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Structural centrality in Alliance Constellations: A study of the performance on the firm by means of social network analysis

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  • Thesis defense presentation

    1. 1. Master Thesis DefenseStructural Centrality in Alliance ConstellationsA Study of the effects on firm Performance by Pico De LucchiDate: Wednesday, June 20th, 2012
    2. 2. Overview✤ Introduction✤ Method✤ Results✤ Contributions to Literature and Management✤ Limitations and Future Research✤ Questions & Answers
    3. 3. Introduction✤ What my research consists of✤ Relevance✤ Research Objectives & Questions
    4. 4. AllianceConstellations
    5. 5. AllianceConstellations✤ Is an alliance group which competes together as a strategic block in multiple value chain activities
    6. 6. AllianceConstellations✤ Is an alliance group which competes together as a strategic block in multiple value chain activities✤ Enclosed network with limited membership and a group governance
    7. 7. AllianceConstellations✤ Is an alliance group which competes together as a strategic block in multiple value chain activities✤ Enclosed network with limited membership and a group governance✤ In a birds-eye view it is a subset network block of the larger network of alliances of the firm
    8. 8. Structural Centrality
    9. 9. Structural Centrality
    10. 10. Structural Centrality How does it Translate to Firm Performance?
    11. 11. Structural Centrality How does it Translate to Firm Performance?Resource Access Centrality; Trust Centrality; Status & Power Centrality
    12. 12. Relevance of the research field
    13. 13. Relevance of the research field✤ Constellations are an important and emerging business practice. Famous examples include SEMATECH, the Android alliance (OHA) and Airline Groups.
    14. 14. Relevance of the research field✤ Constellations are an important and emerging business practice. Famous examples include SEMATECH, the Android alliance (OHA) and Airline Groups.✤ Alliance Constellations is a young and developing field of study, born from the more established, yet still emerging Alliance Network literature.
    15. 15. Relevance of the research field✤ Constellations are an important and emerging business practice. Famous examples include SEMATECH, the Android alliance (OHA) and Airline Groups.✤ Alliance Constellations is a young and developing field of study, born from the more established, yet still emerging Alliance Network literature.✤ Not much research has been done on alliance centrality performance in the network and none in the constellation environment. A Network analysis of the Constellation will help to expand the knowledge of both fields.
    16. 16. Evolution of Network Centrality Analysis Through a discipline centrality time-lapse!
    17. 17. Evolution of Network Centrality Analysis Through a discipline centrality time-lapse!
    18. 18. Research Objectives and Questions
    19. 19. Research Objectives and Questions✤ The effects of structural centrality in alliance constellations on firm performance
    20. 20. Research Objectives and Questions✤ The effects of structural centrality in alliance constellations on firm performance✤ Which centrality mechanism is most crucial? How do they interact?
    21. 21. Research Objectives and Questions✤ The effects of structural centrality in alliance constellations on firm performance✤ Which centrality mechanism is most crucial? How do they interact?✤ How does the centrality performance relation change from network to constellation?
    22. 22. Research Objectives and Questions✤ The effects of structural centrality in alliance constellations on firm performance✤ Which centrality mechanism is most crucial? How do they interact?✤ How does the centrality performance relation change from network to constellation?✤ Are there any influencing variables?
    23. 23. Method
    24. 24. Method✤ 1. Find an appropriate industry which supports a constellation/ network analysis.
    25. 25. Method✤ 1. Find an appropriate industry which supports a constellation/ network analysis.✤ 2. Build a network.
