The Dynamics of Interfirm Networks along the Industry Life Cycle: The Case of the Global Video Game Industry 1987-2007

Abstract

In this article, we study the formation of network ties between firms along the life cycle of a creative industry. We focus on three mechanisms that drive network formation: (i) network endogeneity which stresses a path-dependent change originating from previous network structures, (ii) five forms of proximity (e.g. geographical proximity) which ascribe tie formation to the similarity of attributes of firms and (iii) individual characteristics which refer to the heterogeneity in the capabilities of firms to exploit external knowledge. The article employs a stochastic actor-oriented model to estimate the – changing – effects of these mechanisms on the formation of the interfirm network in the global video game industry from 1987 to 2007. Our findings indicate that, on average, the direction of the effects of the three mechanisms are stable over time, but that their weights change with the degree of maturity of the industry. To an increasing extent, video game firms tend to prefer to partner over short distances and with more cognitively similar firms as the industry evolves.