Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2012
  • Article
  • Industrial and Corporate Change

The Architecture of Transaction Networks: A Comparative Analysis of Hierarchy in Two Sectors

By: Jianxi Luo, Carliss Y. Baldwin, Daniel E. Whitney and Christopher L. Magee
  • Format:Print
ShareBar

Abstract

Many products are manufactured in networks of firms linked by transactions, but comparatively little is known about how or why such transaction networks differ. This article investigates the transaction networks of two large sectors in Japan at a single point in time. In characterizing these networks, our primary measure is "hierarchy," defined as the degree to which transactions flow in one direction, from "upstream" to "downstream." Our empirical results show that the electronics sector exhibits a much lower degree of hierarchy than the automotive sector because of the presence of numerous inter-firm transaction cycles. These cycles, in turn, reveal that a significant group of firms have two-way "vertically permeable boundaries": (i) they participate in multiple stages of an industry's value chain, hence are vertically integrated, but also (ii) they allow both downstream units to purchase intermediate inputs from and upstream units to sell intermediate goods to other sector firms. We demonstrate that the 10 largest electronics firms had two-way vertically permeable boundaries while almost no firms in the automotive sector had adopted that practice.

Keywords

Transactions; Hierarchy; Industry Architecture; Innovation; Networks; Market Transactions; Vertical Integration; Industry Structures; Innovation and Invention; Auto Industry; Electronics Industry; Japan

Citation

Luo, Jianxi, Carliss Y. Baldwin, Daniel E. Whitney, and Christopher L. Magee. "The Architecture of Transaction Networks: A Comparative Analysis of Hierarchy in Two Sectors." Industrial and Corporate Change 21, no. 6 (December 2012): 1307–1335.
  • Find it at Harvard
  • Purchase

About The Author

Carliss Y. Baldwin

→More Publications

More from the Authors

    • 2021
    • Faculty Research

    Computer-Implemented Methods and Systems for Measuring, Estimating, and Managing Economic Outcomes and Technical Debt in Software Systems and Projects: US Patent 11,126,427 B2

    By: Daniel J. Sturtevant, Carliss Baldwin, Alan MacCormack, Sunny Ahn and Sean Gilliland
    • 2020
    • Faculty Research

    Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Strategy without Numbers

    By: Carliss Y. Baldwin
    • 2020
    • Faculty Research

    Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 6 The Value Structure of Technologies, Part 1: Mapping Functional Relationships

    By: Carliss Y. Baldwin
More from the Authors
  • Computer-Implemented Methods and Systems for Measuring, Estimating, and Managing Economic Outcomes and Technical Debt in Software Systems and Projects: US Patent 11,126,427 B2 By: Daniel J. Sturtevant, Carliss Baldwin, Alan MacCormack, Sunny Ahn and Sean Gilliland
  • Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Strategy without Numbers By: Carliss Y. Baldwin
  • Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 6 The Value Structure of Technologies, Part 1: Mapping Functional Relationships By: Carliss Y. Baldwin
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College