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Paper Presentation

Bottleneck or Not? The Ceiling Effect of Network Closure on Individual Innovative Performance

Ideas Bouncing of a Ceiling
Academy of Management Annual Meeting 2024
August 12, 2024
11:30 to 13:00
Fairmont Chicago - Millennium Park

Research shows that employees in closed networks are less innovative because they lack access to diverse knowledge and information. Recognizing this problem, management scholars are investigating how to counteract the knowledge homogeneity in closed networks. Our study reveals that the extent to which employees can compensate for the drawbacks of closed networks are limited. We introduce the “performance ceiling” concept to describe the highest level of individual innovative performance employees can reach in closed networks. Our analysis of data collected from a professional service firm shows that closed networks act like social straitjackets, preventing employees from achieving high levels of innovation.

The presentation is part of the session Network Drivers of Organizational Advantage: It’s Not What You Know….. The session consists of five presentations of scientific research (listed below). All presentations focus on networks and organizations. It is sponsored by the OMT Division and moderated by Manuel Gómez Solórzano.

Network Strategies Within Organizations

Authors: Manuel Gómez Solórzano (Tilburg School of Economics and Management (TiSEM), Tilburg U.), Alessandro Iorio (Bocconi U.), and Giuseppe Soda (Bocconi U.).

Assortativity in intraorganizational networks—the level of homophily prevalent in the network—is an important but often overlooked occurrence with implications for organizational outcomes. An egonetwork composed by contacts with similar knowledge can ease knowledge integration and coordination but it can also create an echo chamber limiting flexibility and innovativeness. We argue that individuals engage in strategic decision-making when considering assortative or disassortative strategies for potential ties to achieve an optimal level of knowledge similarity in their egonetworks. Furthermore, we posit that a formal status-based mechanism plays a role in determining with whom individuals pursue either strategy. Leveraging a novel research design that allows us to identify wanted ties—ties that actors deem effective for their performance but that do not exist yet—, we study the drivers of these network ties in a population of professional staff in a large multinational corporation. This study contributes to our understanding of how individuals actively intend to shape their social networks and has implications for organizations seeking to promote effective network formation and knowledge exchange among employees.

Bottleneck or Not? The Ceiling Effect of Network Closure on Individual Innovative Performance

Authors: Stefan Breet (Radboud University Nijmegen), Lotte Glaser (Free University of Amsterdam), Justin Jansen (Erasmus University Rotterdam), and Jan Dul (Erasmus University Rotterdam).

This study examines the extent to which employees in closed networks can compensate for the lack of structural access to heterogeneous knowledge and information. We introduce the “performance ceiling” concept to describe the maximum level of innovative performance that individuals can potentially achieve with a given level of network closure. Leveraging insights from the literature on necessary conditions and constraint causal mechanisms, we argue that network closure not only reduces the average individual innovative performance of employees, but also puts a cap on the maximum level of innovative performance they can potentially achieve. Our empirical analysis of a professional service firm indeed shows that closed networks serve as social straitjackets, preventing them from achieving high levels of innovative performance. An important implication of our study is that employees in closed networks cannot fully compensate for the lack of structural access to heterogeneous knowledge and information. We discuss the implications of our findings for the literature on social networks and innovation.

Exploring the Relationship Between Deglobalization and Corporate Network Structure

Authors: Paula Margaretic (U. Adolfo Ibañez), Erica Helena Salvaj (U. del Desarrollo), and Julian Andres Diaz Tautiva (U. del Desarrollo).

This study examines the relationship between deglobalization and the structure of interlocking directorates, considering the historical perspective. Corporate networks are vital for coordination, information flow, and cost reduction. However, existing research on corporate networks and (de)globalization remains fragmented, focusing on specific countries or time periods. By analyzing 15 countries over the twentieth and early twenty-first centuries, we document that deglobalization is a key condition generating dense corporate networks. However, institutional factors from the Capital, Labor, and State domains also play crucial complementary roles (particularly legal systems) in generating dense corporate networks during periods of deglobalization. This challenges the prevailing notion that globalization alone caused the decline in corporate network cohesion since the 1980s. Our study emphasizes the significance of institutions in shaping the impact of deglobalization on corporate networks, highlighting the institutional complementarity, equifinality, and asymmetry as core mechanisms driving the institutional configurations. Overall, this research contributes to comparative management by stressing the importance of considering institutional factors and their interactions when understanding network dynamics during periods of deglobalization. It enhances our understanding of the consequences of deglobalization for corporate networks.

Closing a Triad: A Tug of War Between Brokers and Alters

Authors: Wei Xia (U. of Washington), Xiaoou Bai (Georgia State U., J. Mack Robinson College of Business), and Eric WK Tsang (U. of Texas at Dallas).

Integrating the broker’s and the alters’ motivations, this paper proposes a novel framework that sheds light on the dynamics of triadic closure. We integrate broker-centric and alter-centric approaches by bringing the insights of social exchange theory into network analysis. We show how status can be a critical factor generating opposite effects on brokers’ versus alters’ motivations. In a directional network, high-status brokers are less likely to close the triad than low status brokers, but alters are more likely to collapse the structural hole when the brokers are high-status; high-status alters are less likely than low-status alters to be invited by the broker to close the triad, but are more likely than low-status alters to be invited by co-alters to close the triad. Furthermore, we argue that when conflicting motivations arise between brokers and alters, the latter’s motivations are more likely to dominate.

Bourdieu vs. Putnam - Economic Crises and the Motivation Behind Tie Formation in Innovation Networks

Authors: Amit Kumar (Warwick Business School) and Elisa Operti (ESSEC Business School).

This paper takes a contextual approach to network dynamics and investigates how regional innovation networks evolve through exogenous crises. We studied how the 2007-08 Financial Crisis influenced the logic driving the formation of collaboration ties between inventors, and thus the regional network structure. Existing research on social capital has identified two perspectives on network formation: an instrumental approach and a community-oriented approach. Based on behavioral research, we propose that while facing a crisis, individuals shift their emphasis from advancing self-interests to pursuing the collective good of their community. Accordingly, we hypothesize that regional innovation networks become more connected and less hierarchical during downturns while less connected and more centralized during economic growth. We tested these hypotheses using data describing the evolution of the co-inventing networks of US Metropolitan Statistical Areas (MSA) between 2002 and 2014, before and after the 2007-8 Financial Crisis.

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