Brass 2004

Taking Stock of Networks and Organizations: A Multilevel Perspective
Author(s): Daniel J. Brass, Joseph Galaskiewicz, Henrich R. Greve and Wenpin Tsai
Reviewed work(s):
Source: The Academy of Management Journal, Vol. 47, No. 6 (Dec., 2004), pp. 795-817
Published by: Academy of Management
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Academy ofManagement Journal
2004, Vol. 47, No. 6, 795-817.
TAKING STOCK OF NETWORKS AND ORGANIZATIONS:

A MULTILEVEL PERSPECTIVE
DANIEL J. BRASS
University of Kentucky
JOSEPHGALASKIEWICZ
University of Arizona
HENRICH R. GREVE
Norwegian School of Management BI
WENPIN TSAI
Pennsylvania State University
The central argument of network research is that actors are embedded in networks of
interconnected social relationships that offer opportunities for and constraints on
behavior. We review research on the antecedents and consequences of networks at the
interpersonal, interunit, and interorganizational levels of analysis, evaluate recent
theoretical and empirical trends, and give directions for future research, highlighting
the importance of investigating cross-level network phenomena.
A quarter century of social network research in nected relationships that provide opportunities for
management journals has resulted in the accumu and constraints on behavior. This perspective dif
lation of many findings in recent years (see, for fers from traditional in organizational
perspectives
example, Borgatti and Foster [2003] for a recent studies that examine individual actors in isolation.
review). Network studies have appeared regularly The difference is the focus on relations rather than
in management journals, contributing to the inves attributes, on structured of interaction
patterns
tigation of a wide range of organizational topics rather than isolated individual actors. It is the in
across different levels of analysis (for a discussion tersection of relationships that defines an individ
of the concepts, techniques and measures in net ual's in a a role in an
centrality group, group's
work analysis, see, for example, Wasserman and
organization (White, Boorman, & Breiger, 1976), or
Faust [1994]). The purpose of this article is to eval an organization's in a market
niche (McPherson,
uate organizational network research. Where have
1983).
we been? What do we know? Where are we going?
We define a network as a set of nodes and the set
To that end, we take stock of the results of organi
of ties representing some relationship, or lack of
zational network research at the interpersonal, in
relationship, between the nodes. We refer to the
terunit, and interorganizational levels of analysis,
nodes as actors (individuals, work units, or organi
focusing on the antecedents and consequences of
zations). The particular content of the relationships
networks at each level. We hope to generate future
research directions where network represented by the ties is limited only by a re
by assessing searcher's are stra
imagination. Typically studied
scholarship currently is.
Network research embraces a distinctive tegic alliances and collaborations, flows of informa
per
tion (communication), affect (friendship), goods
spective that focuses on relations among actors,
and services (work flow), and influence (advice),
whether they are individuals, work units, or orga
to and overlapping group memberships such as
nizations. According the network perspective,
actors are embedded within networks of intercon boards of directors. We consider ties that are main
tained over time, thus establishing a relatively sta
ble pattern of network interrelationships.
Using this network perspective, organizational
The order of authorship is alphabetical, reflecting
from the four authors. We thank all researchers have been able to explain variance in
equal contributions
reviewers and authors who helped make this special such traditional organizational outcomes as indi
research forum possible, and above all we thank Tom Lee vidual satisfaction, performance, and job exit;
for his strong support throughout this process. group structure and performance; and organiza
795
796 Academy of Management Journal December
tional innovation and survival. Likewise, research (1977) to this process

