Abstract

An important operational aspect of international business is the coordination of widely dispersed resources of their networks of relationships with partners. Such interdependencies affect their ability to compete and/or create economic wealth. In order to examine the significance of network relationships in alliance capitalism and foreign direct investment (FDI), a network perspective as governance structure is used to examine the effects of resource interdependencies on relationship value. The article provides insights into alliance capitalism of interfirm relations for understanding implications for relationship value and increasing FDI between firms in industrial clusters of small and medium sized firms. On the basis that flows of local and foreign investment could be from internal or external partners particularly for transnational corporations, research hypotheses are developed and examined in the context of clusters of high technology firms. The results show that resource interdependencies of network relationships support the resource base of a firm and enhance its competencies. There is evidence that the variety of firms and their network resources have a positive effect on alliance capitalism in terms of cost efficiency of asset complementarity and network capabilities. The article considers the implications of focal and network relationships for locational decisions of firms and for public policy and investment promotion.