the prevalence of networks


The July issue of the Academy of Management Review presents a forum on social network research and its application to organizational analysis. Arvind Parkhe, Stanley Wasserman (who also has a blog), and David Ralston guest edited the issue. Their introduction begins with the following:

Of all the phenomena that have gripped the business world in recent years, few match the impact of networks. Quite literally, networks are reshaping the global business of architecture. In the ongoing evolution of the dominant organizational paradigm and mode of competition along the continuum of single, autonomous firms to dyadic alliances to networks to virtual companies, the current period is marked by a growing prevalence of the network form of organization. The ubiquity of networks, and networking, at the industry, firm, group, and individual levels has attracted significant research attention. [italics added]

I love network research. Coming from Arizona, I got a lot of exposure to (and training in) social network analysis. Perhaps that's why the editors' line of reasoning makes me uncomfortable. (Maybe I'm just reacting to hyperbole meant to draw in the reader.)

Parkhe et al. say that network forms of organization are becoming more prevalent in society. I'm not sure how much evidence there is to support this claim. Although I've seen this statement repeated a few times by organizational network scholars (Powell 1990; Gulati 1995; Powell, Koput, and Smith-Doerr 1996), few of these studies actually demonstrate change over time. There is some evidence that strategic alliances have become more common recently, but in the broad literature on inter-organizational networks, alliances are only one specific type of relation. I may be wrong (and I'm going out on a limb here), but this claim about the increasing prevalence of networks seems to lack strong empirical support.

Many scholars would say that networks have always been central to economic activity of any kind. This is Granovetter's embeddedness thesis. The early research on regional economies demonstrated that network forms of organization were prevalent in the German textile industry in the 19th Century. Clearly, this was not a new invention of Silicon Valley; in fact, it was and is still the dominant form of organizing in the construction and textile industries in the U.S. (see Brian Uzzi's work). If anything, the recent trend in the U.S. textile industry is to move in the opposite direction and use more arms-length, contractual relations. As Uzzi has noted, rationalization of the market due to the emergence of new super-retailers has cut into the efficiency of firms using only embedded ties.

Paul Ingram's and Arik Lifschitz's paper on the Scottish shipbuilding industry also demonstrated that these close-knit ties became less important over time. As the corporation became a dominant institution, the benefits received from using interbuilder ties in shipbuilding efforts declined.

The growth of social networks outside of the organizational context has also declined. That is the thesis of Putnam's Bowling Alone. People stop building social capital because they're too busy at home watching television. In the most recent issue of the American Sociological Review Miller McPherson, Lynn Smith-Lovin, and Matthew Brashears provide more evidence of this. Using GSS data, they show that from 1985 to 2004 Americans' discussion networks decreased in size. Non kin ties declined the most, suggesting that individuals' connections to voluntary and neighborhood associations (important community organizations) are diminishing.

All of this evidence suggests that Parkhe et al.'s statement may be somewhat overblown. Networks are not becoming denser and more prevalent in every organizational context. Perhaps they just need to be clearer about this point. Some kinds of networks may becoming more prevalent (e.g. corporate strategic alliances; cyber-networks), but this is a far cry from making the claim that the firm's boundaries have eroded in favor of new relational forms of governance. The autonomy and dominance of the corporation is still intact, and inter-organizational relations have always been an important stabilizing force in the economy.

Written by brayden king

June 23, 2006 at 4:23 am

Posted in brayden, research, sociology

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