New Europe College Regional Program Yearbook 2001-2002

DENIZ EYLEM YÖRÜK
2.3 Explaining Industrial Upgrading at the Firm Level by Strategic
Networks: External Dynamics
The growth of the firm in transition economies has been divided into
three categories by Peng and Heath (1996): first, generic expansion, as
discussed by the resource-based view (Penrose, 1959; Wernerfelt, 1984;
Chandler, 1996) and followed by the capabilities literature; second,
mergers and acquisitions (minor or major) where the firms create bigger
oligopolistic units by merging or subsidiaries or affiliates (i.e., holdingtype
structures) by acquiring shares in an existing firm; and third, networks
which are treated as either the intermediate form between market and
hierarchy in transaction cost economics (Contractor and Lorange, 1988)
or a new phenomenon in their own right (Chesnais, 1996). Recently internal
growth generated by the capabilities discussed above has become a sine
qua non for firms to operate on the frontier of the market, if not of the
technology, in the CEECs. Generally, in the last two decades there is a
global tendency for the reinforcement of enterprise growth strategy to be
strongly predominated by networks; in the most developed countries,
moreover these networks are increasingly characterized by non-market
activities. Also, in the 1990s, to some extent, the MNEs have transformed/
decentralized their internal structures, becoming networked firms (Buckley
and Casson, 1998). Yet, as will be shown, the MNEs in the CEECs –
particularly in the food processing industry – hardly provide evidence of
this transformation into ‘networked MNE’ structures.
In the 1980s, scholars have been interested in the simple buyer-supplier
relationships that inspired the huge business networks literature, which
in particular focuses on the co-operative marketing activities of firms,
and the mechanisms by which they stimulate the development of further
networking activity (e.g., in the areas of production specialisation,
knowledge and technology transfer, etc.). In the 1990s, the profile of the
networks has been altered in response to the demands of the developing
knowledge-based economy, as firms have begun to search for new
external knowledge through differing means than they have employed
inside the firm. As mentioned above, the purpose of various types of
networks is to enhance and facilitate the ability/potential to extract
knowledge from these relationships and then absorb/integrate it into the
pool of knowledge within the firm. The crucial role of knowledge
integration (as well as acquisition and accumulation) has been emphasized
in the knowledge management literature.
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