Personal and Business Networks

1. Personal and Business Networks Gerrit Rooks “no man is an island, entire of itself…” (Donne 1624).

2. This lecture • A few tidbits about personal networks • How many close friends do people have? How many do you have? • Which persons have what kinds of networks? • The evolution of business-networks from entrepreneurial networks • The Toyota supplier network • Alliance networks: direct and indirect ties

3. Social Brain Hypothesis • Ronald Dunbar (1947), anthropologist and evolutionary biologist, University of Oxford • Ronald Dunbar is famous for the social brain hypothesis: “human intelligence is the evolutionary result of the need for social coordination and cooperation”

4. 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.

6. Dunbars number: 150

7. “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 • Megaband + Tribe: larger social units

8. 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 Organizations > 150 need bureaucracy… Company size = 75-200

9. Is Dunbars number still valid in this new media age? • Microblogging and online tools, on the other hand, might be analogous to a pocket calculator that, while speeding up the way we can do simple math, does not improve our cognitive capabilities for mathematics. • 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. Modeling Users' Activity on Twitter Networks: Validation of Dunbar's Number. Goncalves, Perra & Vespigani

10. Primitive societies and networks

11. Barry Wellman, 2011. "Is Dunbar's Number Up?" British Journal of Psychology 102: in press: DOI: 10.1111/j.2044-8295.2011.02075. Feld, Scott L. (1991), "Why your friends have more friends than you do", American Journal of Sociology 96 (6): 1464-1477, http://www.jstor.org/stable/2781907

12. That's why the cognitive social structure work is relevant to this question. There is evidence that we humans see networks as more structured than they actually are (see Koehly & Pattison in Carrington, Scott and Wasserman, 2005; also Kumbasar et al, 1994, which they cite.) Casciaro did some interesting work on network perception in the 1990s. More recently, have a look at Igarashi and Kashima (2011) in the Journal of Experimental Social Psychology, involving some network perception experimental manipulations and perceptions of "group-ness". If you get down to specific types of network ties, then Lutz and Lakey and colleagues have done some interesting work in regard to social support networks, about the factors that lead individuals perceiving that a social support tie is present.

14. (Explaining) variation in networks

15. Kalish & Robbish:Ego networks and triad census Strong tie Weak tie

16. Kalish&Robbish describe and explain the triad census Strong tie Weak tie

17. Transitivity: “the forbidden triad” = strong tie = weak tie Chris Chris Gerrit Uwe Gerrit Uwe The forbidden triad is a building block in Granovetters strength of weak ties theory

18. Frequent interaction Similarity Structural balance / cognitive dissonance reduction Reasons for transitivity = strong tie Chris Gerrit Uwe

19. Only weak ties are bridges = strong tie Koen Chris Bert Gerrit Uwe Önder

22. Kalish & Robbish try to explain network differences • Do psychological differences affect network differences? • What kind of differences are important?

24. Personal and business 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

25. Socialnetwork entrepreneur = firmnetwork • `identity’ basednetworks • high proportion of tieswithsome type of personalorsocialidentification • Pre-existingties, strongembeddednetwork high in closure and cohesion

26. Early / Later growth • Calculativenetworks • Ties are primarilymotivatedbyexpectedeconomicbenefits • Weaktiesthat are more marketlike, less redundant • (Partly) result of pro-actively managing networks

27. From embedded to balanced • Emerging firms rely on embedded ties • Low reputation / legitimacy • Not an attractive partner • -> reluctant banks etc. • Limited search capabilities • Growth firms have to rely on arms length relations as well • Firm is more attractive etc • Better search capabilites

28. Intentionally managed networks • Firms and individuals (can) learn to create network value • Creation of networks also depends on specific competences

29. The Medici • Policitical dynasty, banking family, later royal family (14 century) • The Medici produced four Popes & two regent queens of France a.o.

31. Padgett, John F.; Ansell, Christopher K. (May 1993). "Robust Action and the Rise of the Medici, 1400–1434". The American Journal of Sociology98 (6): 1259–1319.

32. The Toyata supplier network • Japanese automobile makers are more and more productive, US is lagging • Dyer and Nobeoka: "Creating and managing a high performance knowledge-sharing network: the Toyota case"

33. One large network with core firm as hub Bilateral relationships Weak ties/arm's length relations Structural holes Large network plus multiple nested networks Multi-lateral relationships Strong/embedded ties in nested networks with core firm Dense network

34. Knowledge sharing routines • Dilemmas associated with knowledge sharing • how can self-interested network members openly share valuable knowledge? • how to prevent free-rider problems? • how to maximize the efficiency of knowledge transfers?

35. Overcoming knowledge sharing dilemmas • how can self-interested network members openly share valuable knowledge? • Create a network 'identity' through network-level knowledge-sharing routines • how to prevent free-rider problems? • Network `rules' for knowledge protection and value appropriation • how to maximize the efficiency of knowledge transfers? • Creating multiple knowledge-sharing processes and sub-networks in the larger network

36. 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

37. How did Toyata create a network 'identity'? • Toyota's network is known (labeled) as the `Toyota group'. • Toyota creates a shared network identity by developing multiple groups • The supplier association • Toyota's operations management consulting division • Voluntary small group learning teams (jishuken)

38. Developing ties • The supplier association (s) • Kyohokai: Toyota's supplier association was established in 1943 • Suppliers must be close to each other • Supplier association has regular meetings, fi • Quality committees. • Visit `best practice' plants • Quality management conference held once a year

39. Developing ties • 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 • After determining theme, the group visits each member to develop suggestions • Groups are frequently rearranged

40. 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

41. Creating multiple knowledge sharing processes

42. Two types of ties Direct ties knowledge sharing complementary skills scale economies Indirect ties knowledge spillovers Alliance networks: Ahuja Indirect tie Direct tie

43. Effects of direct ties Many direct ties Fewer direct ties • Knowledge sharing • Complementarity higher innovation output • Economies of scale

44. Effects of indirect ties Many indirect ties Fewer indirect ties • Information gathering devices higher innovation output • Screening device

45. Effects of indirect ties depend on the # direct ties Many direct ties Fewer direct ties • Relative addition of new resources is smaller. • When many partners have indirect ties, information is likely less valuable. since it will reach many others

46. What is better for innovation output of firms: structural holes or network closure? B A

47. What is better for innovation output of firms: structural holes or network closure? B A Ahuja finds that firms embedded in a closed / dense network outperform firms in a open network (B) in terms of patent production