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Personal and Business Networks Gerrit Rooks
“Never eat alone” Keith Ferrazzi (2005)
“no man is an island, entire of itself…” (Donne 1624).
This lecture• A few tidbits about personal networks
– How many close friends do people have? How many acquaintances?
– Which persons have what kinds of networks?• The evolution of business-networks from
entrepreneurial networks• Network management
– Medici family– The Toyota supplier network
• Alliance networks: direct and indirect ties
Social Brain Hypothesis
Ronald Dunbar is famous for the social brain hypothesis: “human intelligence is the evolutionary result of the need for social coordination and cooperation”
Ronald Dunbar (1947), anthropologist and evolutionary biologist, University of Oxford
Personal network size• the number of social
group members a primate can track, appears to be limited by the volume of the neocortex region of their brain.
Dunbar, R.I.M. (1993), Coevolution of neocortical size, group size and language in humans, Behavioral and Brain Sciences 16 (4): 681-735.
“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
Increased emotional closenessIncreased frequencty of interaction
Any group greater than 150 will become disfunctional
Company size = 75-200 Organizations > 150 need bureaucracy…
75-200
475-1000
50,000 +
20,000 to 45,000
10,000 to 15,000
20,000 to 45,000
Is Dunbars number still valid in this new media age?
• “We find that the data are in agreement with Dunbar’s result; users can entertain a maximum of 100–200 stable relationships. Thus, the ‘economy of attention’ is limited in the online world by cognitive and biological constraints as predicted by Dunbar’s theory”.
• Note: Dunbars theory is about maintaining relationships, not remembering faces (on average 1500)
Transitivity: “the forbidden triad”
Chris
Gerrit Uwe
= strong tie
= weak tie
Chris
Gerrit Uwe
The forbidden triad is a building block in Granovetters strength of weak ties theory
Reasons for transitivity
• Frequent interaction
• Similarity
• Structural balance / cognitive dissonance reduction
Chris
Gerrit Uwe
= strong tie
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
Social network entrepreneur = firm network
`identity’ based networkshigh proportion of ties with some type of personal or social identification
Pre-existing ties, strong embedded network high in closure and cohesion
Early / Later growth
Calculative networksTies are primarily motivated by expected economic benefits
Weak ties that are more market like, less redundant
(Partly) result of pro-actively managing networks
Intentionally managed networks
• Firms and individuals can learn to create network value– Medici– Toyata– Alliance networks
Padgett, John F.; Ansell, Christopher K. (May 1993).
"Robust Action and the Rise of the Medici, 1400–1434".
The American Journal of Sociology 98 (6): 1259–1319.
The Toyata supplier network• 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"
Knowledge sharing routines• Dilemmas associated with knowledge
sharing1. how can self-interested network members
openly share valuable knowledge?2. how to prevent free-rider problems?3. how to maximize the efficiency of knowledge
transfers?
Overcoming knowledge sharing dilemmas
1. how can self-interested network members openly share valuable knowledge?
– Create a network 'identity' through network-level knowledge-sharing routines
2. how to prevent free-rider problems?– Network `rules' for knowledge protection and value
appropriation3. how to maximize the efficiency of knowledge transfers?
– Creating multiple knowledge-sharing processes and sub-networks in the larger network
Why create an identity?
• Many experiments demonstrate the powerfull effects of social identity, f.i.
– Randomly assign individuals to a blue and a green group
– Individuals were unknown to each other and were told that they would not meet again
– Group members evaluated each other more positively and were more willing to cooperate with each other than non group members
How did Toyata create a network 'identity'?
• Toyota's network is known (labeled) as the `Toyota group'.–philosophy within the Toyota Group
called ‘coexistence and coprosperity’• Toyota creates a shared network
identity by developing multiple groups, and “knowledge sharing routines”
Network identity
• Kyohokai: Toyota's supplier association was established in 1943– Information exchange– Socializing events
• Supplier association has regular meetings, fi– Quality committees.– Visit `best practice' plants– Quality management conference held once a year
Network identity
• Toyota's operations management consulting division– Direct free `on-site' assistance for suppliers
• Voluntary small group learning teams (jishuken)– Each group consists of roughly 5-8 suppliers– The group visits each member to develop
suggestions– Groups are frequently rearranged
Network rules for knowledge protection
• Creating an identity isn't enough to solve sharing and free riding problems
• Toyota sets a norm/rule by sharing its own knowledge– eliminating the notion that there is `proprietary knowledge'
• Suppliers must be willing to open their plants to other network members to other network members – reciprocal obligations: We will help you, but in return, you must agree
to help the network.– reciprocity norm is enforced by implicit threat of withdrawal of
business
37
Alliance networks: Ahuja• Two types of ties• Direct ties
– knowledge sharing– complementary skills– scale economies
• Indirect ties– knowledge spillovers
Direct tie
Indirect tie
38
Effects of direct ties
Many direct ties Fewer direct ties
Knowledge sharingComplementarity higher innovation output Economies of scale
39
Effects of indirect ties
Many indirect ties Fewer indirect ties
Information gathering devices higher innovation output Screening device
40
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