Network perspective

This chapter outlines the main tenets of a relational or network perspective to strategy, which argues that another useful way to understand the differences in firms' profitability and conduct is by examining the network of relationships in which firms are embedded. A network perspective combines a focus on external aspects of the firm, such as its partners and their resources, with attention to its internal characteristics, such as the firm's ability to identify, engage in collaboration with, learn from and create value through, its partnerships. It suggests that a firm's relationships and location in a network are its unique and most difficult to imitate strategic assets. The chapter provides new insights into competition by examining the sources, benefits and drawbacks of relational advantage. A case study of InnoCentive, an open innovation marketplace established by Ely Lilly, is used to illustrate some of the key issues under consideration in adopting a network perspective.