Corporate Governance, Business Strategy, and the Dynamics of Networks: a Theoretical Model and Application to the British Cotton Industry, 1830–1980

Abstract

This article develops a theoretical model to explain the variation of network structures and network dynamics according to industry and firm resource characteristics and the extent of resource dependency. It incorporates an accountability and corporate governance dimension and thereby seeks to explain the long-run processes of industrial and corporate change. To verify the theoretical framework, the article examines the long-run evolution of network structures in the British cotton industry. It shows how this industry developed network structures as part of the process of industrialization and then goes on to explain how these structures prevented flexible and timely responses to the later challenges of restructuring and re-equipping. The article also shows that the application of the theoretical model offers an opportunity to reinterpret the history of this archetypal industry.

Corporate governance, accountability and mechanisms of accountability: an overview

“…For example, Toms and Filatotchev (2004) Roberts et al, (2005) challenged the dominance of agency theory and called for greater theoretical pluralism in studying the dynamic processes of accountability in the boardroom.…”

Industrial districts as organizational environments: Resources, networks and structures

“…Both RBV and the capital dependency theory are useful in a dynamic perspective as resources are inevitably subject to time-based variations of technology and demand conditions inducing product life-cycle constraints. While both are well established in the strategic management literature, there have been relatively few attempts to synthesise them, least of all in a dynamic historical perspective (Toms and Filatotchev 2004). This paper extends the Toms and Filatotchev dynamic resourcegovernance model incorporating the spatiality of IDs.…”

“…Thus, district dynamics are also dependent on governance forms and arrangements, with externalization dependent on the co-ordination of interdependent but institutionally dispersed resources. Previous research has conceptualized networks as modes of organizing inter-firm activities through coordination and cooperation (Grandori and Soda 1995: 184;Toms and Filatotchev, 2004), an approach extended to districts in the present paper.…”

“…From this perspective, 'relational assets', such as networks, become vital. But the natural spatial limits to trust ensure that networks may also restrict access to such scarce resources (Cookson 2003;Toms and Filatotchev 2004). As Breschi and Lissoni argue, if 'epistemic communities' will not disclose their 'common codebooks' then they have the power to act in highly 'exclusionary' ways (2001: 989).…”

“…Thus, this paper focuses on the resource bases and the resources dependencies of both firms and districts and on how these interact with each other and further drivers to shape the dynamic processes at work in districts. In doing so, we build on Toms and Filatotchev's (2004) framework for the exploration of the dynamic linkages between governance, strategy and networks. This approach draws explicitly on resource based views (RBV) of the firm and resource dependency (RD) theory.…”