referred as "homosocial re
has focused on the antecedents of networks. We production." Thus, an individual's similarity in re
organize our review around antecedents and con lation to the modal attributes of an organization (or
sequences of networks by levels of analysis. We a group) may determine the extent to which he or
the level of analysis she is central or integrated in the interpersonal
begin with interpersonal (in
dividual people as actors), then consider interunit network.
networks (groups as actors), and follow with the Personality. Many radical structuralists would
level
of analysis (organizations argue that is a result of network posi
interorganizational personality
as actors). In each case, we consider the anteced tion. However, research indicates that personality
ents and consequences, noting what researchers can affect social network patterns. Mehra, Kilduff,
know, what they don't, and future directions for and Brass (2001) found that people in the center of
research. the networks they studied scored high on self-mon
itoring, a stable personality characteristic that
indicates the extent to which people monitor envi
INTERPERSONAL NETWORKS ronmental cues and modify their behavior to meet
external expectations. In a study that appears in
Antecedents of Interpersonal Networks
this issue, Klein, Lim, Saltz, and Mayer (2004)
Actor similarity. Similar people tend to interact found that several personality characteristics
with each other. Similarity is thought to ease com predicted centrality in advice, friendship, and ad
munication, increase the predictability of behavior, versarial networks within teams. In addition, per
and foster trust and reciprocity. A good deal of sonality has been show to be related to accurate
research has supported this proposition, and it is a perceptions of networks (Casciaro, 1998).
basic assumption in many theories (Blau, 1977; Proximity and organizational structure. The fo
Davis, 1966; Granovetter, 1973; Homans, 1950). cus on actor similarity and personality implies that
has been operationally defined on such interactions within organizations are voluntary.
Similarity
dimensions as age, sex, education, prestige, social However, organizational structure shapes networks
class, tenure, and occupation (Carley, 1991; Ibarra, in organizations. Labor is divided, positions are
1993; Laumann, 1966; Lazerfield & Merton, 1954; formally differentiated both horizontally (by work
McPherson & Smith-Lovin, 1987; McPherson, flow and task design) and vertically (by hierarchy),
Smith-Lovin, & Cook, 2001). For example, Brass and means for coordinating among differentiated
(1985a) and Ibarra (1992) found for ho
evidence positions are specified. Formally differentiated po
mophily (interaction with similarothers) based on sitions locate individuals and groups in physical
in organizations, two largely seg space and at particular points in an organizations's
gender observing
regated networks, one predominately men, the work flow and hierarchy of authority, thereby re
other women, in different settings. Mehra, Kilduff, stricting their opportunity to interact with some
and Brass (1998) found that racial minorities were others and facilitating interaction with still others.
clustered on the periphery of networks. Also, re Because it would be difficult for a superior and
search on relational and organizational demogra subordinate directly linked by a formal hierarchy to
phy (Tsui & O'Reilly, 1989; Wagner, Pfeffer, & avoid interacting, it would not be surprising for an
O'Reilly, 1984) has been based on the homophily "informal" social network to shadow the formal
principle; ease of communication and social inte hierarchy of authority. For example, research has
gration have been the assumed mediating variables shown that social networks differ in organic and
in these studies. mechanistic organizations (Tichy & Fombrun,
Although there is extensive research on homoph 1979; Shrader, Lincoln, & Hoffman, 1989). In gen
ily in networks, it is often unclear which dimen eral these results suggest more unrestricted, flexi
sion of "similarity" will be manifest in a given ble interaction in organic organizations than in
context. It is important to note that mechanistic organizations. In addition, Lincoln
organizational
similarity is a relational concept; an individual can and Miller (1979) found that rank was related to
only be similar with respect to another individual, centrality in task and friendship networks. Al
and in relation to dissimilar others. That is, inter though sex and race were related to friendship net
is influenced to which an work Lincoln and Miller's results em
action by the degree centrality,
individual is similar to other individuals relative to phasize the extent to which organizational
how similar he or she is to everyone else (Mehra et structure constrains friendship as well as instru
al., 1998). Culture, selection, and socialization pro mental ties.
cesses and reward systems may cause an organiza Networks are influenced by the work flow re
tion to exhibit a modal pattern. Kanter quirements of organizations as well. Longitudinal
similarity
2004 Brass, Galaskiewicz, Gr?ve, and Tsai 797
studies have found that communication patterns behavior. Attitudes and behaviors change as a re
change when organizations adopt new technologies sult of networks. We now turn our attention to the
(Burkhardt & Brass, 1990; Papa, 1990). Recent consequences of interpersonal networks.
changes in communication technology, such as Attitude similarity. Theory and research have
electronic mail, have generated increased interest also noted that, just as similar actors are prone to
in technology's effects on communication networks interact, those who interact become more similar.
(Fulk & Steinfield. 1990). People are not born with their attitudes, nor do they
To the extent that formal structures situate actors develop them in isolation; attitude formation and
in physical and temporal space, they exert an ad change occur primarily through social interaction
ditional influence on network building. For exam (Erickson, 1988). As people seek to make sense of
ple, actors scheduled to work at the same time are reality, they compare their own perceptions with
more likely to communicate. Festinger, Schachter, those of others.
and Back (1950) established the link between phys Research on attitude similarity in organizations
ical proximity, interaction, and friendship. Their has focused on debate over whether attitudes are
research suggests that proximity is more important formed through direct interaction or through struc
than actor similarity or personality. More recently, tural equivalence. Structural refers to
equivalence
Borgatti and Cross (2003) found that physical prox the extent to which actors occupy similar positions
imity mediated the relationship between knowing or roles in a network. to Burt (1982),
According
what other actors know, valuing it, and timely ac actors compare their own attitudes and behaviors
cess to information seeking. Although the use of with those of others occupying similar roles, rather
telephones and electronic mail may moderate the than being influenced by direct communications
relationship between proximity and interaction, from others in dissimilar roles. Thus, we might
proximate ties are easier to maintain and more expect managers to have attitudes similar to other
likely to be strong, stable links (Monge & Eisenberg, managers' attitudes, rather than to subordinates'.
1987). It is also likely that proximity facilitates Studies by Walker (1985), Galaskiewicz and Burt
initial contact, whereas e-mail may help maintain (1991), and Burkhardt (1994) have supported the
relationships once they have formed. structural equivalence perspective, but studies by
Environmental factors. Mergers and acquisi Kilduff (1990), Rice and Aydin, (1991), Pastor,
tions are environmental jolts that can substantially Meindl, and Mayo (2002), and Umphress, Labi
change network patterns within an organization. anca, Brass, Kass, and Sch?lten (2003) have found
Danowski and Edison-Swift (1985) found dramatic support for the direct contact perspective. Al
changes in electronic mail usage following a though interest in the debate has waned, it is clear
merger. However, these changes were temporary, as that social networks can affect attitudes.
employees reverted to premerger patterns after a Job satisfaction. Perhaps the most frequently re
short time. Similarly, environmental events such as searched attitude in organizational studies is job
downsizing significantly affect intraorganizational satisfaction. Early laboratory studies (see Shaw
networks (Shah, 2000). [1964] for a review) indicated that central actors
There is evidence that national culture influ were more satisfied than peripheral actors in small
ences social network patterns within organizations. groups, yet field research results have been mixed.
For example, French employees prefer weak links In one of the few studies of job satisfaction con
at work, whereas Japanese workers tend to form ducted in the field, Roberts and O'Reilly (1979)
strong, multiplex ties (Monge & Eisenberg, 1987). found that relative isolates (people with zero or one
Given the Japanese group orientation to decision link) in an organization's communication network
making, as opposed to the individualistic emphasis were less satisfied than participants (those with
in the United States as a whole, we might expect two or more links). Morrison (2002) found that
density and interconnectedness to be greater in Jap organizational commitment (a construct related to
anese companies. Future research may fruitfully satisfaction) was associated with the
organizational
focus on the effects of both national and organiza closeness of friendship ties for organizational new
tional culture on interpersonal networks. comers. However, Brass (1981) found no relation
ship between centrality in the work flows of work
groups or and satisfaction.
of Interpersonal Networks departments employee
Consequences within an entire work flow
Centrality organization's
Established patterns of interaction become insti had a negative to satisfaction, a finding
relationship
tutionalized and take on the qualities of socially that may reflect the routineness of jobs associated
shared, structural facts. Network patterns emerge, with the core technology of an organization.
become routine, and both constrain and facilitate These mixed results suggest that interaction is
not always positive. Since Durkheim (1997/1951) onstrated how a lack of knowledge of the social
argued that social integration promotes mental network in a firm prevented a union from success
health, there been a long history
has of equating fully organizing employees.
social interaction with social support (Wellman, One's power also depends upon to whom one is
1992). Yet we have all experienced the obnoxious linked. Brass (1984) found that ties beyond work
coworker, the demanding boss, or the uncoopera group and work flow requirements were related to
tive subordinate. When possible, we tend to avoid In particular,
influence. closeness to the dominant
interaction with these people, thereby producing a in an organization
