௠ Academy of Management Journal 2004, Vol. 47, No. 6, 795–817.

TAKING STOCK OF NETWORKS AND ORGANIZATIONS: A MULTILEVEL PERSPECTIVE

DANIEL J. BRASS University of Kentucky

JOSEPH GALASKIEWICZ 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 perspectives in organizational 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 patterns of interaction 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 centrality in a group, a group’s role in an 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 niche in a market (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 represented by the ties is limited only by a re- research directions by assessing where network searcher’s imagination. Typically studied are stra- scholarship currently is. Network research embraces a distinctive per- tegic alliances and collaborations, flows of informa- spective that focuses on relations among actors, tion (communication), affect (friendship), goods whether they are individuals, work units, or orga- and services (work flow), and influence (advice), nizations. According to the network perspective, and overlapping group memberships such as 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 equal contributions from the four authors. We thank all researchers have been able to explain variance in 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) referred to this process 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 begin with the interpersonal level of analysis (in- she is central or integrated in the interpersonal dividual people as actors), then consider interunit network. networks (groups as actors), and follow with the Personality. Many radical structuralists would interorganizational level of analysis (organizations argue that personality is a result of network posi- 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 Similarity has been operationally defined on such interactions within organizations are voluntary. 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 l993; 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 evidence for ho- positions are specified. Formally differentiated po- mophily (interaction with similar others) based on sitions locate individuals and groups in physical gender in organizations, observing two largely seg- space and at particular points in an organizations’s 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 organizational context. It is important to note that mechanistic organizations. In addition, Lincoln 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- action is influenced by the degree to which an work centrality, Lincoln and Miller’s results em- 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 similarity pattern. Kanter quirements of organizations as well. Longitudinal 2004 Brass, Galaskiewicz, Greve, 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 equivalence refers to 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. According to Burt (1982), 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 Scholten (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 organizational satisfaction) was associated with the 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 departments and employee satisfaction. Consequences of Interpersonal Networks Centrality within an entire organization’s work flow Established patterns of interaction become insti- had a negative relationship to satisfaction, a finding 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 798 Academy of Management Journal December 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 has been a long history 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 influence. In particular, closeness to the dominant interaction with these people, thereby producing a coalition in an organization 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 higher occu- 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 2004 Brass, Galaskiewicz, Greve, and Tsai 799 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 develop weak relation- Performance. The network perspective on per- ships with many coworkers or strong personal re- formance invites one to analyze patterns of rela- lationships with a few coworkers or with a mentor. 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 provides a There is considerable empirical support for this 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 800 Academy of Management Journal December 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 Al 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 typically focused 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 2004 Brass, Galaskiewicz, Greve, and Tsai 801 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. The design of 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 performance outcomes. 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, Reagans, Zuckerman, and 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 intergroup net- 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, predicting group outcomes. In a study of intergroup 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 802 Academy of Management Journal December

