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Type: Conference paper
Title: Capital investment and network logic
Author: Medlin, C.
Moller, K.
Citation: Proceedings of the 25th Annual IMP Conference, 2009: pp.1-13
Publisher: IMP
Publisher Place: online
Issue Date: 2009
Conference Name: IMP Conference (25th : 2009 : Marseille, France)
Statement of
Christopher John Medlin and Kristian Möller
Abstract: The industrial network framework is discussed from the perspective of capital investment theory. To our knowledge this is the first time that these academic fields are considered together. The theory and method described allow an understanding of the forward projection of firm networks from a specific time, so providing a new way to examine the dynamics of networks. Capital investment decisions are usually irreversible and this creates some assurance concerning the future for parts of the business network. The ‘shadow’ of a past capital investment decision is projected into the future, providing ‘net momentum’. Conversely, the ‘shadow’ of the future acts as a form of ‘environmental power’ that constrains and enables other firms’ interactions in the present. Together these effects have a strong impact on network logic. Value nets are applied as a formal way of bounding parts of the network so that strategic investment decisions can be formalized. A new definition of net centrality is proposed based on a time perspective. Net time centrality is defined by resource connections between firms, with the connections weighted by the remaining investment period at a specific point in time. The variations in investment time periods across the actors in a value net will need to be coordinated for each firm to achieve reasonable returns. The firm with the largest investment in future resources is likely to have considerable strategic control within the value net and so is likely to most strongly influence the timing of change by the firms in the net.
Keywords: future network; real options; net momentum; net time centrality; environmental power; value net
Rights: Copyright status unknown
RMID: 0020094691
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Appears in Collections:Business School publications

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