Structural Hole And Capability Building Under Environmental Uncertainty

After 30 years of rapid economic growth,the economic situation of China changes greatly.In specific,on the demand side,the "three carriages" that promote the economic growth can't support sustained economic growth no longer in the future under the current economic development mode.The supply-side reform,industrial restructuring and upgrading,and creating effective supply,have become new topic in the future.And at the present situation of economic development,innovation and marketing capability have become important driving force for firms' survival.Because,the industrial restructuring and upgrading need firms to enhance their innovation capabilities in order to produce more innovative products or service with high knowledge content;enhance their marketing capabilities to make products or services can fully meet customer needs.However,how to develop or enhance these two kinds of capabilities is a puzzle for many managers.Therefore,in the current stage,exploring how Chinese firms develop or enhance their innovation and marketing capabilities has important practical implications.How a firm can build its capabilities to achieve a competitive advantage is a major research question in the strategy research field.Scholars have generally addressed the building of capabilities from internal perspectives to social network perspective.However,the findings in this area are not convergent.Some researches argued that,networks with rich structural holes are conducive to a firm's capability building,while others contend that,more dense networks would promote a firm's competitive capability building.Nevertheless,such divergent findings may be explained by a reality that capability building is likely to be a joint result of firm's network structural position accessing knowledgeable others and specific knowledge exchange with other network contactors,which seems to be neglected by previous researches in this area.This study categorizes knowledge exchange as technological and market knowledge exchange and then explores the joint effect of structural holes and technological or market knowledge exchange on innovation and marketing capabilities.Furthermore,from a perspective of environmental uncertainty,this study also investigates the contingent roles of competitive intensity and enforcement inefficiency.Hierarchical regression analysis using data collected from service-outsourcing vendors in China provides evidence that firms can improve their innovation and marketing capabilities by occupying structural holes while simultaneously exchanging technological or market knowledge with other network contacts.Different environmental hostilities play different roles in stimulating the positive effects of a firm's embedded network on its capability building.As competitive intensity increases,firms rely heavily on their embedded networks to improve their innovation and marketing capabilities.As enforcement inefficiency increases,a firm's embedded network no longer works as a beneficial instrument to promote its innovation and marketing capabilities.This study links a firm's internal capabilities with its external networks and environmental uncertainty,and provides both theoretical and managerial insights into how a firm can benefit from its embedded network when confronted with environmental uncertainty:(1)First,our study contributes to the literature on capability by exploring the origins of capability from both a network-and a knowledge-based perspective.Most scholars argue that firms develop or accumulate their internal capabilities though repetitive activities.Recently,however,some scholars have argued that the heterogeneity in capabilities can be accounted for by variations in the firm's network.We provide empirical support for this embeddedness perspective by confirming the joint effect of a focal firm's structural position and knowledge exchange in its egocentric network on its internal capabilities.Our findings thus deepen our understanding of how a firm can derive internal capabilities from its external network.(2)Second,this study contributes to the network literature by examining the joint effect of structural holes and knowledge exchange.This study confirms that the focal firm can build its innovation and marketing capability by occupying structural holes and frequently exchanging technological or market knowledge with other network contacts simultaneously.By providing such evidence,this study resolves the dilemma that how a firm that occupies structural holes can realize the potential benefits of access to knowledge effectively,and thus contributes to the related network literature.(3)Third,our study contributes to the literature on emerging markets.Numerous studies in this area argue that the most typical characteristic of an emerging market is environmental uncertainty(Tang & Hull,2012).This uncertainty limits the effect of market-based capabilities,such as innovation and marketing capability,on firm performance,and makes the role of “Guanxi” between government and other business partners more salient in China's emerging market.As the level of market development increases,market-based capabilities become increasingly important for emerging-market firms to compete in the market.As such,exploring how emerging-market firms build their market-based capabilities and how environmental uncertainty affects the process deserves more attention as the level of market development increases.This study takes environmental uncertainty in an emerging market as a two-dimensional construct that compromises competitive intensity and enforcement inefficiency,and provides empirical support that competition motivates firms to fully utilize diverse technological knowledge and market knowledge to improve their innovation and market capabilities.In contrast with competitive intensity,enforcement inefficiency decreases the focal firm's motivation to leverage diverse knowledge to build these two capabilities.As such,we contribute to the emerging market literature by uncovering a dilemma in building innovation and marketing capabilities for emerging market firms.Our findings also suggest that,in order to promote the supply side reforms,another than cutting corporate tax and encouraging investment into technological innovation,the government should also accelerate building market-based competition system and guarantee the effective operation of the market system by establishing effective legal framework,which motivates firms to enhance their innovation and marketing capabilities.