(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. drance networks” was negatively related to group Motives. Galaskiewicz (1985) cited four motives performance. behind interorganizational cooperation: acquire re- Innovation and knowledge activities. Innova- sources, reduce uncertainty, enhance legitimacy, tion- and knowledge-related activities are likely to and attain collective goals (see also Oliver, 1990). be influenced by patterns of interunit ties. Given Business strategy scholars have argued that inter- the existence of allied groups or blocks of business organizational ties such as strategic alliances, joint units within multiunit firms, network research can ventures, and long-term buyer-supplier partner- inform about how units share resources with other ships are vehicles that provide a firm with access to units to enhance innovation (Kilduff & Tsai, 2003; “information, resources, markets, and technologies; Tsai, 2001). Organizational units that are more cen- with advantages from learning, scale, and scope tral in an interunit resource exchange network tend economies; and allow firms to achieve strategic to produce more product innovations (Tsai & objectives, such as sharing risks and outsourcing Ghoshal, 1998). Social ties between units facilitate value-chain stages and organizational functions” knowledge sharing for units that compete in the (Gulati, Nohria, & Zaheer, 2000: 203; see also Alter same market segments (Tsai, 2002). Strong ties be- & Hage,1993; Ebers, 1997). According to transac- tween business units facilitate the transfer of com- tion cost analysis, interorganizational forms are plex knowledge, whereas weak ties are sufficient ways to reduce opportunistic behavior on the part for less complex knowledge (Hansen, 1999). of suppliers and distributors (Williamson, 1991). In sum, characteristics of personal networks Learning. Firms that have more experience crossing work-unit boundaries affect both interunit working with other organizations are more likely to conflict and unit performance and innovativeness. form new and more diverse network ties and to Negative ties appear to be highly consequential, become dominant players in networks. Powell, Ko- perhaps more so than positive ones, and deserve put, and Smith-Doerr (1996) found that dedicated further investigation. biotechnology firms that had more networking ex- 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 cooperative relationships be- interfirm ties subsequently were more likely to tween organizations and suppliers, customers, form joint ventures based on new technologies. competitors, and other organizational actors in Firms learn not only about an industry but also which organizations retain control over their own about networking when they engage in alliances, resources but jointly decide on their use (Ebers, and this knowledge makes them attractive network 1997). In these partnerships, problems are typically partners. resolved through discussion, and rules and norms Trust. Many researchers acknowledge the impor- of reciprocity ensure cooperation (Powell, 1990; tance of trust in building interorganizational net- 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- 2004 Brass, Galaskiewicz, Greve, and Tsai 803 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 (1988) also found a 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 arising from 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 readily among 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 b’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- interpersonal level of analysis. 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 relationship with each other in the 804 Academy of Management Journal December 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, plained variation in regional development focusing Greve, Rao, Baum, and Shipilov (in press) found on local subcultures, and Marquis (2003) explained that higher density within an interorganizational patterns of local corporate interlocking focusing on clique led to fewer exits from the clique. community institutions and local histories. Scott 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 has accounted 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 pay back, and thus b would avoid collaborating evidence, however, is mixed on whether cultural with a. As Emerson (1962) argued, the power dif- differences hinder cross-national collaborations. In ferential between a and b creates an unstable situ- an analysis of international joint ventures by large ation for b. If problems in the relationship arise, a Dutch firms, Barkema, Shenkar, Vermeulen, and 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 Chung, Singh, and Lee (2000) found that invest- between the firms and their partners. In contrast, Park ment banks were more likely to form syndicates to and Ungson (1997) found that cultural distance was underwrite corporate stock offerings if their sta- unrelated to joint venture dissolution rates. However, tuses were similar. Rowley and colleagues (in both studies concluded that cultural differences can 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 exogenous influence reported that two firms were likely to form a stra- (Wood & Gray, 1991). These include government tegic alliance if both were central in a relevant agencies, foundations, and industry leaders who interorganizational network of alliances (but not if attempt to build networks among organizational they were both peripheral). Han and Breiger’s actors (Doz, Olk, & Ring, 2000). McEvily and Za- (1999) reanalysis of Eccles and Crane’s (1988) syn- heer (1999) studied the role of regional 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. Context. Other researchers have focused on the prises in the U.S. wood products industry. Lu¨tz broader cultural, historical, and institutional con- (1997) studied an effort at network building by the text to explain interorganizational networks. For German Federal Ministry for Research and Tech- example, changes in the U.S. regulatory environ- nology and showed how scientific partners acted as ment, such as the National Cooperative Research brokers between manufacturers and provided infor- Act, enabled coordinated research and develop- mation that became the building block for future ment activity among market competitors to an ex- collaborations. Kogut (2000) and Dyer and Nobeoka tent unseen previously (Podolny & Page, 1998). (2000) described how Toyota built its production Firms were cooperating before this regulatory system and monitored its behavior. When organi- change, but this and other legislation legitimated zations do not have compelling motives to collab- 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. 2004 Brass, Galaskiewicz, Greve, and Tsai 805

