Network Memory and Firm Innovation: The Effect of Network Consistency

Does network memory affect innovation? Specifically, how and under what conditions do current and previous alliance networks jointly affect firm innovation? Unlike prior research that only considers one state alliance network or analyzes current and previous alliance networks independently, we argue that previous network ties can still exist in organizational memory as ghost ties, and propose that current and previous alliance networks can jointly affect firm innovation performance. We explore their joint influence by introducing the concept of network consistency, which means the extent to which the actor exhibits identical relational patterns with the same alters across current and previous networks. Drawing on the literature of knowledge sharing and transfer in interfirm network, we contend that the benefits and costs of network consistency on knowledge sharing and transfer among network partners result in an inverted U-shaped relationship between network consistency and firm innovation performance. We also contend that organizational absorptive capacity and degree centrality can further affect the effectiveness of knowledge sharing and transfer caused by network consistency, moderating the inverted U-shaped relationship. Analyses of 151 firms in the American electronic components industry from 1990 to 2002 fully support our hypotheses.