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Title: Social Networks The Basic Network Arguments U. Matzat


1
Social NetworksThe Basic Network ArgumentsU.
Matzat
2
The setup in some more detail
  • Network theory and background
  • Introduction what are they, why important
  • Four basic network arguments
  • Kinds of network data (collection)
  • Small world networks
  • Business networks

3
Today
  • Its not what you, but whom you know!
  • Arguments of classical social network theories
    that make clear
  • 1. why
  • 2. which network characteristics
  • 3. have what effect?

4

What you have learned already the last
time.....what is a network?
  • Network A set of ties among a set of actors (or
    nodes)
  • Actors persons, organizations, business-units,
  • countries
  • Ties Any instance of connection of interest
  • between the actors

5
What you have learned already the last time.....
Example relations among organizations
  • Firms as actors
  • Buys from, sells to, outsources to
  • Owns shares of, is part of
  • Has a joint venture or alliance with, has sales
    agreements with
  • Has had quarrels with

6
What you have learned already the last time.....
Why networks innovation?
  • Classical innovation studies characteristics of
    individuals or firms
  • firm size
  • However, innovation social in nature
  • firms have relations with other firms
  • networks
  • important in explaining innovation
  • and innovation changes networks as well

7
Today
  • Arguments of classical social network theories
    that make clear
  • 1. why
  • 2. which network characteristics
  • 3. have what effect?

8
Outlooking Example Innovation Success
Network closure high
low
?trust, safeguard against opportunism
9
Outlooking Example Innovation Success
Network diversity (of a single company)
high low
?brokerage benefits, diverse resources,
innovative ideas
10
Outlooking Example Innovation Success
Contingency H Alternative networks for different
objectives (1) Close-knit networks optimize
benefits from collaboration (2) Diverse
networks optimize competitive benefits
11
4 Basic Social Network Arguments
  • Mark Granovetter The strength of weak ties
  • James Coleman Network closure as social capital
  • Ron Burt Structural holes
  • J. Coleman/R. Burt Diffusion of innovation
    cohesion versus structural equivalence
  • All good theories are portable. Take them to your
    problem.

12
Argument 1 Mark GranovetterThe strength of
weak ties
13
Mark Granovetter The strength of weak ties
  • Dept of Sociology, Harvard, The strength of weak
    ties (1973)
  • strong vs. weak ties
  • - frequency of interaction
  • - emotional closeness
  • - duration of contact
  • interviewed 100 people who had changed jobs in
    the Boston area.
  • More than half found job through personal
    contacts (at odds with standard economics).

14
M. Granovetter The strength of weak ties (2)
  • Many contacts rather indirect (a weak tie)
  • surprising, strong ties usually more willing
    to help you out
  • Granovetters conjecture strong ties are more
    likely to contain information you already know
  • According to Granovetter you need a network that
    is low on transitivity

15
M. Granovetter The strength of weak ties (3)
  • weak ties better access to information
  • Coser (1975) bridging weak ties connections to
    groups outside own clique ( cognitive
    flexibility, cope with heterogeneity of ties)
  • Empirical evidence
  • Granovetter (1974) 28 found job through weak
    ties
  • 17 found job through strong ties
  • Langlois (1977) result depends on kind of job
  • Blau added arguments about high status people
    connecting to a more diverse set of people than
    low status people

16
Example acquisition of diverse information
through weak ties
  • Assume manager C has to to eliminate some
    contacts and he has the opportunity to get rid of
    T or D
  • Whom should he dump?

X
X
  • Get rid of T and the tie to T!

17
Social Networking in plain English
  • http//www.youtube.com/watch?v6a_KF7TYKVc

18
Argument 2 James ColemanSocial Capital and
network closure
19
Coleman Social capital in the creation of human
capital
  • Social capital vs human capital

Dep. of Sociology, University of Chicago, died
1995
20
Coleman Social capital in the creation of human
capital (2) some (vague) definitions
  • SEVERAL DEFINITIONS OF SOCIAL CAPITAL
  • OF AN ACTOR (person/organisation)
  • The resources you can mobilize through others
  • The value of social networks that actors can draw
    on to solve common problems. The benefits of
    social capital flow from the trust, reciprocity,
    information, and cooperation associated with
    social networks.
  • OF A SOCIETY
  • The attitude, spirit and willingness of people to
    engage in collective, civic activities the
    social infrastructure
  • The collective value of all social networks

21
Coleman Social capital in the creation of human
capital (3)
  • Human capital the competencies and resources
    you have available yourself (e.g., intelligence,
    education, experience, )
  • Social capital the resources you can mobilize
    through others the way in which your
    connections to others facilitate achieving ones
    goals
  • Note
  • Social capital need not be social. For
    instance mafia family ties

22
Coleman Social capital in the creation of human
capital (4)
  • One of Colemans social capital examples
  • The diamond merchants
  • Compare
  • Diego Gambettas 1996 The sicilian mafia
  • (? social capital need not be good for society)
  • Putnams Bowling alone Social capital is
  • declining in the US (and according to him, this
    has
  • something do do with privatization and
    television)
  • At the same time new social networking sites
  • for professionals (LinkedIn..)