    26. 26. Method✤ 1. Find an appropriate industry which supports a constellation/ network analysis.✤ 2. Build a network.✤ 3. Calculate the network centrality values
    27. 27. Method✤ 1. Find an appropriate industry which supports a constellation/ network analysis.✤ 2. Build a network.✤ 3. Calculate the network centrality values✤ 4. Find and calculate the performance variables
    28. 28. Method✤ 1. Find an appropriate industry which supports a constellation/ network analysis.✤ 2. Build a network.✤ 3. Calculate the network centrality values✤ 4. Find and calculate the performance variables✤ 5. Performing a regression analysis
    29. 29. Airline Constellation Network
    30. 30. Building the Code-Share Alliance Network
    31. 31. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights
    32. 32. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights
    33. 33. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights
    34. 34. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights✤ Step 2: Build a node matrix for the Network (287x287) and Constellations (53x53)
    35. 35. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights✤ Step 2: Build a node matrix for the Network (287x287) and Constellations (53x53)
    36. 36. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights✤ Step 2: Build a node matrix for the Network (287x287) and Constellations (53x53)
    37. 37. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights✤ Step 2: Build a node matrix for the Network (287x287) and Constellations (53x53)✤ Step 3: Plug-in the matrices in the social network analysis software
    38. 38. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights✤ Step 2: Build a node matrix for the Network (287x287) and Constellations (53x53)✤ Step 3: Plug-in the matrices in the social network analysis software
    39. 39. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights✤ Step 2: Build a node matrix for the Network (287x287) and Constellations (53x53)✤ Step 3: Plug-in the matrices in the social network analysis software
    40. 40. Building the Code-Share Alliance Network✤ Step 1: Collecting the Codeshare Flights✤ Step 2: Build a node matrix for the Network (287x287) and Constellations (53x53)✤ Step 3: Plug-in the matrices in the social network analysis software
    41. 41. Calculating the Centrality Mechanisms
    42. 42. Calculating the Centrality Mechanisms
    43. 43. Calculating the Centrality Mechanisms Mechanism Subsection Measure Direct Access Degree CentralityResource Access Speed of Access Closeness Centrality Quality of Access Betweenness Centrality Trust Closeness Centrality Status Eigenvector Centrality Power Power/control Bonacich Power Centrality
    44. 44. Calculating the Centrality Mechanisms Mechanism Subsection Measure Direct Access Degree CentralityResource Access Speed of Access Closeness Centrality Quality of Access Betweenness Centrality Trust Closeness Centrality Status Eigenvector Centrality Power Power/control Bonacich Power Centrality
    45. 45. Calculating the Centrality Mechanisms Mechanism Subsection Measure Direct Access Degree CentralityResource Access Speed of Access Closeness Centrality Quality of Access Betweenness Centrality Trust Closeness Centrality Status Eigenvector Centrality Power Power/control Bonacich Power Centrality
    46. 46. Calculating the Centrality Mechanisms Mechanism Subsection Measure Direct Access Degree CentralityResource Access Speed of Access Closeness Centrality Quality of Access Betweenness Centrality Trust Closeness Centrality Status Eigenvector Centrality Power Power/control Bonacich Power Centrality
    47. 47. Calculating the Centrality Mechanisms Mechanism Subsection Measure Direct Access Degree CentralityResource Access Speed of Access Closeness Centrality Quality of Access Betweenness Centrality Trust Closeness Centrality Status Eigenvector Centrality Power Power/control Bonacich Power Centrality
    48. 48. Calculating the Centrality Mechanisms Mechanism Subsection Measure Direct Access Degree CentralityResource Access Speed of Access Closeness Centrality Quality of Access Betweenness Centrality Trust Closeness Centrality Status Eigenvector Centrality Power Power/control Bonacich Power Centrality
    49. 49. Calculating the Centrality Mechanisms Mechanism Subsection Measure Direct Access Degree CentralityResource Access Speed of Access Closeness Centrality Quality of Access Betweenness Centrality Trust Closeness Centrality Status Eigenvector Centrality Power Power/control Bonacich Power Centrality
    50. 50. The Performance Variables
    51. 51. The Performance Variables
    52. 52. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    53. 53. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    54. 54. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    55. 55. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    56. 56. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    57. 57. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    58. 58. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    59. 59. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    60. 60. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    61. 61. The Performance Variables Operational Financial Performance Performance Revenues & Profitability KPIs Flight Operation KPIs Costs Gross Operating Net Income OperatingRevenues Expenses Profit Load Factor Passengers RPKs FTKs Cost Ratio Margin Margin Margin
    62. 62. The Performance Variables
    63. 63. The Performance Variables
    64. 64. Regressions5 types of Centrality vs 10 Performance variables vs 4 Models vs 2 Settings
    65. 65. Regressions5 types of Centrality vs 10 Performance variables vs 4 Models vs 2 Settings
    66. 66. Findings & Conclusions
    67. 67. Findings in the Constellation
    68. 68. Findings in the Constellation
    69. 69. Findings in the Constellation✤ All mechanisms and types of constellation centrality are required for the best firm performance
    70. 70. Findings in the Constellation✤ All mechanisms and types of constellation centrality are required for the best firm performance✤ Power is the strongest centrality determinant of firm performance in a constellation.
    71. 71. Findings in the Constellation✤ All mechanisms and types of constellation centrality are required for the best firm performance✤ Power is the strongest centrality determinant of firm performance in a constellation.✤ Trust is the second most important determinant of a constellation firm’s performance.
    72. 72. Findings in the Constellation✤ All mechanisms and types of constellation centrality are required for the best firm performance✤ Power is the strongest centrality determinant of firm performance in a constellation.✤ Trust is the second most important determinant of a constellation firm’s performance.✤ Of the Resource Access sub-mechanisms Speed of Access ties trust in second place, Quality of Access remains mostly insignificant and Direct Access is important yet too multi-collinear to the other centrality variables to be ranked.
