The Effects of S-D Logic on Interfirm Relationships: An Abstract

Drawing on sociometric traditions, this research examines interfirm relationships using longitudinal goods and services flow data across two value networks between firms and their strategic suppliers in light of the movement toward a service-dominant (S-D) logic-based approach to doing business. The findings suggest that firms adopting this approach are more likely to garner positional advantage (moving to the network’s core), while firms maintaining a goods-dominant (G-D) approach are less likely to win positional advantage. The findings also suggest that both networks are dominated by new S-D logic adopting entrants, who enjoy more positional advantage in the second time period. Core firms are more likely to remain in the value network, although many transitioned to its periphery. In addition, peripheral firms—which are more inclined to maintain a G-D logic-based approach—are more likely to be shaken out of the network. Moreover, while firms in advantageous positions are not assured of continued incumbency, they are more likely to remain entrenched despite having not completely adopted an S-D logic-based approach. Finally, the results demonstrate that networks become multilayered with the emergence of a service-driven economy, as each transitioned into a three-layered value network. The study asserts that firms can optimize their relational strategies by considering the hidden effects of positional advantage, coupled with embracing the S-D logic.

The main research questions addressed include: (1) What happens to the structure of interfirm relationships with the advent of changes to the way that firms do business? And, (2) what are the theoretical and managerial implications of these changes to value network structures? By subjecting relational data to a network analysis, the research presented provides strategic insights into how firms can capitalize on network positions while increasing their likelihood of long-term viability.

Using core-periphery analysis, the effects of transitioning from a G-D to an S-D logic are expressed as a change in a firm’s positional advantage from t1 to t2. The results from the core-periphery analyses summarize the firms’ change in positional advantage over time. In particular, new entrants to the core in t2 and firms remaining in the core from t1 to t2 have adopted an approach to doing business that resonates with S-D logic and are thus more likely to play a dominant role in the value network. However, firms maintaining a G-D logic or slowly transitioning from G-D to an S-D logic-based approach, but not fully appreciating the value of using open source platforms, for instance, were relegated to the periphery or were forced to join an external network. The results show that interfirm relationships can be conceptualized as containing core-peripheral structures, dominated by more adaptable, service-oriented firms that facilitate discontinuous transformations (Vargo & Lusch, 2008).