23
Coleman Social capital in the creation of human
capital (5)
  • Social capital (of a society or group) consists
    of
  • Obligations and expectations
  • Example Kahn El Khalili market in Cairo
  • Channels of information
  • Norms about what (not) to do
  • all kinds of collective action problems can then
    be solved (e.g., prevention of deviant behavior
    in small cities through gossiping curious
    neighbours)
  • For 1. and 3. you need closure (dense networks
    between actors / connections between your ties)

24
Coleman Social capital in the creation of human
capital (6)
  • Social capital (of parents) leads to human
    capital (of children)
  • Empirical analysis
  • To explain school dropouts
  • Network actors pupils and their parents
  • Network ties having frequent contact with
  • To do well in school, you need
  • Financial capital (physical resources)
  • Human capital (cognitive environment)
  • AND Social capital
  • Pupils whose parents spend more time on them,
    drop out less often.
  • in Catholic schools parents know each other from
    church related meetings
  • some parents have stayed in the same
    neighborhood, parents know each other better

25
Example Social capital for successful innovation
through collaboration
  • Two collaborating firms anticipate opportunistic
    behavior of the partner
  • e.g. pooling of resources for
    collaborating
  • Standard solution contracts
  • Disadvantage costly, sometimes difficult to
    manage
  • (e.g., are the best employees given for
    participation in collaborative projects?)
  • Alternative/additional solution implementation
    of
  • collaboration in an organisational
    environment with high network closure

26
Example Social capital for successful innovation
through collaboration (2)
Market 2 with high closure
Market 1
B
B
A
A
  • Assume that manager of company B has to choose
    between collaboration in the two markets which
    one should he choose?
  • Who would loose more by opportunistic behavior
    partner A or partner A?

27
Example Social capital for successful innovation
through collaboration (3)
  • Opportunities for company B under high network
    closure
  • -damage of reputation of A
  • -collective action with other (third) parties
    if A violates basic standards
  • A anticipates these dangers therefore special
    interest in avoidance of anything that could
    appear as opportunism
  • Network closure as safeguard against opportunism
  • Network closure facilitates trust

28
Argument 3 Ronald BurtStructural holes
29
Ron Burt Structural holes versus network closure
as social capital
  • Burts conclusion
  • structural holes beat network closure
  • when it comes to predicting which actor
  • performs best
  • Coleman says closure is good
  • Because information goes around fast
  • and it facilitates trust
  • fear of a damaged reputation
  • precludes opportunistic behavior
  • Burt subsequently compares people (managers)
    with dense networks with those with networks rich
    in structural holes

University of Chicago, Graduate School of Business
30
Ron Burt Structural holes versus network closure
as social capital (2)
A
B
1
7
3
2
James
Robert
6
4
5
9
8
C
  • Roberts network is rich in structural holes
  • James' network has fewer structural holes

D
31
Ron Burt Structural holes versus network closure
as social capital (3)
  • Robert will do better than James, because of
  • informational benefits
  • tertius gaudens (entrepreneur)
  • autonomy

32
Ron Burt Structural holes versus network closure
as social capital (4)
  • It is not that clear (yet) what precisely
    constitutes a structural hole, but Burt does
    define two kinds of redundancy in a network
  • Cohesion two of your contacts have a close
    connection
  • Structurally equivalent contacts contacts who
    link to the same third parties
  • This more or less corresponds to the inverse of
    structural holes
  • If two of your contacts are connected, you do not
    connect a structural hole
  • If two of your contacts lead to the same other,
    then to get to that other, you actually would
    have needed only one of those contacts

33
Structural holes vs network closure
  • Empirical evidence on
  • Dependent variable early promotion
  • large bonus
  • outstanding evaluation
  • Most or all of the evidence seems to favor
    Burts structural holes
  • Burt on Coleman
  • Colemans dependent variable dropping out of
    school
  • parents in a close network
  • ? smaller probability of school dropout of
    children
  • ? but parents may tend to earn less
  • And about network closure
  • Best team performance when groups are cohesive
    but team
  • members have diverse external contacts.

