Where can capabilities come from? network ties and capability acquisition in business groups

Ishtiaq P. Mahmood, Hongjin Zhu, Edward J. Zajac

Research output: Contribution to journalArticlepeer-review

211 Scopus citations


While strategy researchers have devoted considerable attention to the role of firm-specific capabilities in the pursuit of competitive advantage, less attention has been directed at how firms obtain these capabilities from outside their boundaries. In this study, we examine how firms' multiplex network ties in business groups represent one important source of capability acquisition. Our focus allows us to go beyond the traditional focus on network structure and offer a novel contingency model that specifies how different types of network ties (e.g., buyer-supplier, equity, and director), individually and in complementary combination, will differentially affect the process of R&D capability acquisition. We also offer an original analysis of how other aspects of network structure (i.e., network density) in business groups affect the efficacy of network ties on R&D capability. Empirically, we provide an original contribution to the capabilities literature by utilizing a stochastic frontier estimation to rigorously measure firm capabilities, and we demonstrate the value of this approach using longitudinal data on business groups in emerging economies. We close by discussing the implications of our supportive results for future research on firm capabilities, organizational networks, and business groups.

Original languageEnglish (US)
Pages (from-to)820-848
Number of pages29
JournalStrategic Management Journal
Issue number8
StatePublished - Aug 2011


  • business group
  • buyer-supplier ties
  • capability
  • emerging economy
  • innovation
  • network

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management


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