Personal and Business Networks

1. Personal and Business Networks Gerrit Rooks “Never eat alone” Keith Ferrazzi (2005) “no man is an island, entire of itself…” (Donne 1624).

2. About me

3. This lecture • A few tidbitsaboutpersonalnetworks • Howmany close friends do people have? Howmanyacquaintances? • Whichpersons have what kinds of networks? • The evolution of business-networksfromentrepreneurialnetworks • Network management • Medici family • The Toyota suppliernetwork • Alliance networks: direct and indirect ties

4. 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

5. 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.

7. Dunbars number: 150

8. “Social units” • Support clique: peoplewho we seek personal advicefrom • Sympathygroup: special ties, frequent contact • Band: acquaintances, less frequent contact • Clan: allcurrentcontacts • Megaband + Tribe: largersocial units Increasedemotionalcloseness Increasedfrequencty of interaction

9. Any group greater than 150 will become disfunctional 50,000 + 20,000 to 45,000 10,000 to 15,000 20,000 to 45,000 475-1000 75-200 Organizations > 150 need bureaucracy… Company size = 75-200

10. Facebookfriendships

11. 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 aboutmaintainingrelationships, notrememberingfaces (on average 1500)

12. (Explaining) variation in networks

13. Kalish & Robbish:Ego networksandtriad census Strong tie Weak tie

14. Kalish&Robbish describe and explain the triad census Strong tie ego Weak tie

16. Transitivity: “the forbidden triad” = strong tie = weak tie Chris Chris Gerrit Uwe Gerrit Uwe The forbidden triad is a building block in Granovettersstrength of weak ties theory

17. Frequent interaction Similarity Structural balance / cognitive dissonance reduction Reasons for transitivity = strong tie Chris Gerrit Uwe

18. Only weak ties are bridges = strong tie Koen Chris Bert Gerrit Uwe Önder

21. Kalish & Robbishtry to explainnetworkdifferences

22. 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

23. Socialnetwork entrepreneur = firmnetwork • `identity’ basednetworks • high proportion of tieswithsome type of personalorsocialidentification • Pre-existingties, strongembeddednetwork high in closure and cohesion

24. Early / Later growth • Calculativenetworks • Ties are primarilymotivatedbyexpectedeconomicbenefits • Weaktiesthat are more marketlike, less redundant • (Partly) result of pro-actively managing networks

25. Intentionally managed networks • Firms and individualscanlearn to createnetworkvalue • Medici • Toyata • Alliance networks

27. Padgett, John F.; Ansell, Christopher K. (May 1993). "Robust Action and the Rise of the Medici, 1400–1434". The American Journal of Sociology98 (6): 1259–1319.

28. 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"

29. Knowledge sharing routines • Dilemmas associated with knowledge sharing • how can self-interested network members openly share valuable knowledge? • how to prevent free-rider problems? • how to maximize the efficiency of knowledge transfers?

30. Overcoming knowledge sharing dilemmas • how can self-interested network members openly share valuable knowledge? • Create a network 'identity' through network-level knowledge-sharing routines • how to prevent free-rider problems? • Network `rules' for knowledge protection and value appropriation • how to maximize the efficiency of knowledge transfers? • Creating multiple knowledge-sharing processes and sub-networks in the larger network

31. 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

32. 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”

33. Network identity • Kyohokai: Toyota's supplier association was established in 1943 • Information exchange • Socializingevents • Supplier association has regular meetings, fi • Quality committees. • Visit `best practice' plants • Quality management conference held once a year

34. 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 frequentlyrearranged

35. 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

36. Creating multiple knowledge sharing processes

37. Two types of ties Direct ties knowledge sharing complementary skills scale economies Indirect ties knowledge spillovers Alliance networks: Ahuja Indirect tie Direct tie

38. Effects of direct ties Many direct ties Fewer direct ties • Knowledge sharing • Complementarity 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

41. What is better for innovation output of firms: structural holes or network closure? B A

42. What is better for innovation output of firms: structural holes or network closure? B A Ahuja finds that firms embedded in a closed / dense network outperform firms in a open network (B) in terms of patent production