Network, Social Capital, Autonomy, and Achievement

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Network, Social Capital, Autonomy, and
Achievement
PRAD 637 Social and Organizational Networks

• Nov 27 2006
• Presented by Yin-Chi Liao Lei Chi

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Burt, Ronald S. (1992) Structural Holes The
social structure of competition

• This book is about how competition works when
  players have established relations with others.
• Competitive advantage is a matter of access to
  holes. Players with networks rich in structural
  holes enjoys high rate of return on investment.
• The structural hole argument is not a theory of
  competitive relations, but a theory about
  competition for the benefits of relationships. It
  lies on the negotiability of the relationships on
  which competitors survive.

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Social Capital

• Social capital is at once the resources contacts
  hold (whom you reach) and the structure of
  contacts in a network (how you reach).
• Social capital is owned jointly by parties to a
  relationship.
• Social capital concerns rate of return in
  production function.
• Success is determined less by what you know
  than by whom you know.

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Structural Hole

• Structural hole is a relationship of
  nonredundancy between two contacts.
• Nonredundant contacts are disconnected either
  they have no direct contacts with one another
  (non-cohesion) or one has contacts that exclude
  the others (non-structural equivalence)

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Structural Hole (Cont)

• As a result of the hole between them, the two
  contacts provide network benefits that are
  additive rather than overlapping.
• A network rich in nonredundant contacts is rich
  in structural holes

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Competitive Advantage of Structural Holes
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Structural Autonomy

• Players with relationships free of structural
  holes at their own end and rich in structural
  holes at the other end are structurally
  autonomous.
• Players with networks optimized for structural
  holesplayers with networks that provide high
  structural autonomyenjoys high rate of return on
  investment.

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Redundancy

• Effective size of is network
• Piq is the proportion of is network time
  and energy invested in the relationship with q
• Mjq is the interaction with q divided by the
  strongest of js relationships with anyone
• Efficiency measure effective size measure
  divided by N (number of primary contacts). Range
  from 1 (nonredundant ) to 0 (redundancy)

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Constraints

• Constraint of absent primary and secondary holes
• Oj be a measure of the organization of
  players within the cluster around contact j such
  that is would be difficult to replace j

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Constraints (Cont)

• Redundancy measure is based on connection and the
  constraint measure is based on dependence,
  indicated by exclusive access.
• Constraint decreases for all levels of density as
  network size increases, and the decrease is
  concentrated in sparse networks.
• Exclusive access is the tie that spans a
  structural hole.

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Hole Signature

• Hole signature characterizes the distribution of
  opportunity and constraint across a players
  relationships.
• Two networks are the same kind of environment to
  the extent that they have identical hole
  signatures.

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Hole Signature (Cont)

• Distinction among kinds of environments are
  useful in that they highlight conditions most
  responsible for behavioral and outcome
  differences among players.
• Hierarchy can be understood as the extent to
  which the aggregate constraint on a player is
  concentrated in the relationship with a single
  contact.

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Structural Autonomy

• The level of a players structural autonomy, Ai,
  increases with the lack of structural holes
  around the player (Oi), and decreases with the
  lack of structural holes around players contacts
  (Ci).
• Aa(1-O)ß0Cßc
• (1-O) the constraints of secondary
  structural holes around the person at the center
  of a network
• C the aggregate constraint of absent holes
  between and around the persons contacts

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First ExampleProduct networks and market profit

• 77 American product markets over twenty years are
  empirically examined for the relationship between
  structural autonomy and profit margins.
• The results confirm structural hole argument that
  the profit margin increases across product
  markets with the structural autonomy of
  producers.
• Margins increase with O and decrease with C.

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Methodology

• Study population 77 product markets in 1963,
  1967, 1972 and 1997 by using input-output tables.
• Measuring structural holes use four-firm
  concentration ratios to compute the lack of
  structural holes within each market. Range from
  1(few structural holes within the market) to 0
  (many structural holes)

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Hole Effects

• Hole effects are nonlinear and multiplicative in
  the final structural autonomy model.
• Structural holes have their greatest effect as
  completely unconstrained action begins to be
  constrained.
• Overall, the hypothesized structural hole effects
  are strong and stable across all kinds of
  production activities

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Market Hole Signatures

• Five clusters are identified through hierarchical
  clustering
• Constraints distribution across transaction is
  hierarchical.

