Transcript Slide 1

Personal and Business Networks
Gerrit Rooks
The meeting of two personalities is like the
contact of two chemical substances: if
there is any reaction, both are transformed.
― C.G. Jung
“Never eat alone” Keith Ferrazzi (2005)
“no man is an island, entire of itself…” (Donne 1624).
This lecture
• A few tidbits about personal networks
– How many close friends do people have? How many
acquaintances?
– Which persons have what kinds of networks?
• The evolution of business-networks from
entrepreneurial networks
• Intentionally managed networks
Questions you should be able to
answer after this lecture
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What is the social brain hypothesis?
What is Dunbars number
Is Dunbars number still valid?
What is a triad census?
Is Granovetters assumption of “forbidden triads” valid?
Which phases does an entrepreurial network go through?
Why were the Medici family so powerful?
How did Toyota create and manage a knowledge sharing network?
What knowledge dilemmas were solved by Toyota, how?
What are the benefits of direct and indirect ties in an alliance network?
How do they interact?
Social Brain Hypothesis
Ronald Dunbar is famous for
the social brain hypothesis:
“human intelligence is the
evolutionary result of the need
for social coordination and
cooperation”
Ronald Dunbar (1947),
anthropologist and evolutionary
biologist, University of Oxford
Personal network size
• the number of social
group members a
primate can track,
appears to be
limited by the
volume of the
neocortex region of
their brain.
Dunbar, R.I.M. (1993), Coevolution of neocortical size, group size and language in humans,
Behavioral and Brain Sciences 16 (4): 681-735.
Dunbars number: 150
“Social units”
• Support clique: people
who we seek personal
advice from
• Sympathy group:
special ties, frequent
contact
• Band: acquaintances,
less frequent contact
• Clan: all current
contacts
Increased emotional closeness
Increased frequencty of interaction
• Megaband + Tribe:
larger social units
Any group greater than 150 will become disfunctional
50,000 +
20,000 to 45,000
10,000 to 15,000
20,000 to 45,000
475-1000
75-200
Company size = 75-200
Organizations > 150 need bureaucracy…
Facebook friendships
Is Dunbars number still valid in this
new media age?
• “We find that the data are in
agreement with Dunbar’s result;
users can entertain a maximum of
100–200 stable relationships.
Thus, the ‘economy of attention’
is limited in the online world by
cognitive and biological
constraints as predicted by
Dunbar’s theory”.
• Note: Dunbars theory is about
maintaining relationships, not
remembering faces (on average
1500)
(Explaining) variation in networks
Kalish & Robbish:
Ego networks and triad census
Strong
tie
Weak
tie
Kalish&Robbish describe and
explain the triad census
ego
Strong
tie
Weak
tie
Transitivity: “the forbidden triad”
= strong tie
= weak tie
Chris
Gerrit
Chris
Uwe
Gerrit
Uwe
The forbidden triad is a building block in
Granovetters strength of weak ties theory
Reasons for transitivity
= strong tie
• Frequent interaction
Chris
• Similarity
Gerrit
Uwe
• Structural balance /
cognitive dissonance
reduction
Only weak ties are bridges
= strong tie
Rudi
Chris
Gerrit
Uwe
Bert
Önder
Kalish & Robbish try to explain network
differences
The evolution of entrepreneurial
networks
The organizational life cycle
Hite & Hesterly. The Evolution of Firm Networks: From Emergence to Early Growth of the Firm
Strategic Management Journal, Vol. 22, No. 3 (Mar., 2001), pp. 275-286
Social network entrepreneur = firm network
`identity’ based networks
high proportion of ties with some type of
personal or social identification
Pre-existing ties, strong embedded network high
in closure and cohesion
Early / Later growth
Calculative networks
Ties are primarily motivated by expected economic
benefits
Weak ties that are more market like, less redundant
(Partly) result of pro-actively managing networks
Intentionally managed networks
• Firms and individuals
can learn to create
network value
– Medici
– Toyata
– Alliance networks
Padgett, John
F.; Ansell,
Christopher K.
(May 1993).
"Robust Action
and the Rise of
the Medici,
1400–1434".
The American
Journal of
Sociology 98
(6): 1259–1319.
The Toyata supplier network
The problem Dyer
and Nobeoka
adressed:
Japanese
automobile
makers are more
and more
productive, US is
lagging
The answer of
Dyer and
Nobeoka:
Toyota created
and managing a
high performance
knowledgesharing network
Knowledge sharing routines
• Dilemmas associated with knowledge
sharing
1. how can self-interested network members
openly share valuable knowledge?
2. how to prevent free-rider problems?
3. how to maximize the efficiency of knowledge
transfers?
Overcoming knowledge sharing dilemmas
1. how can self-interested network members openly share
valuable knowledge?
– Create a network 'identity' through network-level
knowledge-sharing routines
2. how to prevent free-rider problems?
– Network `rules' for knowledge protection and value
appropriation
3. how to maximize the efficiency of knowledge transfers?
– Creating multiple knowledge-sharing processes and subnetworks in the larger network
Why create an identity?
• Many experiments demonstrate the
powerfull effects of social identity, f.i.
– Randomly assign individuals to a blue and
a green group
– Individuals were unknown to each other
and were told that they would not meet
again
– Group members evaluated each other
more positively and were more willing to
cooperate with each other than non
group members
How did Toyata create a network 'identity'?
• Toyota's network is known (labeled) as
the `Toyota group'.
–philosophy within the Toyota Group
called ‘coexistence and coprosperity’
• Toyota creates a shared network
identity by developing multiple groups,
and “knowledge sharing routines”
Knowledge sharing routines
• Kyohokai: Toyota's supplier association was
established in 1943
– Information exchange
– Socializing events
• Supplier association has regular meetings, fi
– Quality committees.
– Visit `best practice' plants
– Quality management conference held once a year
Knowledge sharing routines
• Toyota's operations management consulting
division
– Direct free `on-site' assistance for suppliers
• Voluntary small group learning teams
(jishuken)
– Each group consists of roughly 5-8 suppliers
– The group visits each member to develop
suggestions
– Groups are frequently rearranged
Network rules for knowledge
protection
• Creating an identity isn't enough to solve sharing and free
riding problems
• Toyota sets a norm/rule by sharing its own knowledge
– eliminating the notion that there is `proprietary knowledge'
• Suppliers must be willing to open their plants to other
network members to other network members
– reciprocal obligations: We will help you, but in return, you must agree
to help the network.
– reciprocity norm is enforced by implicit threat of withdrawal of
business
Creating multiple knowledge sharing processes
Alliance networks: Ahuja
Indirect tie
Direct tie
37
• Two types of ties
• Direct ties
– knowledge sharing
– complementary skills
– scale economies
• Indirect ties
– knowledge spillovers
Effects of direct ties
Many direct ties
Knowledge sharing
Complementarity
Economies of scale
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Fewer direct ties
higher innovation output
Effects of indirect ties
Many indirect ties
Information gathering devices
Screening device
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Fewer indirect ties
higher innovation output
Effects of indirect ties depend on the
# direct ties
Many direct ties
Fewer direct ties
Relative addition of new resources is smaller.
40
When many partners have indirect ties, information is likely less
valuable. since it will reach many others
What is better for innovation output of firms:
structural holes or network closure?
A
B
What is better for innovation output of firms:
structural holes or network closure?
A
B
Ahuja finds that firms embedded in a closed / dense network
outperform firms in a open network (B) in terms of
patent production