    73. 73. Findings in the Constellation✤ All mechanisms and types of constellation centrality are required for the best firm performance✤ Power is the strongest centrality determinant of firm performance in a constellation.✤ Trust is the second most important determinant of a constellation firm’s performance.✤ Of the Resource Access sub-mechanisms Speed of Access ties trust in second place, Quality of Access remains mostly insignificant and Direct Access is important yet too multi-collinear to the other centrality variables to be ranked.✤ Status was found to quite strongly inhibit firm performance across the board.
    74. 74. The mediating effect of Time of Entry to the Constellation
    75. 75. The mediating effect of Time of Entry to the Constellation✤ The early members and founders are found to have a gained a profound first mover advantage over time. The 14.04% increase in explanation power of Model 3 shows it.
    76. 76. The mediating effect of Time of Entry to the Constellation✤ The early members and founders are found to have a gained a profound first mover advantage over time. The 14.04% increase in explanation power of Model 3 shows it.✤ In particular Resource Access, in particular Quality of Access, becomes over time the single most important influencer of firm performance.
    77. 77. The comparison with the Alliance Network results
    78. 78. The comparison with the Alliance Network results
    79. 79. The comparison with the Alliance Network results vs
    80. 80. The comparison with the Alliance Network results vs
    81. 81. The comparison with the Alliance Network results✤ Trust in Alliance Network has a considerably reduced impact on performance vs
    82. 82. The comparison with the Alliance Network results✤ Trust in Alliance Network has a considerably reduced impact on performance✤ Quality of Access on the other hand plays a much more critical role in the Alliance Network vs
    83. 83. The comparison with the Alliance Network results✤ Trust in Alliance Network has a considerably reduced impact on performance✤ Quality of Access on the other hand plays a much more critical role in the Alliance Network vs✤ Status in Alliance Networks is an important positive influence of performance
    84. 84. The Dark sides of Centrality
    85. 85. The Dark sides of Centrality✤ The Expense anomaly: the results showed an almost perennial positive relation between centrality and expenses. This means that being central in both Networks and Constellation increases the firm’s costs. There are 2 main explanations: the costs of network maintenance and the protection costs from the many ‘leakage points’.
    86. 86. The Dark sides of Centrality✤ The Expense anomaly: the results showed an almost perennial positive relation between centrality and expenses. This means that being central in both Networks and Constellation increases the firm’s costs. There are 2 main explanations: the costs of network maintenance and the protection costs from the many ‘leakage points’.✤ Status in the Constellation shows how being connected to other powerful players increases the risk of exploitation by ‘corporate sharks’ and ‘structural equivalence’.
    87. 87. Thesis Contributions
    88. 88. Contribution to the Alliance Network Literature
    89. 89. Contribution to the Alliance Network Literature✤ Consolidation of separate research. Through the results we are now able to understand the unique interaction and importance of the previously independently researched centrality mechanisms.
    90. 90. Contribution to the Alliance Network Literature✤ Consolidation of separate research. Through the results we are now able to understand the unique interaction and importance of the previously independently researched centrality mechanisms.✤ Establishment of a ranking of importance of the centrality performance drivers in a network: 1. Power, 2. Resource Access: Quality of Access, 3. Status, 4. Trust
    91. 91. Contribution to the Alliance Network Literature✤ Consolidation of separate research. Through the results we are now able to understand the unique interaction and importance of the previously independently researched centrality mechanisms.✤ Establishment of a ranking of importance of the centrality performance drivers in a network: 1. Power, 2. Resource Access: Quality of Access, 3. Status, 4. Trust✤ The confirmation of the ‘dark side of centrality’ as Expenses are found to increase with firm centrality.
    92. 92. Contribution to the Alliance Constellation Literature
    93. 93. Contribution to the Alliance Constellation Literature✤ It is the first empirical proof of structural centrality having an effect on firm performance in constellations.
    94. 94. Contribution to the Alliance Constellation Literature✤ It is the first empirical proof of structural centrality having an effect on firm performance in constellations.✤ More specifically it shows the ranking of: 1. Quality of Access over time, 2. Power, 3. Trust & Speed of Access
    95. 95. Contribution to the Alliance Constellation Literature✤ It is the first empirical proof of structural centrality having an effect on firm performance in constellations.✤ More specifically it shows the ranking of: 1. Quality of Access over time, 2. Power, 3. Trust & Speed of Access✤ It extends the knowledge on the mediating effect of time of entry
    96. 96. Contribution to the Alliance Constellation Literature✤ It is the first empirical proof of structural centrality having an effect on firm performance in constellations.✤ More specifically it shows the ranking of: 1. Quality of Access over time, 2. Power, 3. Trust & Speed of Access✤ It extends the knowledge on the mediating effect of time of entry✤ An additional force of the ‘dark side of centrality’ was discovered in the constellation, the fallacy of status.