coalition was strongly related to
positive correlation between interaction, friend power and promotions. Men were more closely
ship, and job satisfaction. However, physical prox linked to this dominant coalition (composed of four
imity and organizational structure constrain the men) and were perceived as more influential than
voluntary nature of social interaction in organiza women (Brass, 1985a). Assuming that men domi
tions. The possibility that such "required" interac nate power positions in most organizations, women
tion may involve negative outcomes suggests the may be forced to forgo any preference for homoph
need for further research on the negative side of ily in order to build connections with dominant
social interaction (Labianca & Brass, 2004). A non coalitions. Thus, organizational context constrains
linear, inverted U-shaped relationship between preferences for homophily, especially for women
network centrality and job satisfaction may even and minorities (Ibarra, 1993). In suggesting that
tually be found. Isolation is probably negatively network position represented potential power (that
related to satisfaction, while a high degree of cen is, access to and control of resources), and that
trality may lead to interaction with unpleasant oth behavioral tactics represented the strategic use of
ers, conflicting expectations, and stress. resources, Brass and Burkhardt (1993) concluded
Power. A network perspective on power and in that behavioral tactics decreased in importance as
fluence has been the topic of much research. The network position increased in centrality.
finding that central network positions are associ Getting a job. Networks are valuable in job
ated with power has been reported for small, labo search and recruitment, particularly for high-pay
ratory work groups (Shaw, 1964) as well as for ing, high-responsibility jobs such as managerial po
interpersonal networks in organizations (Brass, sitions. Previous studies have shown that people
1984, 1985a; Brass & Burkhardt, 1993; Burkhardt & find jobs more effectively through weak ties (ac
Brass, 1990; Krackhardt, 1990). Theoretically, ac quaintances) than through strong ties (friends) or
tors in central network positions have greater ac formal listings (e.g., Granovetter, 1982). An actor's
cess to, and potential control over, relevant re acquaintances are less likely to be linked to one
sources, such as information in a communication another than are an actor's close friends and are
network. Actors who are able to control relevant thus more likely to provide nonredundant informa
resources and thereby increase others' dependence tion. Thus, individuals have greater access to more
on themselves acquire power. In addition, actors and different job opportunities when relying on
must also decrease their dependence on others. weak ties. Later findings have modified and em
They must have access to relevant resources that phasized this notion, showing that weak ties used
are not controlled or mediated by others. in finding jobs were associated with occu
higher
Simple measures of network size have been as pational achievement when they connected the job
sociated with power (Brass & Burkhardt, 1992, seekers to those of higher occupational status (e.g.,
1993; Burkhardt & Brass, 1990). Blau and Alba de Graaf & Flap, 1988, Lin, Ensel, & Vaughn, 1981;
(1982) found that ties linking different work groups Marsden & Hurlbert, 1988; Wegener, 1991). Thus,
increased actors' power. Brass (1984) found that the effectiveness of weak ties rests in the diversity
centrality in larger departments was a better pre and nonredundancy of the information they pro
dictor of power than centrality in smaller sub vide. In studying job markets in the People's Re
groups. Both of those studies (Blau & Alba, 1982; public of China, Bian (1997) found that people's
Brass, 1984) and Ibarra (1992) showed that group strong ties were more effective in getting them good
membership was related to individual power. In jobs. It seems that when the costs of providing
addition, Krackhardt (1990) found that others valued information are high, strong rather than
viewed people who had more accurate cognitive weak ties are needed.
maps of the social network in an organization as Organizations have recently established formal
more influential. That is, power was related to the recruiting networks based on employee referrals.
degree to which an individual's perception of the Network referrals can provide richer pools of ap
interaction network matched the "actual" social plicants, better matches between referred appli
network. In a case analysis, Krackhardt (1992) dem cants and job requirements, and social support
from referees once referred applicants are hired Brass (1984, 1985a) found that network indicators
(Fernandez, Castilla, & Moore, 2000). In a related of power also related to promotions of nonsupervi
study, Seidel, Polzer, and Stewart (2000) found that sory employees over a three-year
period.
recruits' social ties to an organization increased Burt (1992) noted that network relations can be
salary negotiation outcomes. Two studies of the costly to maintain, suggesting that selectivity in
socialization of new employees (Jablin & Krone, choosing relationships is important. Strong, close
1987; Sherman, Smith, & Mansfield, 1986) have relationships require more time than weak (ac
indicated that network involvement is a key pro quaintance) relationships, raising the question of
cess in their assimilation. whether managers should weak relation
develop
The network on per or strong personal re
Performance. perspective ships with many coworkers
formance invites one to analyze patterns of rela with a few coworkers or with a mentor.
lationships
tionships rather than view individuals' perfor Burt (1992) argued that the size of one's network
mance in isolation. As is the case with and strength of one's ties are not as important as the
interdependent tasks in organizations, relation diversity of one's contacts: The key is having a
ships with others affect performance, especially if network rich in structural holes. A structural hole
those relationships involve the ability to acquire is defined as the absence of a link between two
necessary information and expertise. contacts who are both linked to an actor. Not only
Recent studies have found a link between cen does the actor gain nonredundant information from
trality and performance in complex jobs; these in the contacts (Granovetter's weak tie argument), but
clude Mehra and colleagues (2001) and a study, also, the actor is in a position to control the infor
reported in this issue, by Cross and Cummings mation flow between the two (that is, to broker the
(2004). Papa (1990) found that performance follow relationship), or to play the two off against each
ing a technological change was related to interac other. Using the criterion of early promotions, Burt
tion frequency, network size, and network diversity (1992) found the structural hole strategy to be ef
(number of ties to other departments and hierarchi fective for established, male managers and that
cal levels). This conclusion is consistent with bridging structural holes was the most valuable for
small-group laboratory network studies (see Shaw managers with few peers (Burt, 1997). Also sup
[1964] for a review) that indicated that task com porting the structural hole argument, Seibert, Krai
plexity was an important moderator of the network mer, and Liden (2001) found that weak ties and
performance relationship (see also Brass, 1981, structural holes in a career advice network were
1985b; Roberts & O'Reilly, 1979). That is, perfor positively related to social resources, which in turn
mance is better when communication structure were related to salary, promotions over careers, and
matches the information-processing requirements career satisfaction. Also, Podolny and Baron,
of a task. This logic suggests it is likely that network (1997) found that having a large, sparse informal
connections are most useful when jobs require cre network with many structural holes enhanced ca
ativity (Brass, 1995; Perry-Smith & Shalley, 2003). reer mobility.
However, Sparrowe, Liden, Wayne, and Kraimer However, sparse, nonredundant networks do not
(2001) found that supervisors' ratings of perfor always produce the best outcomes for women and
mance were positively related to centrality across a newly hired managers (Burt, 1992). Because these
variety of jobs. Also, research has shown that citi "players" may face barriers to entry into estab
zenship behavior is positively related to network lished networks, a strong connection to powerful,
centrality (Settoon & Mossholder, 2002). well-connected mentors may be more beneficial.
Getting ahead. Getting ahead in organizations The strong tie strategy allows an employee to be
has often been said to be a matter of "who you central by virtue of a few direct links to others who
know, not what you know." This statement empha have many direct links. However, reliance on indi
sizes the importance of "social capital" as com rect links creates a dependency on the highly con
pared to "human capital," attributes such as edu nected other (see Higgins & Kram, 2001) to mediate
cation, intelligence, and attractiveness (Burt, 2000). the flow of resources. Thus, a strong, trusting tie to
Most managers' careers are contingent on what they a highly connected other is potentially valuable,
can effectively accomplish in connection with oth but risky.
ers. Thus, the social network framework a There is considerable for this
provides empirical support
useful perspective for focusing on the importance thesis. Kilduff and Krackhardt (1994) found that
of social relationships for careers. To the extent that the perception of a friendship link to a prominent
acquiring power and influence is related to upward person in an organization tended to boost an indi
mobility and success, much of the previous discus vidual's performance reputation. Likewise, Brass
sion of networks and power applies. For example, (1984, 1985a) found that links to supervisors and
dominant coalitions were related to promotions for Unethical behavior. Networks can serve socially
both men and women. Boxman, de Graaf, and Flap negative as well as positive ends (Brass, Butterfield,
(1991) found no differences in predictors between & Skaggs, 1998; Gargiulo & Benassi, 1999). For ex
men and women in their study of 1,359 Dutch ample, in a critique of economics, Granovetter
managers. External work contacts and memberships (1985) outlined the effects of social structure on
were related to income attainment and position level trust and malfeasance. In a rare empirical study of
even when human capital (education and experience) unethical behavior, Baker and Faulkner (1993)
were controlled for, and the return on human capital studied price-fixing conspiracies (illegal networks)
decreased as social capital increased. in the heavy electrical equipment industry. They
Turnover. In a study of fast-food restaurants, found that convictions, sentences, and fines were
Krackhardt and Porter (1986) found that job exits related to personal centrality, decentralized net
("turnover") did not occur randomly, but occurred work structure, and a middle management level.