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 & Greve, 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 & Greve, search has shown that research scientists indeed 1997; Galaskiewicz & Burt, 1991; Galaskiewicz & use strong and weak ties to share knowledge across Wasserman, 1989; Greve, 1996; Haunschild & Beck- organizational boundaries, particularly if their or- man, 1998; Hedstro¨m, Sandell, & Stern, 2000; Hen- ganizations are not direct competitors (Bouty, isz & Delios, 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 Powell et al., 1996; Shan, Walker, & 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 through the main custom- 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 adoption of 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. computer and telecommunication 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 centrality moderates the re- structures of network ties affect the diffusion of lationship between product awards and change in different innovation practices in organizational R&D investments. fields. Networks also affect the diffusion of behav- Closer inspection of network structures has ior norms. When behaviors are controversial or yielded additional findings. An important debate is 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 & Greve, 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 through activation of network ties when 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 response (McDonald & Westphal, 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, organizational, or strategic characteristics of ing rates increased when firms had many ties to organizations because the managers in adopting or- firms that were themselves interconnected, indicat- ganizations see similar organizations as more rele- 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 & Greve, 1997; Haunschild & Beckman, 1998; vation rates. These findings seem to support a 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 patenting rates. And in Ruef’s lence as explanations of imitation, with some work (2002) study, members of start-up teams evaluated 806 Academy of Management Journal December 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 (Bru¨ derl & applying for a patent. Preisendo¨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 high internal capabilities but had networks in structures that generate trust. Such virtually no independent (main) effect, suggesting structures include spatial proximity, access to a that network ties helped firms realize the value of common labor market, and central organizations internal capabilities but were not a way of obtain- committed to information sharing (Owen-Smith & ing capabilities. A main effect can still be obtained 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 an interorganizational 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., technology start-ups with networks giving access to Bates, 1990), but studies have shown a positive 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 (Bru¨ derl & Preisendo¨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 Stearns, 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 ties to community organizations and government (Rowley, Baum, Shipilov, Greve, & Rao, 2004). agencies had much lower death rates. Singh, Debate continues about the effects of strong and Tucker, and Meinhard (1991) found that voluntary weak ties and brokerage and network cohesion on social service organizations that had listings in performance. Rowley, Behrens, and Krackhardt community directories, charitable registration (2000) found that strong ties increased performance numbers, and large boards of directors had signifi- in the relatively stable steel industry, whereas weak cantly lower death rates. Being linked to legitimate ties increased performance in the more dynamic actors may be especially beneficial in markets semiconductor industry. Thus, weak ties that facil- where output is difficult to evaluate directly. itate information collection are more valuable Distinguishing the strength of ties yields addi- when there is much information to collect, while 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 high proportion of exchanges and close interaction, a study of hotels in Sydney, Ingram and Roberts 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 competitors increased room facturers in New York showed that firms with a yields, particularly when demand was low, as did high proportion of embedded ties to firms with cohesive ties among competitors. In other work, 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 2004 Brass, Galaskiewicz, Greve, and Tsai 807 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 generation of innovations; (2) 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 (especially past ac- 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. Endogenous factors include infor- 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 approach to studying structural 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 808 Academy of Management Journal December most useful to an actor and its ability to create such form these bridging roles are likely to know more a network. Individual characteristics, such as per- and to 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 losing control over one’s own resources may help on individual actors’ group memberships). Groups 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 especially the loyalty. There is a considerable amount of research 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- change, analysts need to understand the larger con- sumes the products and services of which provid- 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 by adding more units, their networks of internal an incentive 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 personnel and departments are disrupted. and interlock (Burt, 1983). Research on multimar- 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 by being in the same group (a department or an rates (Greve & Baum, 2001). industry for instance), and they in turn link the When competitors form alliance ties with each different groups of which they are members. Some other, they may also try to gain advantage over a actors are critical in maintaining or increasing the competitor outside their alliance (Gargiulo, 1993). integration among groups, since their departure The potential of using alliances with competitors to 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 2004 Brass, Galaskiewicz, Greve, and Tsai 809 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? relationship, because such a level of detail is often 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. 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