    97. 97. Contribution to the Management Practice
    98. 98. Contribution to the Management Practice✤ The results of the Network and the Constellation allow managers to gain insights for the simultaneous management of a firm’s alliance network and constellation partners.
    99. 99. Contribution to the Management Practice✤ The results of the Network and the Constellation allow managers to gain insights for the simultaneous management of a firm’s alliance network and constellation partners.✤ Managers need to pay attention to balance simultaneously two opposite processes: Status & Quality of Access in its network activities and build trust to reinforce the resource access over time in the constellation.
    100. 100. Contribution to the Management Practice✤ The results of the Network and the Constellation allow managers to gain insights for the simultaneous management of a firm’s alliance network and constellation partners.✤ Managers need to pay attention to balance simultaneously two opposite processes: Status & Quality of Access in its network activities and build trust to reinforce the resource access over time in the constellation.✤ Managers are warned of the dangers of having a high status centrality, over- investing in direct access conduits and joining a constellation late.
    101. 101. Limitations 24
    102. 102. Limitations✤ The Code-share Network is not a comprehensive representation of the depth of the airline constellation alliances which are not restricted to codesharing practices exclusively. 24
    103. 103. Limitations✤ The Code-share Network is not a comprehensive representation of the depth of the airline constellation alliances which are not restricted to codesharing practices exclusively.✤ Endogeneity: 1. Simultaneity of centrality/performance, 2. unobserved heterogeneity, the possibility of another actor characteristic that translates centrality into better performance. 24
    104. 104. Future Research
    105. 105. Future Research✤ Use more fine grained and advanced financial ratios
    106. 106. Future Research✤ Use more fine grained and advanced financial ratios✤ Test whether the centrality/performance relationship is more influenced by firm Size or Time spent in the constellation
    107. 107. Future Research✤ Use more fine grained and advanced financial ratios✤ Test whether the centrality/performance relationship is more influenced by firm Size or Time spent in the constellation✤ Collect longitudinal data & cross industry analysis
    108. 108. Future Research✤ Use more fine grained and advanced financial ratios✤ Test whether the centrality/performance relationship is more influenced by firm Size or Time spent in the constellation✤ Collect longitudinal data & cross industry analysis✤ Alliance network and constellation literature needs to be consolidated by integrating and developing unifying frameworks in a structured scientific way. In particular the insights of Organisational Network theory, Social Capital theory and the Strategic Management Alliance literature
    109. 109. Thank you for your attention!I hope you enjoyed the show
    110. 110. Sources✤ http://www.leydesdorff.net/journals/socnetw/index.htm✤ http://www.youtube.com/watch?v=6v9CNKrrQDY
    111. 111. Regression Analysis
    112. 112. Regression Analysis✤ Model 1 shows the results of the regressions of the control variables with the performance ones. The R2 of Size and Age on the average the performance variables is 43.96%.
    113. 113. Regression Analysis✤ Model 1 shows the results of the regressions of the control variables with the performance ones. The R2 of Size and Age on the average the performance variables is 43.96%.✤ Model 2 illustrates the results of the regression of the centrality mechanisms on top of the control variables. The R2 of the model is of 54.69% which is a 24.41% increase from Model 1.
    114. 114. Regression Analysis✤ Model 1 shows the results of the regressions of the control variables with the performance ones. The R2 of Size and Age on the average the performance variables is 43.96%.✤ Model 2 illustrates the results of the regression of the centrality mechanisms on top of the control variables. The R2 of the model is of 54.69% which is a 24.41% increase from Model 1.✤ Model 3 exhibits the results of the all the control and centrality variables with the influencing mediating variable of ‘time of entry’ to the constellation. The explanation power of this model rises to 62.37% which means that the mediating variable is responsible for a 14.04% increase from Model 2.
    115. 115. Regression Analysis✤ Model 1 shows the results of the regressions of the control variables with the performance ones. The R2 of Size and Age on the average the performance variables is 43.96%.✤ Model 2 illustrates the results of the regression of the centrality mechanisms on top of the control variables. The R2 of the model is of 54.69% which is a 24.41% increase from Model 1.✤ Model 3 exhibits the results of the all the control and centrality variables with the influencing mediating variable of ‘time of entry’ to the constellation. The explanation power of this model rises to 62.37% which means that the mediating variable is responsible for a 14.04% increase from Model 2.✤ Model X is a comparison model created to analyse the centrality variables without the disturbing effect of the control variable of Size in order to understand the pure interaction dynamics of the centrality variables on performance. Furthermore it allows for a clear comparison between the constellation’s and the network’s individual centrality mechanisms. The average R2 of the the Model X constellation is 33.62% which is marginally higher than Model X network’s 32.78%.

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