Transcript Slide 1

Personal and Business Networks
Gerrit Rooks
29-09-10
“no man is an island, entire of itself…” (Donne 1624).
This lecture
• A tidbit on personal networks
– How many close friends do people have? How
many do you have?
• The evolution of business-networks from
entrepreneurial networks
• The Toyota supplier network
• Alliance networks: direct and indirect ties
Social Brain Hypothesis
• Ronald Dunbar (1947),
anthropologist and evolutionary
biologist. Director of the Institute of
Cognitive and Evolutionary
Anthropology, University of Oxford
• Ronald Dunbar hypothesized that
the development of human
intelligence (and the neo-cortex) is
the evolutionary result of the need
for social coordination and
cooperation
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.
Dunbars number
• Based on a regression
equation on data for 38
primate genera,
Dunbar predicted a
human "mean group
size" of 148 (casually
rounded to 150).
• Dunbars number: 150
(estimates of network
size vary between 100230)
Dunbar, R.I.M. (1993), Coevolution of neocortical size, group size and language in humans,
Behavioral and Brain Sciences 16 (4): 681-735.
Dunbars number
•
•
•
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Support clique:
people who we seek
personal advice from
Sympathy group:
special ties, frequent
contact
Band: acquaintances,
frequent contact
Clan: all current
contacts
Megaband + Tribe:
larger social units
(Co)variation in network size
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
lieutenant general or higher
lieutenant general
major general
colonel
lieutenant colonel
475-1000
captain
75-200
Company size = 75-200
Organizations > 150 need bureaucracy…
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 networks
high 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 networks
Ties are primarily motivated by expected economic
benefits
Weak ties that are more market like, less redundant
Result of pro-actively managing networks
From embedded to balanced
• Emerging firms rely on embedded
ties
– Low reputation / legitimacy
• Not an attractive partner
• -> reluctant banks etc.
– Limited search capabilities
• Growth firms have to rely on arms
length relations as well
– Firm is more attractive etc
– Better search capabilites
From cohesion to bridging
structural holes
• Emerging firms rely on cohesive
networks
– Reciprocity, Enforcable trust,
direct access to resources
– However, available resources
are limited.
– Add new contacts, bridge
structural holes
• Firms need a balanced network,
neither too dense, nor too sparse
Intentionally managed networks
• Firms (can) learn to create
network value
• Creation of networks also
depends on specific skills (in
case of persons social
competences)
• Co-evolution of firm and
network
The Toyata supplier network
• Japanese
automobile
makers are more
and more
productive, US is
lagging
• WHY?
• Dyer and
Nobeoka:
"Creating and
managing a high
performance
knowledgesharing network:
the Toyota case"
• One large network with
core firm as hub
• Bilateral relationships
• Weak ties/arm's length
relations
• Structural holes
• Large network plus multiple
nested networks
• Multi-lateral relationships
• Strong/embedded ties in
nested networks with core
firm
• Dense network
Knowledge sharing routines
• Dilemmas associated with knowledge
sharing
1. 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
appropriation
3. how to maximize the efficiency of knowledge transfers?
– Creating multiple knowledge-sharing processes and subnetworks 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'.
• Toyota creates a shared network identity by
developing multiple groups
– The supplier association
– Toyota's operations management consulting division
– Voluntary small group learning teams (jishuken)
Developing ties
• The supplier association (s)
– Kyohokai: Toyota's supplier association was
established in 1943
– Suppliers must be close to each other
• Supplier association has regular meetings, fi
– Quality committees.
– Visit `best practice' plants
– Quality management conference held once a year
Developing ties
• 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
– After determining theme, 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
Creating multiple knowledge sharing processes
Alliance networks: Ahuja
• Two types of ties
Indirect tie
Direct tie
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• Direct ties
– knowledge sharing
– complementary
skills
– scale economies
• Indirect ties
– knowledge
spillovers
Effects of direct ties
Many direct ties
Knowledge sharing
Complementarity
Economies of scale
26
Fewer direct ties
higher innovation output
Effects of indirect ties
Many indirect ties
Information gathering devices
Screening device
27
Fewer indirect ties
higher innovation output
Effects of indirect ties depend on the
# direct ties
Many direct ties
Fewer direct ties
Relative addition of new resources is smaller.
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When many partners have indirect ties, information is likely less
valuable. since it will reach many others
What is better for innovation output of firms:
structural holes or network closure?
• Ahuja finds clear support that network
closure is superior