in structurally equivalent clusters in the restau Raab and Milward (2003) described the AI Qaeda
rants' communication networks. Krackhardt and terrorist network as a network
of project teams that
Porter (1985) also examined the effects of turnover operated independently from each other and a
on the attitudes of those who remained in organi tightly knit core. The ultimate success of these con
zations and found that the closer an employee was spiratorial networks is to stay secret but still ensure
to those who left, the more satisfied and committed enough coordination to realize their goals.
the remaining employee became. The authors ar In sum, interpersonal networks have an impor
gued that remaining employees cognitively justi tant effect on a variety of important individual out
fied their decision to stay by increasing their satis comes: getting a job, gaining influence, performing
faction and commitment. well, and getting promoted. As our review indi
Research on relational and organizational de cates, network researchers have focused
typically
mography (Tsui & O'Reilly, 1989; Wagner et al., on outcomes, taking available network structures as
1984) has shown that similarity in age and tenure given. Although similarity, personality, proximity,
among group members is related to turnover. Com and organizational structure have been shown to
bining this observation with our previous review of affect interaction patterns within organizations,
homophily results, we can predict that similarity more work is needed on network antecedents. For
leads to increased communication, which, in turn, example, individuals with critical human capital
is negatively related to turnover. McPherson, Pop (expertise, intelligence, skills) and social capital
ielarz, and Drobnic (1992) supported this predic (connections to others) may be particularly attrac
tion. In voluntary organizations, they found, net tive partners. Taking a multilevel perspective, we
work ties within a group were associated with need to locate interpersonal networks within the
reduced turnover, while ties outside the group in larger contexts of organizations, looking at the effects
creased turnover. This finding has been reproduced of both interunit and interorganizational linkages.
in interorganizational networks (Rao, Davis, &
Ward, 2000).
INTERUNIT NETWORKS
Leadership. Although little empirical work has
been done on leadership and social networks, there An organization can be conceptualized as a net
are several reasons to believe that social networks work in which organizational units are nodes inter
may affect leadership effectiveness. Small-group acting with each other, establishing formal and in
laboratory studies in the 1950s (see Shaw [1964] for formal relationships. Formal relationships include
a review) showed that central actors in centralized ties mediated by work flow, resource exchange, and
network structures were overwhelmingly chosen as personnel transfer (Ghoshal & Bartlett, 1990;
leaders of the groups. Leadership is essentially an Nohria & Ghoshal, 1997); informal relationships
influence process that can be described as a net include those whereby members of different units
work phenomenon (Brass & Krackhardt, 1999; seek personal advice from or make friends with
Sparrowe & Liden, 1997). The extensive work on each other (Kilduff & Tsai,
2003). The organiza
leader-member exchange (LMX; Graen & Scandura, tional work units of interest
include groups, divi
1987; Sparrowe & Liden, 1997) has shown the im sions, business units, and subsidiaries. These units
portance of relationships between supervisors and represent part of the context in which interpersonal
subordinates. Mehra, Dixon, Brass, and Robertson relationships are embedded. It is important to con
(2003) found that differences in leaders' social net sider the unit or group context in each organization
works were related to differences in the economic when examining interpersonal network linkages, as
performance of their units as well as to their per the meanings of such linkages may vary (Emirbayer
sonal reputations as leaders. & Goodwin, 1994). Investigating network linkages
of organizational units not only advances knowl tines, or control mechanisms may affect the
edge of social networks, but also contributes to interactions between units.
design Theof opera
understanding of organizational design (Pearce & tional processes influences the opportunities for
David, 1983). different units to interact with one another. Also,
the extent to which an organization uses control
mechanisms to achieve centralization can have a
Antecedents of Interunit Networks
negative impact on the formation of cooperative
Interpersonal ties. The emergence and forma ties among organizational units. Greater centraliza
tion of ties among organizational units can be at tion prevents a unit from exercising discretion in
tributed to organizational characteristics and oper dealing with its task environment and reduces the
ations as well as to individual characteristics. Ties initiatives that it can take in forming interunit
between people in different units are especially knowledge-sharing ties (e.g., Tsai, 2002).
intriguing, because they create ties between organi In sum, the intersection of individual-, unit-, and
zational units, illustrating the "duality" of groups organization-level characteristics and processes
and individuals (Breiger, 1974). When two individ suggests many avenues for examining work-unit
ual interact, they not only represent an interper network antecedents. It also highlights the impor
sonal tie, but they also represent the
groups of tance of investigating the connections among cross
which they are members. Thus, interunit ties are level network phenomena for unraveling complex
often a function of interpersonal ties, and the cen network dynamics in the organizational settings.
tralities of units are a function of their members'
connections (Bonacich, 1991). The simultaneous
Consequences of Interunit Networks
mapping of units as well as individuals can con
tribute to a better understanding of both interper Performance. Network ties within and across
sonal and interunit networks. organizational units have significant impact on
Ties between
organizational units are often cre unit and organizational outcomes.
performance
ated by powerful individuals, such as the units' Mehra and his
colleagues (2003) showed that unit
leaders, who are involved in decisions about inter leaders' network ties with peers and higher-level
unit activities (e.g., Knoke, 2001). Several scholars managers in an organization positively affected
have shown how individual differences in cogni unit performance. Reagans and Zuckerman (2001)
tion and personality relate to the origins and for found that organizational units that had more
mation of interunit networks (e.g., Kilduff & Tsai, dense networks achieved a higher level of produc
2003). Research on social capital has suggested that tivity than those with sparse networks. Oh, Chung,
individuals' personal connections that cross their and Labianca (2004; this issue) found that high
own group or organizational boundaries contribute performance work teams had moderately cohesive
to the social capital of their groups or organizations ties internally or many bridging ties to formal lead
(e.g., Burt, 1992; Coleman, 1990; Uzzi, 1996). ers in other groups. Also, and
Reagans, Zuckerman,
Functional ties. A tie between two units can also McEvily (2004) found that organizational units
be based on unit-level considerations. For example, with high internal density and large external range
a unit's size, performance records, and resource finished projects more quickly. In a simulation,
endowments can influence its decision to form a tie Krackhardt and Stern (1988) found that friendship
with other units and the attractiveness of the unit ties across groups provided coordination in re
as a
partner for other units. As resource
depen sponding to crises.
dence theory has suggested, a unit is likely to be Many studies have shown how group perfor
motivated to form a tie with other units that have mance is influenced by the structure of formal
complementary resources. Also, research on multi (Guzzo & Shea, 1992) and informal net
intergroup
unit organizations has shown that two units are works (Shaw, 1964). As noted above, most studies
likely to form a tie when their resources are strate tend to focus on positive or neutral relations when
gically related (Tsai, 2000). Units that are more examining intergroup networks, and only a few
central in a resource exchange network are quicker scholars have looked at negative relations (Labianca &
than others to establish interunit linkages with a Brass, 2004). It could be that negative relations across
newly formed unit (Tsai, 2000), and units with groups are more important than positive relations in
more knowledge communicate more (Schulz, group outcomes. In a study of intergroup
predicting
2001). networks in 20 organizations, Nelson (1989) found
Organizational processes and control mecha that organizational conflict was negatively related to
nisms. In addition to individual-level and unit the percentage of friendship ties that crossed group
level factors, certain organizational processes, rou boundaries. In contrast, Labianca, Brass, and Gray
(1998) found that friendship ties across groups were Antecedents of Interorganizational Networks
not related to perceptions of conflict. Rather, negative
Many of the variables that explain the formation
relationships (in which one person indicated prefer
of interpersonal and interunit networks explain the
ring to avoid another) were related to higher per
creation of interorganizational networks as well.
ceived interunit conflict. They made the case for neg
This is not surprising, since interorganizational re
ative asymmetry?the idea that negative events and
lations are often initially created by "boundary
relationships have more impact on people than pos
spanners." Early research focused on motives be
itive events or relationships (Labianca & Brass, 2004).
hind cooperation, but later research has focused on
The importance of studying negative relations was
the conditions facilitating cooperation, such as
also highlighted by Sparrow, Liden, Wayne, and Krai
mer (2001), who showed that the density of "hin learning, trust, norms, equity, and context.
Motives. Galaskiewicz (1985) cited four motives
drance networks" was negatively related to group
behind interorganizational cooperation: acquire re
performance.
sources, reduce uncertainty, enhance
legitimacy,
Innovation and activities.
knowledge Innova
are likely to and attain collective goals (see also Oliver, 1990).
tion- and knowledge-related activities
Business strategy scholars have argued that inter
be influenced by patterns of interunit ties. Given
organizational ties such as strategic alliances, joint
the existence of allied groups or blocks of business
ventures, and long-term partner
units within multiunit firms, network research can buyer-supplier
inform about how units share resources with other ships are vehicles that provide a firm with access to
to enhance "information, resources, markets, and technologies;

