that a joint consideration of resource complementarity and status effects, as well as important firm- and environmental-level contingent factors, are critical for understanding the underlying mechanisms of alliance formations and their effects on firm performance. Further, our study suggests that it is necessary to consider both societal and network status as they can have distinct effects under certain conditions. Our analyses of four U.S. industries (computer, steel, pharmaceutics, crude petroleum and natural gas) over a span of 13 years largely support our framework. Copyright © 2009 John Wiley & Sons, Ltd.

Interfirm collaboration among knowledge intensive firms is increasing as a result of accelerating competition, falling regulatory barriers, and rising customer expectations. Resource dependency theory is used to position knowledge as the key resource for the knowledge-based enterprise (KBE) and to examine the suitability of alliances as a mode of knowledge acquisition and exchange, contrasted particularly with merger and acquisition. The alliance and knowledge literatures are reviewed and particular attention is paid to the critical alliance formation stage. This stage is reviewed against a research model that posits firm performance in knowledge creation arises from a number of factors, including the motivation for an alliance, partner firm characteristics (the ability to develop and sustain valuable resources; absorptive capacity; combinative capability; experience with alliances; and appropriate design for knowledge exchange), the development of operating structures and norms, and the choice of alliance structure. The paper concludes with suggestions for future research.

Drawing on the concept of relational embeddedness and the associated mechanisms of mutual understanding, trust, and commitment, we examine how leaders ’ prior exchange experiences influence the likelihood of subsequent interorganizational exchange. We begin to develop a microlevel model of organization-level relations that accounts for nodal multiplexity. In data on baseball player trades, we found that individual leaders ’ ties affected exchanges less than did an organization’s other ties. The sharing of exchange experiences by organizations and their current leaders increased the influences of those experiences on exchange behavior. Thus, leaders have more influence within their organizational contexts than in isolation. For their helpful advice on this project, we thank

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