IDEAS home Printed from https://ideas.repec.org/a/oup/indcch/v21y2012i6p1307-1335.html
   My bibliography  Save this article

The architecture of transaction networks: a comparative analysis of hierarchy in two sectors

Author

Listed:
  • Jianxi Luo
  • Carliss Y. Baldwin
  • Daniel E. Whitney
  • Christopher L. Magee

Abstract

Many products are manufactured in networks of firms linked by transactions, but comparatively little is known about how or why such transaction networks differ. This article investigates the transaction networks of two large sectors in Japan at a single point in time. In characterizing these networks, our primary measure is "hierarchy," defined as the degree to which transactions flow in one direction, from "upstream" to "downstream." Our empirical results show that the electronics sector exhibits a much lower degree of hierarchy than the automotive sector because of the presence of numerous inter-firm transaction cycles. These cycles, in turn, reveal that a significant group of firms have two-way "vertically permeable boundaries": (i) they participate in multiple stages of an industry's value chain, hence are vertically integrated, but also (ii) they allow both downstream units to purchase intermediate inputs from and upstream units to sell intermediate goods to other sector firms. We demonstrate that the 10 largest electronics firms had two-way vertically permeable boundaries while almost no firms in the automotive sector had adopted that practice. Copyright 2012 The Author 2012. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • Jianxi Luo & Carliss Y. Baldwin & Daniel E. Whitney & Christopher L. Magee, 2012. "The architecture of transaction networks: a comparative analysis of hierarchy in two sectors," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 21(6), pages 1307-1335, December.
    • Handle: RePEc:oup:indcch:v:21:y:2012:i:6:p:1307-1335
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/icc/dts007
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bei, Xiaoshu, 2019. "Trademarks, specialized complementary assets, and the external sourcing of innovation," Research Policy, Elsevier, vol. 48(9), pages 1-1.
    2. Joachim Henkel & Alexander Hoffmann, 2019. "Value capture in hierarchically organized value chains," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 260-279, April.
    3. Lafond, François & Astudillo-Estévez, Pablo & Bacilieri, Andrea & Borsos, András, 2023. "Firm-level production networks: what do we (really) know?," INET Oxford Working Papers 2023-08, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    4. KICHIKAWA Yuichi & IINO Takashi & IYETOMI Hiroshi & INOUE Hiroyasu, 2019. "Hierarchical and Circular Flow Structure of the Interfirm Transaction Network in Japan," Discussion papers 19063, Research Institute of Economy, Trade and Industry (RIETI).
    5. Navya Pandit & Constantin Prox & Carliss Y. Baldwin, 2022. "Studying modular design: an interview with Carliss Y. Baldwin," Journal of Organization Design, Springer;Organizational Design Community, vol. 11(2), pages 77-85, June.
    6. Baldwin, Carliss & MacCormack, Alan & Rusnak, John, 2014. "Hidden structure: Using network methods to map system architecture," Research Policy, Elsevier, vol. 43(8), pages 1381-1397.
    7. GOTO Hiromitsu & SOUMA Wataru, 2022. "Similarity and Connectivity of Industrial Networks of Japanese Prefecture Based on Firm-level Data," Discussion papers 22092, Research Institute of Economy, Trade and Industry (RIETI).
    8. László Lőrincz & Sándor Juhász & Rebeka O. Szabó, 2022. "Business transactions and ownership ties between firms," CERS-IE WORKING PAPERS 2216, Institute of Economics, Centre for Economic and Regional Studies.
    9. Stefano Brusoni & Joachim Henkel & Michael G Jacobides & Samina Karim & Alan Mac & Phanish Puranam & Melissa Schilling, 2023. "The power of modularity today: 20 years of “Design Rules”," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(1), pages 1-10.
    10. Luo, Jianxi & Triulzi, Giorgio, 2018. "Cyclic dependence, vertical integration, and innovation: The case of Japanese electronics sector in the 1990s," Technological Forecasting and Social Change, Elsevier, vol. 132(C), pages 46-55.
    11. Kito, Tomomi & New, Steve & Reed-Tsochas, Felix, 2018. "Disentangling the complexity of supply relationship formations: Firm product diversification and product ubiquity in the Japanese car industry," International Journal of Production Economics, Elsevier, vol. 206(C), pages 159-168.
    12. Faggini, Marisa & Bruno, Bruna & Parziale, Anna, 2019. "Crises in economic complex networks: Black Swans or Dragon Kings?," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 105-115.
    13. Takayuki Mizuno & Takaaki Ohnishi & Tsutomu Watanabe, 2015. "Structure of global buyer-supplier networks and its implications for conflict minerals regulations," Papers 1505.02274, arXiv.org.
    14. Rahul Kapoor, 2013. "Persistence of Integration in the Face of Specialization: How Firms Navigated the Winds of Disintegration and Shaped the Architecture of the Semiconductor Industry," Organization Science, INFORMS, vol. 24(4), pages 1195-1213, August.
    15. Michael G. Jacobides & John Paul MacDuffie & C. Jennifer Tae, 2016. "Agency, structure, and the dominance of OEMs: Change and stability in the automotive sector," Strategic Management Journal, Wiley Blackwell, vol. 37(9), pages 1942-1967, September.
    16. Takayuki Mizuno & Takaaki Ohnishi & Tsutomu Watanabe, 2015. "Structure of global buyer-supplier networks and its implications for conflict minerals regulations," UTokyo Price Project Working Paper Series 053, University of Tokyo, Graduate School of Economics.
    17. Takayuki Mizuno & Takaaki Ohnishi & Tsutomu Watanabe, 2015. "Structure of global buyer-supplier networks and its implications for conflict minerals regulations," CARF F-Series CARF-F-362, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    18. Luo, Jianxi, 2018. "Architecture and evolvability of innovation ecosystems," Technological Forecasting and Social Change, Elsevier, vol. 136(C), pages 132-144.
    19. Josh Whitford & Francesco Zirpoli, 2014. "Pragmatism, Practice, and the Boundaries of Organization," Organization Science, INFORMS, vol. 25(6), pages 1823-1839, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:indcch:v:21:y:2012:i:6:p:1307-1335. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/icc .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.