units innovation (Kilduff & Tsai, 2003;
units that are more cen with advantages from learning, scale, and scope
Tsai, 2001). Organizational
tral in an interunit resource network tend economies; and allow firms to achieve strategic
exchange
to produce more objectives, such as sharing risks and outsourcing
product innovations (Tsai &
Social ties between units facilitate value-chain stages and organizational functions"
Ghoshal, 1998).
for units that in the (Gulati, Nohria, & Zaheer, 2000: 203; see also Alter
knowledge sharing compete
same market & Hage,1993; Ebers, 1997). to transac
segments (Tsai, 2002). Strong ties be According
tween business units facilitate the transfer of com tion cost analysis, forms are
interorganizational
whereas weak ties are sufficient ways to reduce opportunistic on
behavior
the part
plex knowledge,
for less complex of suppliers and distributors (Williamson, 1991).
knowledge (Hansen, 1999).
In sum, characteristics of personal networks Learning. Firms that have more experience
work-unit boundaries affect both interunit working with other organizations are more likely to
crossing
conflict and unit and innovativeness. form new and more diverse network ties and to
performance
ties to be become dominant players in networks. Powell, Ko
Negative appear highly consequential,
perhaps
more so than positive ones, and deserve put, and Smith-Doerr (1996) found that dedicated
further biotechnology firms that had more networking ex
investigation.
perience subsequently gained more knowledge,
had more diverse network portfolios, and became
INTERORGANIZATIONAL NETWORKS more central in collaborative networks. Ahuja
Our discussion of interorganizational networks is (2000) found that chemical firms that had more
limited to long-term be interfirm ties subsequently were more likely to
cooperative relationships
tween and customers, form joint ventures based on new technologies.
organizations suppliers,
and other actors in Firms learn not only about an industry but also
competitors, organizational
which retain control over their own about networking when they engage in alliances,
organizations
resources but decide on
(Ebers, their use and this knowledge makes them attractive network
jointly
1997). In these partnerships, problems are typically partners.
resolved and rules and norms Trust. Many researchers the impor
through discussion, acknowledge
of reciprocity ensure (Powell, 1990; tance of trustin building interorganizational net
cooperation
Uzzi, 1997). Examples of interorganizational cooper works, but it is difficult to measure trust a priori
ation include joint ventures, strategic alliances, joint and to assess its effect on interorganizational coop
programming, collaborations, business groups, con eration. Zaheer, McEvily, and Perrone (1998) drew
sortia, relational contracts, and some forms of fran the distinction between interpersonal trust be
chising and outsourcing (Podolny & Page, 1998). We tween two boundary spanners and interorganiza
do not review the extensive literatures on mergers tional trust where a boundary spanner in one or
and acquisitions, board interlocks (Mizruchi, 1996), ganization trusts the other organization (but not a
and competition except as they relate to interorgani particular individual). Although ties may originate
zational cooperation. because of the former, the success of interorganiza
tional cooperation depends on the latter. In their averse, and continue to work with others because of
study of buyer-supplier dyads in the electrical the strong ties among boundary spanners. Overem
equipment manufacturing industry, Zaheer and his bedded actors may miss cost-effective opportuni
coauthors found that, independent of interpersonal ties with other actors. In their study of tie dissolu
trust, a buyer's trust in a supplier organization re tion, Seabright, Levinthal, and Fichman (1992) found
duced negotiation costs and conflict and was asso that attachments among boundary spanners de
ciated with better
supplier performance. creased the likelihood of terminating firm-auditor
Rousseau, Sitkin, Burt, and Camerer (1998) dis relations, and these ties attenuated the effect of
tinguished between deterrence, calculative, institu changes in clients' resource needs on switching
tional, and relational trust. Most researchers have auditors. However, in a study of advertisers and
focused on relational trust, in which the parties advertising agencies, Baker, Faulkner, and Fisher
will use information from
prior interactions to (1998) found that the departure of the advertisers'
judge each other's
reliability. Eisenhardt and top executives had little effect on the termination of
Schoonhoven (1996) found that firms with large dyadic ties with agencies. Dissolution was sensi
top management teams, or with top managers who tive to changes in market conditions.
were also employed by other industry employers, Norms and monitoring. Even if actors trust each
or with top managers who were higher ranking other, problems will arise in the course of collabo
executives in other firms were more likely to form ration. Hierarchy is certainly one solution for set
strategic alliances. Top management team social tling disputes (Williamson, 1975); however, Os
capital translated directly into interorganizational trom (1990) and Coleman (1990) stressed the
alliances. Gulati (1995a) and Chung, Singh, and Lee importance of reciprocity norms, and Kogut (2000)
(2000) found a curvilinear (inverted U-shaped) re noted the importance of rules of behavior that, in
lation between number of prior alliance ties and the turn, create network identities. Ostrom (1998) re
formation of future ties. Levinthal and Fichman viewed an extensive body of empirical work that
a
(1988) also found curvilinear (inverted U-shaped) showed that people cooperate when they can com
relationship between the length of an auditor-client municate beforehand, learn reciprocity norms, and
relationship and the hazard of that relationship punish those that deviate. Reciprocity norms and
ending. rules can become heuristics that actors evoke in
Prior ties seem
to be particularly important under relating to others. Larson (1992) found a similar
conditions of uncertainty. Gulati (1995b) found pattern in her qualitative study of dyads formed by
that non-equity-based (i.e., riskier) alliances in the high-growth entrepreneurial firms. Over time ac
biopharmaceutical, new materials, and automobile tors collaborated, but social controls from
arising
industries were more tightly coupled to the number norms of trust and reciprocity, not formal contracts,
of previous alliances between the partners than governed this collaboration.
were equity-based alliances. In a similar vein, Network structure can help enforce norms and
Beckman, Haunschild, and Phillips (2004) found rules. Coleman (1988) argued that the benefit of
that large service and industrial firms experiencing closure, the condition in which an actor a's net
greater market uncertainty were more likely to form work ties are dense and redundant, is that informa
alliances and interlocks (sharing of board members) tion (or gossip) about the uncooperative behavior of
with firms with which they had previously aligned a second actor, b, circulates more among
readily
themselves or interlocked. Keister (2001) found third parties, (c's), who can then mobilize sanctions
that in the early stages of China's economic reform, against the uncooperative actor in cooperation with
a period of great uncertainty, firms tended to form actor a. A third-party c not only keeps track of 6's
ties within a business group with firms and man performance but can threaten to withdraw from
agers with whom they had prior ties outside the interaction with b as well (Putnam, 1993). Because
business group. Rosenkopf, Metiu, and George networks can pass on information about others'
(2001) found that interaction between midlevel behaviors, it is reasonable to expect that the pres
managers in cross-firm technical committees led to ence of third parties can motivate cooperation be
subsequent alliance formation among cellular ser tween two collaborators (Putnam, 1993). This ratio
vice providers and equipment manufacturers, but nale applies at the interorganizational as well as the
the effect decreased as firms gained more experi level of analysis.
interpersonal
ence with one another and thus had better informa There is evidence to support this argument. In
tion on their partners. the three industries he studied, Gulati (1995b)
Although prior networking and close ties can found that if two actors were both cooperating with
enhance trust, it is possible that actors can become a third, the likelihood that these two would form a
overly embedded in their networks, become risk new cooperative with each other in the
relationship
future was greater. Gulati argued that actors can cial and business organizations, and institutional
learn about others' tendencies through their coop arrangements were critical in explaining the forma
erative ties with third parties that in turn assure tion of interorganizational networks both in the
them about
approaching these
parties themselves United States and abroad. Saxenian (1994) ex
(see also
Granovetter, 1985). Similarly, Rowley, variation in regional development
plained focusing
Gr?ve, Rao, Baum, and Shipilov (in press) found on local subcultures, and Marquis (2003) explained
that higher density within an interorganizational of local corporate on
patterns interlocking focusing
clique led to fewer exits from the clique. institutions and local histories. Scott
community
Equity. There is evidence that interorganiza
(1987) showed that the different forms of interfirm
tional collaborations are more likely if partners
relations in Britain, France, and Germany can be
have similar status and power (Ostrom, 1990; Ring traced to their distinct patterns of historical devel
& Van de Ven, 1992). DeLaat (1997) noted that
opment. Much of the new institutional research on
unless b can reciprocate the gesture extended by a, interfirm structures in East Asia
accounted has
for
a is unlikely to enter into a cooperative relationship variations in network structures
by focusing on cul
with b. Such entry would require a unilateral com
tural, political, and historical contexts (see Gerlach,
mitment on a's part. In turn, if a extended favors to
1992; Hamilton & Biggart, 1988; Keister, 2000). The
b, b would incur obligations to a that he could not
evidence, however, is mixed on whether cultural
pay back, and thus b would avoid collaborating
a. As Emerson differences hinder cross-national collaborations. In
with (1962) argued, the power dif
a and b creates an unstable an analysis of international joint ventures by
ferential between situ large
Dutch firms, Barkema, Shenkar, Vermeulen, and
ation for b. If problems in the relationship arise, a
has all the power to resolve them as she or he sees Bell (1997) found that the duration of these
joint
fit. ventures was inversely related to the social distance
and Lee (2000) found that invest between the firms and their partners. In contrast, Park
Chung, Singh,
ment banks were more likely to form syndicates to and Ungson (1997) found that cultural distance was
underwrite stock if their sta unrelated to joint venture dissolution rates. However,
corporate offerings
tuses were similar. and colleagues (in both studies concluded that cultural differences can
Rowley
press) found that an investment bank was more be overcome if firms gain experience partnering with
likely to leave syndication cliques that had unequal others and working across international borders (see
power relations, especially if the bank was weak also Contractor & Lorange, 1988).
relative to the others. Gulati and Gargiulo (1999) "Conveners" are another influence
exogenous
reported that two firms were likely to form a stra & Gray, 1991). These include
(Wood government
tegic alliance if both were central in a relevant foundations, and leaders who
agencies, industry
interorganizational network of alliances (but not if attempt to build networks among organizational
were both Han and Breiger's actors
they peripheral). (Doz, Oik, & Ring, 2000). McEvily and Za
(1999) reanalysis of Eccles and Crane's (1988) syn heer the role of regional
(1999) studied institutions
dicate data for U.S. investment banks showed that in developing local networks for manufacturers,
firms that put together deals were status equals (see the propensity of manufacturers to participate in
also Podolny, 1993). Although these findings may
these networks, and the effect of their participation
seem like confirmations of the similarity hypothe on their competitive capabilities. Human and
sis found in the interpersonal network studies, we
Provan (2000) studied how network brokers and
suspect that the findings result from the problems
administrators helped to build
networks and net
of negotiating cooperative relationships among ac
work credibility among small manufacturing enter
tors with different capabilities and power.
prises in the U.S. wood products industry. Lutz
Context. Other researchers have focused on the
broader and institutional con (1997) studied an effort at network building by the
cultural, historical,
German Federal Ministry for Research and Tech
text to explain interorganizational networks. For
example, changes in the U.S. regulatory environ nology and showed how scientific partners acted as
such as the National Research brokers between manufacturers and provided infor
ment, Cooperative
enabled coordinated research and develop mation that became the building block for future
Act,
ment market to an ex collaborations. Kogut (2000) and Dyer and Nobeoka
activity among competitors
tent unseen & 1998). (2000) described how Toyota built its production
previously (Podolny Page,
Firms were before this system and monitored its behavior. When organi
cooperating regulatory
but this and other zations do not have
compelling motives to collab
change, legislation legitimated
cooperation among competitors. Powell (1990) orate, outside intervention may be necessary for
gave numerous examples of how culture, local so networks to form and will shape how they form.
Consequences of Interorganizational Networks finding structural equivalence having more explan