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ConclusionProduct networks and market profit

• American product market example confirm
  structural hole argument in that the profit
  margin increases across product markets with the
  structural autonomy of producers.
• Constraints distribution across transaction is
  hierarchical.
• The hole effects are stable over time and
  consistent across kinds of production activities.

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Second ExampleContact Networks and Manager
Achievement

• The structural hole argument are examined with
  data on the networks and achievements of senior
  managers at the top of one of Americas leading
  high-tech firms.
• The results conclude that the information and
  control benefits of structural holes are an
  advantage to managers.

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Methodology

• Strata sampling of managers in one of Americas
  largest high-tech firms in 1989.
• Measuring achievement early promotion fast
  promotion

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Hole Effects

• Managers with networks rich in structural holes
  get promoted faster and at a younger age than
  their peers.
• Structural holes are not equally advantageous to
  all managers in the same way.

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Hole Effects (Cont)

• Hole effects are most evident for managers
  operating on a social frontier.
• Hole effects are stronger for
• -Managers in remote plant locations
  (periphery of the firm)
• -Women than for men (sexual boundary).
• -Filed managers (frontier between customer
  and producer).
• -Recent hired managers.
• -Managers move up the corporate hierarchy
  (political frontier)

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Hole Effects (Cont)

• Structural holes affect the early promotions
  differently to high-ranking men and women and
  entry-rank men.
• Early promotions are more likely for high-ranking
  men with entrepreneurial, opportunity-oriented
  networks.
• The women and entry-rank men promoted early are
  those who have a hierarchical network around a
  strategic partner.

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Hole Effects (Cont)

• The earliest promotions for women and entry-rank
  men occur among those with a hierarchical
  network, built around a strategic partner other
  than the immediate supervisor.
• The pattern is a strong relation with a strategic
  partner who is in turn strongly connected with
  otherwise disconnected contacts in the network.

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ConclusionGetting Ahead

• A managers physical or functional position in
  the firm is less a cause or consequence of the
  managers network than it is a context defining
  the manner in which the network contributes to
  promotion.
• Every kind of network can be found among any
  group of managers, but only certain kinds of
  networks contribute to early promotion for
  certain kinds of managers.
• The lesson for managers is to build the network
  that works best for their current position in the
  firm. A network should be selected for its
  particular advantagebreaking through a political
  boundary or entrepreneurial opportunity.

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Putnam, R. (1995) Bowling alone Americas
declining social capital

• A strong and active civil society plays an
  important role to the consolidation of democracy.
  The quality of governance was determined by
  longstanding traditions of civic engagement.
• The quality of public life and the performance of
  social institutions are influenced by norms and
  networks of civic engagement, that is, social
  capital.
• Social capital refers to features of social
  organization such as networks, norms, and social
  trust that facilitate coordination and
  cooperation for mutual benefit.

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Americas Declining Social Capital

• The vibrancy of American civil society has
  notably declined over the past several decades.
• At all educational levels of American society,
  and counting all sorts of group memberships, the
  average number of associational memberships has
  fallen by about a fourth over the last
  quarter-century.
• Bowling example More Americans are bowling today
  than ever before, but bowling in organized
  leagues has plummeted in the last decade. The
  broader social significance lies in the social
  interaction and civic conversations that solo
  bowlers forgo.

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Possible Explanations

• The rise of new types of organizations such as
  the Environmental Defense Fund and support groups
  are not the kind of social capital in that they
  dont increase social trust or obligations.
• Several possible explanations are addressed such
  as the movement of women into the labor force,
  mobility, demographic transformations and
  technological transformation of leisure.
• Technological trends are radically "privatizing"
  our use of leisure time and thus disrupting many
  opportunities for social-capital formation.

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Further Lines of Inquiry

• The dimensions of social capital needs more
  study. What types of organizations and networks
  most effectively embody social capital?
• Another important issues involves
  macrosociological crosscurrents such as the
  impact of electronic networks on social capital,
  the development of social capital in the
  workplace.
• The need of exploring how public policy impinges
  on social-capital formation. In some well-known
  instances, public policy has destroyed highly
  effective social networks and norms such as
  slum-clearance policy in 1950s and 1960s.