SPRU, University of Sussex, UK; Faculty of Economics, University G. D'Annunzio, Italy
A growing body of theoretical and empirical literature argues that the relevance of external sources of component and knowledge for a firm's competitive advantage has increased in the last two decades. This is due to two closely interrelated sets of factors: increasing complexity of products in terms of number of components composing them and the expanding set of component knowledge bases deriving from the increasing specialization of scientific and technological disciplines. Hence, managing external relationships (through the development and maintenance of an extensive flow of information across the boundaries of the firm) becomes critical for developing and sustaining a competitive advantage.
The concept of network has emerged as a form of organization of economic activity as opposed to markets and hierarchies (Powell 1990). Empirical studies emphasized the relevance of network forms of organization as patterns of economic organization in an increasing number of industrial sectors (Lorenzoni and Lipparini 1999 ; Kogut 2000). As argued by Richardson (1972 : 895) 'Firms are not islands but are linked together in patterns of co-operation and affiliation. Planned co-ordination does not stop at the boundaries of the individual firm but can be effected through co-operation between firms'.
The importance of network relationships and the management thereof has also been emphasized in studies of complex product systems industries (Hobday 1998). Complex product systems (CoPS) are capital-, engineering- and IT-intensive, business-to-business products. They are multi-technology, multi-component products, often produced in multi-firm alliances, as a one-off or in small batches for specific customers. Examples include global business networks, aircraft engines, civil airliners, power stations, off-shore oil platforms, mobile telephone systems, and large civil engineering projects. The multi-technology, multi-component nature of CoPS poses significant