atory power (Galaskiewicz & Burt, 1991). Contact
Imitation. Network ties transmit information and
hypotheses have been tested more frequently, how
are thought to be especially influential information
ever, and they have solid empirical support (Ahuja,
conduits because they provide salient and trusted
2000; Chaves, 1996; Davis & Gr?ve, 1997; Ga
information that is likely to affect behavior. The
laskiewicz & Wasserman, 1989). Like similarity of
proposition that information transmission leads to
characteristics, structural equivalence may amplify
imitation is found in institutional theory (DiMaggio diffusion from contacts rather than replace it.
& Powell, 1983) and organizational learning theory Innovation. The industrial district literature
(Levitt & March, 1988), and it has led many to
claims that firms in close proximity to each other
investigate the effects of networks on the mimetic
gain knowledge spillovers (Jaffe & Adams, 1996;
adoption of practices. Considerable evidence that
Saxenian, 1994), but it usually does not offer direct
imitation follows network ties among organizations evidence on this process. Recently network re
exists (Ahuja, 2000; Chaves, 1996; Davis & Gr?ve, search has shown that research scientists indeed
1997; Galaskiewicz & Burt, 1991; Galaskiewicz &
use strong and weak ties to share knowledge across
Wasserman, 1989; Gr?ve, 1996; Haunschild & Beck
organizational boundaries, particularly if their or
man, 1998; Hedstr?m, Sandell, & Stern, 2000; Hen
ganizations are not direct competitors
isz & Delios, (Bouty,
2001; Palmer, Jennings, & Zhou, 1993; 2000), and formal collaborative ties between firms
Rao et al., 2000; Westphal & Zajac, 1997). The evi
increase the innovation output of biotechnology
dence covers a broad range of study populations
start-up firms (Baum, Calabrese, & Silverman, 2000;
and behaviors, and the work has expanded from et al., 1996; Shan, Walker,
Powell & Kogut, 1994). A
investigating the diffusion of technologies and in broad survey of young technology-based firms
stitutions to examining the diffusion of competitive
showed that interaction with their main customers
strategies. and obtaining customers custom
through the main
Networks speed up diffusion, even of practices ers' networks had a positive association with new
that are widely known. Thus, networks do not
product development (Yli-Renko, Autio, & Sapi
cause adoptionof practices solely through aware enza, 2001). Networks shape not just innovation
ness. Network ties also provide information on
output, but also innovation input such as R&D in
costs and benefits of adoption at a greater level of vestment. In a study of alliance networks in the
detail and persuasiveness than other information U.S. and telecommunication
computer industry,
sources do. Using a computational approach, Gib
Soh, Mahmood, and Mitchell (2004; in this issue)
bons (2004; in this issue) showed how different showed how network the re
centrality moderates
structures of network ties affect the diffusion of between awards and in
lationship product change
different innovation practices in organizational R&D investments.
fields. Networks also affect the diffusion of behav Closer of network structures has
inspection
ior norms. When behaviors are controversial or additional An debate is
yielded findings. important
risky, network actors that have experienced a sim whether information collection is more efficiently
ilar decision may take sides and provide persua done in networks with closure or in networks with
sion (Davis & Gr?ve, 1997; Westphal & Zajac, 1997). structural holes. Closed networks, where direct ties
Indeed, the diffusion of norms for behavior seems are also tied to each other, generate trust (Coleman,
to operate activation of network ties when
through 1988); networks with structural holes, where direct
a focal actor is facing a problem and is uncertain ties are not themselves connected and are tied to
about the best (McDonald & Westphal,
response different portions of the networks, give access to
2003). diverse knowledge (Burt, 1992, 2001). Ahuja's
Network diffusion is amplified by similarity of (2000) study of chemical firms showed that patent
social, or strategic characteristics
of
organizational, ing rates increased when firms had many ties to
organizations because the managers in adopting or firms that were themselves indicat
interconnected,
see similar organizations as more rele
ganizations ing a positive effect of information access on inno
vant and easier to learn from (Ahuja & Katila, 2001; vativeness, but that structural holes reduced inno
Davis & Gr?ve, 1997; Haunschild & Beckman, 1998; vation rates. These seem to a
findings support
Soule, 1997; Westphal, Seidel, & Stewart, 2001). closure view but not a structural holes view. On the
The proposition that competition among actors other hand, Baum and his colleagues (2000), in
with similar statuses is a driving force of imitation work on biotechnology firms, showed that net
(Burt, 1987) has led to comparison of contact (the works giving access to diverse information had a
existence of a network tie) with structural equiva positive effect on rates. And in Ruef's
patenting
lence as explanations of imitation, with some work (2002) study, members of start-up teams evaluated
their own ideas as more innovative if they had Performance. The conditions that lead to higher
diverse networks and many discussions with weak survival rates may also result in higher perfor
tie contacts, though these findings did not hold up mance. Indeed, strong and weak tie support in
when the dependent variable was the probability of creases sales growth for new businesses (Br?derl &
applying for a patent. Preisend?rfer, 1998). In the technology-based start
The tension between the knowledge diversity of ups studied by Lee, Lee, and Pennings (2001), how
fered by structural holes and the trust offered by ever, ties to external actors increased sales growth
cohesion can also be resolved through embedding for firms with internal but had
high capabilities
networks in structures that generate trust. Such no (main) effect, suggesting
virtually independent
structures include spatial proximity, access to a that network ties helped firms realize the value of
common labor market, and central internal were not a
organizations capabilities but way of obtain
committed to information sharing (Owen-Smith & A main effect can still be obtained
ing capabilities.
Powell, 2004). when visible network ties are interpreted as a sig
Firm survival. The positive effects of network nal of quality that confers status on a firm, and thus
ties on the information access of a firm suggest that increase the price of its products or services
network ties might yield positive outcomes such as
(Podolny, 1993, 1994) and of its stock (Stuart, Ho
firm survival. The theory of the liability of new &
ang, Hybels, 1999).
ness, according to which a lack of stable exchange
Studies have also examined the effects of differ
relations and a lack of access to resources make ent network structures on performance. Centrality
new firms particularly prone to fail (Stinchcombe, in aninterorganizational network and experience
1965), gives reason to examine the effect of network
with collaborations increased the growth rate of
ties on the survival chances of new firms. This
biotechnology start-ups (Powell et al., 1996). Bio
effect is difficult to show
in aggregate data (e.g.,
a positive technology start-ups with networks giving access to
Bates, 1990), but studies have shown
diverse information had higher revenue growth
effect of ties on the survival chances of newly
(Baum et al., 2000), but the effect seemed depen
founded firms (Br?derl & Preisend?rfer, 1998;
dent on the type of actor a start-up was tied to
Hager, Galaskiewicz, & Larson, 2004) and firms en
(Silverman & Baum, 2002). Clique structures could
gaging in major changes (Miner, Amburgey, &
be identified through the transactions of Canadian
Steams, 1990).
investment banks, and cliques whose members had
Network ties with legitimated symbols in an or
diverse specializations but similar network central
ganizational field also affect survival. Baum and
ity obtained high market shares for their members
Oliver (1991) found that day care centers with more
(Rowley, Baum, Shipilov, Gr?ve, & Rao, 2004).
ties to community organizations and government
Debate continues about the effects of strong and
agencies had much lower death rates. Singh,
weak ties and brokerage and network cohesion on
Tucker, and Meinhard (1991) found that voluntary
performance. Rowley, Behrens, and Krackhardt
social service organizations that had listings in
directories, charitable (2000) found that strong ties increased performance
community registration
in the relatively stable steel industry, whereas weak
numbers, and large boards of directors had signifi
ties increased performance in the more dynamic
cantly lower death rates. Being linked to legitimate
actors beneficial in markets semiconductor industry. Thus, weak ties that facil
may be especially
to itate
information collection are more valuable
where output is difficult evaluate directly.
the strength of ties yields addi when there is much information to collect, while
Distinguishing
tional findings on network effects on survival. Em strong ties are more important when firms seek to
bedded ties are those with which an actor has a reduce competitive intensity in stable industries. In
of exchanges and close a study of hotels in Sydney, Ingram and Roberts
high proportion interaction,
as opposed to less frequent, less close arm's-length (2001) replicated this last finding; they found that
ties. Analysis of the failure rates of apparel manu friendship ties with increased
competitors room
facturers in New York showed that firms with a when was
demand low, as did
yields, particularly
of embedded ties to firms with cohesive ties among competitors. In other work,
high proportion
mixtures of embedded and arm's-length ties had brokerage and cohesion effects have been found to
lower failure rates (Uzzi, 1996). The firms appeared operate together. Organizations obtain better re
to benefit both from the broader information collec turns when they are in a position to broker between
tion that arm's-length ties provided and from the disconnected others and also when they and a pow
trust that embedded ties provided, thus suggesting erful actor are connected within a cohesive set of
that a balance of strong and weak ties is most effec organizations tied to each other (Bae & Gargiulo,
tive (Uzzi, 1997). 2004; in this issue). This formulation suggests that
ties to resource-rich organizations carry costs un tential contacts. Unlike individuals, moreover, or
less ties to third parties are used to gain leverage. ganizations are
strongly affected by competitive
Researchers have also studied
performance or market relations. These considerations also affect
effectiveness at the interorganizational network the consequences of membership in interorganiza
level. As governance structures, networks can pro tional networks. Networks are stable if they serve
duce either positive or negative externalities?both the interests of their constituent organizations. In
for network members and for outsiders?depend terorganizational networks offer a variety of knowl
ing on how they are structured or organized (see, edge, innovation, performance, and survival bene
for example, Lincoln, Gerlach, and Ahmadjian fits, but the issues of competition, information
[1996]). One issue is whether centralized or decen control, and trust in partners makes the problem of
tralized networks work better. In a study of busi building effective networks highly complex.
ness groups in China, Keister (1998) found that
extensive interlocking directorates and nonhierar
DISCUSSION
chical organizational structures enhanced the fi
nancial performance of member firms. Research on As our review has shown, networks have many of
networks of human service organizations has the consequences that have been predicted: (1) they
shown that centralization decreased effectiveness transfer information that gives rise to attitude sim
as perceived by providers (Alter & Hage, 1993) but ilarity, imitation, and of innovations; (2)
generation
increased effectiveness as perceived by users they mediate transactions among organizations and
(Provan & Milward, 1995), suggesting a need for cooperation among persons; and (3) they give dif
additional work. ferential access to resources and power. These ba
It may be that decentralized networks are supe sic findings have been replicated, and researchers
rior when they are organized according to "small have begun to progress to more difficult issues,
world" principles (Watts, 1999). According to this taking into account network dynamics across dif
school of thought, the best network has local clus ferent levels.
tering into dense subnetworks, short paths between At all levels of networking, the joint influence of
all actors, and relatively few ties. Such networks opportunities (especially sought-after information
are effective because bridges span dense clusters and resources) and constraints past ac
(especially
and connect different parts, so that resources "hop" tions and uncertainty) on network reproduction
from cluster to cluster (Uzzi & Spiro, 2004). The and change are apparent. For example, events ex
engineering task is to "rewire" a network so that ogenous to networks can either reinforce or loosen
there are "short cuts" between clusters that mini structure in interorganizational (Madhavan, Koka,
mize the average path distance (Watts & Strogatz, & Prescott, 1998) and in intraorganizational (Shah,
1998). Empirical work on such overall network 2000) networks. factors include infor
Endogenous
properties is promising. For example, Madhavan, mation spillovers that benefit actors and stimulate
Gnyawali, and He (2004; in this issue) found that new linkages (Bouty, 2000; Owen-Smith & Powell,
interorganizational networks in the steel industry 2004). Network changes can be explained by rules
had many transitive triads (triads in which each of attachment (for example, "link with those that
firm was linked to both of the others), particularly are linked to others, or with those that are different
among producers with the same technology or geo from oneself") that affect subsequent network evo
graphical origin. Small-world patterns have also lution (Powell, White, Koput, & Owen-Smith, in
been found in investment bank syndicate networks press). These same rules are seen to evolve in in
in Canada (Baum, Shipilov, & Rowley, 2003), own terpersonal relationships and in power relation
ership networks among German firms (Kogut & ships within organizations (Brass, 1984). In a study
Walker, 2001), and board-interlocked networks in of the Italian TV production industry, Soda, Usai,
the United States (Davis, Yoo, & Baker, 2003). Even and Zaheer (2004; in this issue) took a different
more recent work suggests that industries with to structural
approach studying change. They
small-world networks perform better (Schilling & showed that current structural holes rather than
Phelps, 2004; Uzzi & Spiro, 2004). past ones, but past closure rather than current clo
In sum, interorganizational networks are created sure, helped current network performance.
by some of the same mechanisms that create inter Actors' characteristics can also have an
impact
personal networks, as well as by distinct mecha on changes in interpersonal, interunit, and interor
nisms. Like individuals, organizations extend ties ganizational networks (Chung et al., 2000; Klein et
in the direction of valuable information and re al., 2004; Mehra et al., 2001; Rowley et al., in press;
sources, but organizations are constrained by their Tsai, 2000). Actor characteristics, such as resources
managers' levels of experience and of trust in po and capabilities, determine the type of network
most useful to an actor and

