Network Connectivity and Business Netquakes : Ways to Understand the Spread of Change

• Business network dynamics are generally discussed from the perspective of a focal business relationship and of relationships (e.g. with customers and/or suppliers) connected to it. Such studies examine how direct relationships influence each other, while indirect business relationships (e.g. with customers’ customers) are generally ignored. Thus, we still know little of how change spreads in business networks.   We propose a framework inspired by seismology, using the term ‘netquake’ to describe spread of change in business networks. In a business network, the effects of a netquake can basically take two forms: 1) change in the interaction between actors in the existing structure of connected ongoing business relationships, and 2) change in the overall network structure of connected relationships, by ending existing business relationships or initiating new ones. We propose that the intensity of a netquake can be identified using these basic forms of change in the network. The more changes in the network structure of connected relationships in relation to the amount of adaptation in the ongoing connected relationships, the higher the intensity of the netquake.   Earlier business network studies have shown that business relationships affect each other, which has been described as connectedness. In this paper we discuss connectedness at network level, i.e. network connectivity, as an important factor for understanding variations in netquake intensity. High level of connectivity means that changes spread easily in the network, whereas a low level of connectivity moderates the spreading, and thus the business netquake intensity.   The analysis is based on structural linkages of bankruptcies among Swedish IT-companies. The bankruptcies are both seen as the epicentre of business netquakes, and as effects of other netquakes. The spread of change can consequently be addressed through the occurrence of bankruptcies, and other types of effects are thus disregarded in this study. A higher level of network connectivity can be assumed in situations where many bankruptcies can be linked through connected business relationships, indicating high netquake intensity, whereas isolated bankruptcies, indicating low netquake intensity, are expected in structures with lower connectivity. The analysis indicates a large variability of the observable structural linkages of bankruptcies, and supports network connectivity as an important concept to understand spread of change in business networks.  

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Keyword

business network dynamics

netquakes

mergers

acquisitions

bankruptcies

Business studies

Företagsekonomi

Publication and Content Type

ref (subject category)

kon (subject category)