34
Structural holes vs network closure (2)
  • Coleman
  • closure can overcome trust and cooperation
    problems
  • (empirical evidence from data on school
    dropouts)
  • Burt
  • Structural holes give entrepreneurial
    possibilities
  • (empirical evidence from data on US managers)
  • Perhaps this is not so much a controversy after
    all ?
  • There is a problem though, when it comes to
    innovation. For successful innovation one needs
    both to overcome trust and cooperation problems
    and entrepreneurial possibilities.

35
Argument 4 James Coleman vs Ronald BurtThe
diffusion of innovation Cohesion vs.
structural equivalence
36
J. Coleman/R. Burt Diffusion of Innovations
  • What happens with innovations?a) How and when do
    they spread (adoption)? b) How and when are
    they used?
  • 2 theories (network theories of social influence)
  • A Coleman Diffusion by cohesion
  • B Burt Diffusion by structural equivalence
  • Both theories predict which individuals of a
    social system are similar with regard to
    behavior, evaluation of some phenomena, and
    attitudes.
  • Both theories make predictions about who adopts
    an innovation.

37
Diffusion via social networks
  • effects of individual differences in receptivity
    (k)

dy/dt k(1-y)t
  • effects of social contagion (influences via
    social networks) The Snowball Effect

dy/dt ky(1-y)t
38
Which situations?
  • social influences of cost-benefit evaluation do
    not always take place
  • important for social influences
  • uncertainty of results of actions (often when
    actors are confronted with innovations)
  • no scarcity of information, sometimes even
    information overload
  • problem finding trustworthy information
  • individuals rely on others
  • both models (cohesion, structural equivalence)
    argue that the decisions of actors are influenced
    by "other actors" in the social network
  • they make different predictions about who these
    "others" are

39
J. Coleman Diffusion of Innovation by cohesion
  • two actors share same understanding of costs and
    benefits (shared attitudes) of an innovation when
    they socialize with each other
  • shared understanding of costs and benefits
    (shared attitudes) leads to similar behavior
  • if alter adopts the innovation then ego will
    follow soon
  • who are the relevant alters?
  • the less indirect and the stronger the
    relationship between ego and alter the more
    likely that social influences take place
  • the stronger the relationship with alter the more
    likely that the adoption of alter will trigger
    the adoption of ego

40
J. Coleman Diffusion of Innovation by cohesion
(2)
A
B
1
7
Peter
3
2
James
Robert
6
C
4
5
Tom
assume Peter adopts the innovation who would be
the next to adopt? who would follow
thereafter who would never adopt?
Frank
41
R. Burt Diffusion by structural equivalence
  • What is structural equivalence? - An example
  • 1 2
  • 3 4
  • 5
  • 3 classes of equivalent actors
  • class A 1 2
  • class B 3 4
  • class C 5

42
R. Burt Diffusion by structural equivalence (2)
  • two actors in structurally equivalent positions
    act in the same way because their positions imply
    that they act under the same structural
    conditions
  • individuals take others as a frame of reference
    for judging whether their decisions are correct
  • theory offers a different answer to the question
    "Who are the relevant others that are taken as a
    frame of reference?"
  • structural equivalence emphasizes the competitive
    character of many situations that lead to social
    comparisons

43
R. Burt Diffusion by structural equivalence (3)
  • the more similar the relationships of ego and
    alter are to other (third) individuals the more
    likely that ego takes alter as a frame of
    reference for social comparisons
  • hypothesis the higher the degree of structural
    equivalence between ego and alter the more likely
    that alter's adoption will trigger ego's adoption
    of an innovation

44
Structural Equivalence versus Cohesion3 typical
Cases
  • A Identical predictions of both models social
    influence between ego alter
    ego
  • Person 1 person 2
  • alter
  • B cohesion social influence between ego alter
    structural equivalence no influence
    ego
  • Person 3 Person 4
  • alter
  • C structural equivalence social influence
    between ego alter
  • cohesion no influence
    ego
  • Person 3 Person 4
  • alter

45
Today
  • Its not what you, but whom you know!
  • Arguments of classical social network theories
    that make clear
  • 1. why
  • 2. which network characteristics
  • 3. have what effect?

46
To Do
  • Read the following articles
  • Granovetter, M. S., "The Strength of Weak Ties,"
    American Journal of Sociology 78 (6) 1360-1380
    (1973).
  • Coleman, J.S. "Social Capital in the creation of
    human capital" American Journal of Sociology 94
    95-120 (1988).
  • Burt, R. (2001) "Structural Holes versus Network
    Closure as Social Capital", in Social Capital.
    Theory and Research, ed. by Lin, N., Cook, K.
    Burt, R.
  • Read these papers with in the back of your head
    the idea that you will have to be able to apply
    similar network arguments to problems of alliance
    management and innovation science.
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