its ability to create such formthese bridging roles are likely to know more
a network. Individual
characteristics, such as per andto have influence in the larger, external net
sonality and work unit, and organizational charac work, but they may be peripheral (and expendable)
teristics, such as resources, are potential modera to the internal networks of the groups they belong
tors of network effects. The tension between the to (see, for example, Fernandez and Gould [1994]
hope of acquiring new capabilities and the fear of for a discussion of different brokerage roles based
control over one's own resources may help on individual actors' group memberships). Groups
losing
to explain network reproduction and change at whose members have connections to other groups
both the interpersonal and interorganizational lev are likely to be more innovative, but they may have
els of analysis (Burt, 1992; Das & Teng, 2000; de much weaker member identity and less member
Rond & Bouchikhi, 2004). This is the loyalty. There is a considerable amount of research
especially
case when organizations find themselves cooperat to be done on these issues, since ties between actors
ing with competitors, departments cooperating in organizational and interorganizational networks
with other departments, and managers cooperating may change as actors come and go.
with peers. The duality principle has also been used to study
Understanding network change requires under firm behaviors and outcomes within markets.
standing cross-level pressures. Networks them McPherson (1983) showed how structurally equiv
selves are embedded in larger contexts (Granovet alent sets of competitors within organizational
ter, 1985), and to understand how the networks fields can be identified by looking at who con
need to understand the larger con sumes the products and services of which provid
change, analysts
texts. Individuals work within departments or ers (members and voluntary associations, in his
work units, work units are parts of larger organiza example). Niche composition and overlap, in turn,
tions, and organizations are parts of industries. affected whether voluntary associations grew or
Changes taking place at the industry level have shrunk (McPherson et al., 1992), and whether firms
repercussions at the organizational, work-unit, and survived (Baum & Singh, 1994). The decisions of
individual levels, and vice versa. For example, in firms may be affected by their peers with respect to
dividual job satisfaction may be a function of the both selling and buying networks (White, 2001),
network of interpersonal relations within a work just as individuals are affected by their peers (Burt,
unit, the position of the work unit within its or 1992). Venkatraman and Lee (2004; in this issue)
ganization, and the position of the organization found that software developers were less likely to
within its industry. The performance of firms may launch products on manufacturers' platforms when
depend on their networks of collaboration at the other developers and titles had strong presences?
industry level. Collaboration among firms may be that is, when niche overlap was high.
the result of collaboration among individuals. Con Alternatively, niche overlap provides a strong
versely, the performance of individuals may incentive for collusion and the creation of ties
depend on the networks of collaboration among among structural equivalents (Galaskiewicz & Za
work units. Changes in interpersonal networks heer, 1999). Given that competitors have an interest
within a work unit may be contingent upon in reducing the advantage of those upon whom
changes in an organization. As organizations grow they depend (Burt, 1992), niche overlap provides
an incentive
by adding more units, their networks of internal for competitors to share information
relations increase. On the other hand, as organiza on customers (Ingram & Roberts, 2001), engage in
tions downsize or divest assets, the network ties joint ventures and strategic alliances (Stuart, 1998),
between and are and interlock (Burt, 1983). Research on multimar
personnel departments disrupted.
Researchers looking to explain cross-level net ket competition has examined how the network of
work change should also be aware of the duality of market contacts between firms generates weaker
group structures (Breiger, 1974). Actors are linked competition, higher prices, and higher survival
in the same
group (a department or an rates (Gr?ve & Baum, 2001).
by being
industry for
instance), and they in turn link the When competitors form alliance ties with each
different of which are members. Some other, also to over a
groups they they may try gain advantage
actors are critical in maintaining or increasing the competitor outside their alliance (Gargiulo, 1993).
among groups, since their departure The potential of using alliances with competitors to
integration
would severe the ties between groups. Similarly, defeat other competitors raises the possibility of
some groups (e.g., cross-functional teams and in alliance networks competing with other alliance
dustry associations) are critical because they pro networks. Gimeno (2004; in this issue) showed that
vide an opportunity for members of different when alliances involved specialized investments,
groups to form interpersonal ties. Actors who per competitors of the alliance partners tended to be
excluded from a network. Thus, heavily invested by the better evidence offered by longitudinal re
alliance structures lead to clustering and internet search and by interest in how networks change. (3)
work competition as managers weigh the different There has been a shift from single levels of analysis
motivations for forming alliances and act differ to analysis showing effects crossing levels, inspired
ently depending on how their motivations balance by the realization that networks are affected both
out. Much of the research on alliance formation and from below(for instance, by individual character
niches might fruitfully be extrapolated to the inter istics) and from above (even networks have envi
personal and interunit levels of analysis. Do indi ronments). (4) There has been a shift from simple
viduals create niches and form alliances within binary considerations, such as the existence or non
organizations? Are the motives for alliance forma existence of a relationship, to consideration of dis
tion the same at the interpersonal level as they are tinctions, such as the strength and content of the
at the interorganizational level? because such a level of detail is often
relationship,
Finally, studying network change is critical, be needed to distinguish theoretical predictions. Al
cause cross-sectional analyses of networks often though network research in organizations is al
leave causal relations ambiguous. For example, ready such a large research tradition that it is get
when examining the effect of network ties on inter ting difficult to review, these recent shifts can be
organizational learning, one often sees more learn expected to fuel many future investigations.
ing from similar contacts. However, ties are also
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Taking Stock of Networks and Organizations: A Multilevel Perspective

