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A Latent Space Modeling Approach to Interfirm Relationship Analysis

A Latent Space Modeling Approach to Interfirm Relationship Analysis Interfirm relationships are crucial to our understanding of firms’ collective and interactive behavior. Many information systems-related phenomena, including the diffusion of innovations, standard alliances, technology collaboration, and outsourcing, involve a multitude of relationships between firms. This study proposes a latent space approach to model temporal change in a dual-view interfirm network. We assume that interfirm relationships depend on an underlying latent space; firms that are close to each other in the latent space are more likely to develop a relationship. We construct the latent space by embedding two dynamic networks of firms in an integrated manner, resulting in a more comprehensive view of an interfirm relationship. We validate our approach by introducing three business measures derived from the latent space model to study alliance formation and stock comovement. We illustrate how the trajectories of firms provide insights into alliance activities. We also show that our proposed measures have strong predictive power on stock comovement. We believe the proposed approach enriches the methodology toolbox of IS researchers in studying interfirm relationships. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ACM Transactions on Management Information Systems (TMIS) Association for Computing Machinery

A Latent Space Modeling Approach to Interfirm Relationship Analysis

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Publisher
Association for Computing Machinery
Copyright
Copyright © 2021 ACM
ISSN
2158-656X
eISSN
2158-6578
DOI
10.1145/3424240
Publisher site
See Article on Publisher Site

Abstract

Interfirm relationships are crucial to our understanding of firms’ collective and interactive behavior. Many information systems-related phenomena, including the diffusion of innovations, standard alliances, technology collaboration, and outsourcing, involve a multitude of relationships between firms. This study proposes a latent space approach to model temporal change in a dual-view interfirm network. We assume that interfirm relationships depend on an underlying latent space; firms that are close to each other in the latent space are more likely to develop a relationship. We construct the latent space by embedding two dynamic networks of firms in an integrated manner, resulting in a more comprehensive view of an interfirm relationship. We validate our approach by introducing three business measures derived from the latent space model to study alliance formation and stock comovement. We illustrate how the trajectories of firms provide insights into alliance activities. We also show that our proposed measures have strong predictive power on stock comovement. We believe the proposed approach enriches the methodology toolbox of IS researchers in studying interfirm relationships.

Journal

ACM Transactions on Management Information Systems (TMIS)Association for Computing Machinery

Published: Jan 12, 2021

Keywords: Interfirm relationship

References