The effects of product development network positions on product performance and confidentiality performance

Abstract Product development networks facilitate access to information, knowledge, and technologies that are otherwise difficult to obtain during innovation activities. Most current research on networks focuses on studying product performance benefits, but ignores the potential negative effects on confidentiality performance. Addressing this gap, we investigate how two key components of a firm's network position—network centrality and structural holes—affect both product and confidentiality performance. To do this, we assemble a panel of 1,468 electronic video games designed and developed by 591 developers over an 11‐year period. We find that higher network centrality relates to better product performance but worse confidentiality performance. Meanwhile, firms spanning more structural holes enjoy better performance across both dimensions. In an exploratory analysis, we find that product novelty strengthens the positive relationship between network centrality and product performance but mutes the positive relationship between structural holes and product performance. We discuss the importance of these findings to the literature on innovation in inter‐organizational networks.