TAKING STOCK OF NETWORKS AND ORGANIZATIONS:

tional innovation and survival. Likewise, research (1977) to this process

to enhance "information, resources, markets, and technologies;

Consequences of Interorganizational Networks finding structural equivalence having more explan

most useful to an actor and

after a promo gether. Newbury Park, CA: Sage.

to discern whether liance network structure, and firm profitability in

Baker, W. E., Faulkner, R. R., & Fisher, G. A. 1998. Haz

centralities. Social 13: 155-168.

attainment of Dutch managers. Social Networks, 13:

analysis of individual influence in an organization.

alliance formation. Strategie Management Journal, high-performance knowledge-sharing network: The

communication. can Sociological Review, 27: 31-41.

Dyer, J. H., & Nobeoka, K. 2000. and managing a M. 1993. con

Hager, M. A., Galaskiewicz, J., & Larson, J. A. 2004.

Sociology, 104: 1439-1493. ities in management: A conceptual framework.

Review, 18: 56-87.

721. Turnover embedded in communication networks.

Journal of Applied Psychology, 71: 50-55.

Press. works and perceptions of intergroup conflict: The

Madhavan, R., Koka, B. R., & Prescott, J. E. 1998. Net

McPherson, J. M., P. A., & Drobnic, S. 1992.

voluntary organizations: Status distance and the

Journal, 41: 441-452. Science 28: 40-55.

nectivity on firm innovation (Working paper, New 893-906.

Shaw, M. E. 1964. Communication networks. In L. Tsai, W. 2001. Knowledge transfer in intraorganizational

competitive dynamics. Academy of Management mographic effects: The importance of relational de

Management Journal, 47: 876-892.

ysis: Methods and applications. Cambridge, En

of "small-world" networks. 393: 440-442.

White, H. C. 2001. Markets from networks: Socioeco A

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