Network cohesion in global expansion: An evolutionary view Faith Hatani a, *, Sara L. McGaughey b,1 a Manchester Business School, University of Manchester, Booth Street West, Manchester M15 6PB, UK b Department of International Business and Asian Studies, Griffith Business School, Griffith University, 170 Kessels Road, Nathan, QLD 4111, Australia 1. Introduction How organizations build and sustain competitive advantage across borders remains an enduring question of intense managerial and scholarly interest. In increasingly globalized markets, firms are interrelated with other firms. The resources and capabilities to which any one firm has access can extend well beyond that firm’s boundaries (Dyer & Singh, 1998). Competitive advantage does not reside in a single firm’s capabilities and resources, but in interfirm networks that compete with other networks (Gomes-Casseres, 1994; Gulati, Nohria, & Zaheer, 2000). Deployment of the network as a cohesive and coordinated organization is critical when the network operates globally (Chen, 2003). In response to diverse business environments and location-specific events, interfirm networks evolve over time. In emerging markets, network members will confront uncertainty across heterogeneous business conditions (Delios & Henisz, 2000; Hatani, 2009; Meyer, 2004), and need to coordinate a network-based division of labor and learning internationally. Maintaining network cohesion is essential in global expansion, and international competitive advantage is best understood in light of the evolution of the network, rather than a snapshot of a firm at a single point in time. In the paper, we explore this challenge by asking: How does global expansion, in particular entry into emerging markets, affect the cohesion of a large interfirm network, and with what consequences? We approach this question by, first, extending prior applica- tions of evolutionary theory at the functional (e.g., Fujimoto, 1999) or firm-level (e.g., Cui, 1998; Kogut & Zander, 1993; Zollo & Winter, 2002) to the network. The application of evolutionary theory to market entry allows us to move beyond firm-centric or ad hoc conceptualizations of international market entry, embedding market entry behavior in routines at a network level. We elaborate a cycle of network-level internationalization, in which learning and interfirm relationships play a key role. Our perspective thus complements recent understandings of internationalization em- phasizing networks, where the learning and commitment required to identify and exploit international opportunities takes place in relationships (Johanson & Vahlne, 2006, 2009). We then apply our perspective of network evolution in global expansion to analysis of a longitudinal case study of the Toyota Group, comprising Toyota Motor and its key suppliers. Drucker (1972) once described the automotive industry as ‘‘the industry of industries’’ in which a number of firms are interrelated, forming large supply networks across borders. Over the past few decades, the Toyota Group has been an exemplar of a cohesive and highly effective learning network (e.g., Dyer & Nobeoka, 2000). However, relational patterns in the Toyota Group have evolved and changed over the Group’s history, with implications for network cohesion. Journal of World Business 48 (2013) 455–465 A R T I C L E I N F O Keywords: MNEs Supply networks Network cohesion Foreign expansion Evolutionary view A B S T R A C T Increasingly, competitive advantage does not reside in a single firm’s capabilities or resources, but in interfirm networks that compete with other networks. Recognizing that deployment of the network as a cohesive and coordinated organization is critical when it operates globally, we ask: How does global expansion, in particular entry into emerging markets, affect the cohesion of a large interfirm network and with what consequences? We examine this question through an evolutionary perspective, conceptualizing the process of variation–selection–replication–retention as one cycle of a network-level routine of global expansion. Movement through the cycle accelerates with high levels of network cohesion such that market entry and foreign establishment may become more rapid. We present a longitudinal analysis of the Toyota Group from founding through to its more recent entry into emerging markets, and identify the dangers of a diversion in any stage of this network routine. Our findings highlight the role uncertainty in the emerging market context and speed-based competition plays in the loss of network cohesion, and point to the ongoing, and possibly increased, importance of the core firm’s role in maintaining network cohesion and global competitive advantage. ß 2012 Elsevier Inc. All rights reserved. * Corresponding author. Tel.: +44 161 306 6602; fax: +44 161 306 3505. E-mail addresses: faith.hatani@mbs.ac.uk (F. Hatani), s.mcgaughey@griffith.edu.au (S.L. McGaughey). 1 Tel.: +61 07 373 54889; fax: +61 07 373 55111. Contents lists available at SciVerse ScienceDirect Journal of World Business jo u r nal h o mep age: w ww.els evier .co m/lo c ate/jwb 1090-9516/$ – see front matter ß 2012 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.jwb.2012.09.002