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Where do inter-organizational networks come from?

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This paper proposes a model for the formation of inter-organizational networks. We suggest that such networks result not only from exogenous interdependencies, but also from an endogenous embeddedness dynamic that enables organiozations to identyifiy suitable partners. In such a dynamic organizations manage the uncertainty associated with establishing new ties by embedding them in the network that results from prior ties. The new ties in turn alter that social network for the future. Networks are thus the residual effect of past behavior and the driving force of future action. With the increasing structural differentiation of the network, the impact of endogenous embeddedness factors on ensuing tie formation is enhanced and the effect of exogenous interdependencies is mitigated. We test this model using longitudinal data from a sample of alliances among multinational firms from 1970 - 1989. The discussion closes with suggestions for its application to other areas of organizational theory

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