LAUSR

Organizations create networks with one another, and these networks may in turn shape the organizations involved. Until recently, such complex dynamic processes could not be rigorously empirically analyzed because of a lack of suitable modeling and validation methods. Using stochastic actor-oriented models and unique longitudinal survey data on the changing structure of interfirm production networks in the automotive industry in Japan, this paper illustrates how to quantitatively assess and validate (1) the dynamic micro-mechanism by which organizations form their networks and (2) the role of the dynamic network structures in organizational performance. The applied model helps to explain the endogenous processes behind the recent diversification of Japanese automobile production networks. Specifically, testing the effects of network topology and network diffusion on organizational performance, the novel modeling framework enables us to discern that the restructuring of interorganizational networks led to the increase of Japanese automakers’ production per employee, and not the reverse. Traditional models that do not allow for interaction between interorganizational structure and organizational agency misrepresent this mechanism.