Article ID: | iaor20132437 |
Volume: | 59 |
Issue: | 5 |
Start Page Number: | 1142 |
End Page Number: | 1161 |
Publication Date: | May 2013 |
Journal: | Management Science |
Authors: | Mitchell Will, Chung Chi-Nien, Mahmood Ishtiaq |
Keywords: | economics |
Business groups are key sources of innovation in emerging market economies, but we understand little about why innovativeness differs across groups and over time. Variation in the density of intragroup buyer–supplier ties, which are common structural linkages among group affiliates, can help explain both cross‐sectional and temporal heterogeneity of group innovativeness. We argue that greater buyer–supplier density within a group initially creates combinatorial opportunities that contribute to group innovativeness but ultimately generates combinatorial exhaustion that constrains innovation. Combinatorial exhaustion will set in at lower levels of density as the market environment becomes more developed because the opportunity costs of local search increase. The research introduces a dynamic argument to studies of business‐group innovation.