Case study on the mechanism for influence of network embeddedness on firms' performance

Chinese manufacturing firms have to undergo strategy transformation because those traditional low-cost manufacturing strategies became more and more incompetent with the increased cost of resources, fierce competitive pressures and new emerging low-cost manufacturing regions. In this paper, we believe that the strategic transformation of manufacturing firms will be influenced by their network embeddedness relationships. Based on prior researches, we conducted exploratory case study to examine how network embeddedness influences firm performance. Four typical manufacturing firms were selected. And with the data form those four samples we analyzed the links between network embeddedness and differentiation strategies as well as the links between differentiation strategies and firm performance. After that, five propositions were proposed, and a conceptual model was formulated based on the summarization of the five propositions. We found that network embeddedness has impacts on the firm performance through its influence on the formulation and implementation of differentiation strategies. Our research has made insightful expansion and complementation to existing theories.