B2B Social Network

Seminar of Van den

Bulte
By: Meisam Hejazinia
Social Network Analysis: A Handbook,
Scott, John (2000), 2 nd ed. London, U.K.: Sage.
What is social network analysis?
• Social network:
• A map of relationships (formal or informal) among actors (person, organization,
and others)
• Representations
• Graph
• Matrix (Sociomatrix)
• Framework:
• A set of mathematical and statistical techniques for handling relational data.
• Social Network Analysis is the study of the pattern of interaction between
actors
• Goal:
• identifying the structural properties of sets of relations (i.e. of networks).
• visualising and describing networks.
• Social scientific origins in:
• sociology, anthropology, social psychology
• Mathematical bases in:
• graph theory, matrix algebra and (increasingly) statistics.
• There is an increasing dialogue with:
• physics, maths, computer science, informatics
• Relational thinking challenges powerful approaches which focus
on:
• (a) individual attributes and
• (b) variable-centred perspectives.
Relational data
• We might be interested in relations between:
• people, organisations, nations, towns …anything.
• We might be interested in relations based upon:
• knowledge, emotion, exchange, infection/contamination
…anything
• SNA is not focused on individual properties of nodes or
types of relations but on:
• (i) the ‘whole’ these ‘parts’ comprise,
• (ii) the position of nodes within it (e.g. central or marginal) and
• (iii) the (relational) properties they acquire from it.
• SNA is formal
• i.e. not focused on content/ meaning of relationships
• But on a strength and a weakness.
Social network analysis
• SNA identifies:
• genuine, meaningful, measurable and potentially sociological relevant properties of
networks
• Terminology that is used borrowed from graph theory:
• Relationships:
• indicated by connecting lines
• Edges:
• If lines are undirected
• Arcs:
• If lines are direct and direction is indicated by an arrow head (potentially at
both ends)
• The objects or nodes (e.g. people) connected by arcs/edges are referred to as
vertices (sing. = vertex).
• SNA is often applied to:
• intrinsically interesting groups (elites, policy makers, medical diseases) but it is not
always clear how it applies to ‘mundane’ groups
• The value of linking sociograms to qualitative evidence
• We used in depth interviews to
• show how the structure of networks affected people’s narratives
A simple relational matrix in which presence/absence of
a relation is indicated by a 1 or 0 respectively: who drinks
with whom?

Tom Dick Sally Fred Alice

Tom 0 0 1 1 0

Dick 0 0 1 1 0

Sally 1 1 0 0 1

Fred 1 1 0 0 0

Alice 0 0 1 0 0
Basic sociograms
Measurement of relational properties in
SNA
• Degree (in-degree, out-degree, average degree):
• Density:
• The actual number of connections in a network expressed as a proportion of
the total possible number of connections.
• High density should generate greater: trust, cultural homogeneity and
diffusion speed
• Not easy to make meaningful comparisons of density across networks of
different sizes (or involving different types of relations)
• Components:
• sub-graphs within a graph, any of whose vertices can be reached from any
other (by whatever route)
• Important because the holes that separate different components within a
graph prevent the flow of resources and might indicate tribal or ideological
divides.
• Cliques:
• a subset of vertices within a component, all of whose members are related to
one another (density = 1): fully connected component
• K-Cores:
• a subset of vertices within a component, all of whose members enjoy a
specified number of relations (=‘k’) with the others: e.g. a 6-core is a subset, all
of whose members enjoy relations with at least 6 of the other members
• Helps analysis of grouping and relative power
Measurement of relational properties in
SNA
• Centrality:
• Central vertices enjoy both advantages and disadvantages (potentially)
• Centralisation:
• Measures focused upon the network as a whole
• The most basic of these take variance measures for one of the centrality scores (or
something very similar)
• Centralised networks:
• may be more easy to organise
• are often robust in relation to random attack/damage
• But vulnerable to targeted attack
• Erdos/Bacon number(s):
• The concept of ‘degree’ is also used in this context (and the concept of ‘walk’).
An individual with a Bacon number of 4 is separated from Bacon by ‘four degrees of
separation’.
• The ‘small world’ phenomenon is sometimes referred to as ‘six degrees of separation’
• Diameter:
• The shortest possible path between the two most distant vertices (measured in
degrees)
• Or the (mean) average path distance between all possible pairs of vertices
• Relevant because resources, viruses etc. will take longer to travel across large
diameters.
• Information/gossip will be more liable to distortion (Chinese whispers) the more
mouths it passes through
Terminology cont.
• Network density
• Length and distance:
• Length of path is number of links
• Distance between two nodes is length of shortest path (aka geodesic)
• Component:
• Maximal sets of nodes in which every node can reach every other by some
path (no matter how long). E.g. connected has one
• Cut points:
• Nodes which, if deleted would disconnect net
• Bridge:
• A tie that if removed would disconnect network
• Core/periphery structure:
• Does the network consists of single group ( a core) together with hangers on
(periphery) or
• Are there multiple subgroups each with their own periphery
Terminology Cont.
• N-Clique:
• A set of nodes that are within distance n of each other
• K-Plex:
• A set of n nodes in which every node has tie to at least n-k others in the
set
• Faction:
• A set of mutually exclusive groups of actors such that density of ties
within group is greater than density of ties between groups
• Degree centrality:
• The number of nodes adjacent to given node
• Closeness centrality:
• Sum of geodesic distances to all other nodes, inverse measure of
centrality
• Betweenness centrality:
• Loosely: number of times that a node lies along the shortest path within
two others
• Types of relations:
• Bilateral: non directed nets.: Marriage, friendship aliance
• Unilateral: directed nets: advertising or links to web sites
Eigenvector Centrality
• Importance of an actor in a network
• Sociomatrix (Adjacency matrix)
• Aij = 1, if a link between i and j; 0 otherwise
• Centrality measure xi
Degree Centrality:

• In matrix form:
• Here λ is the eigenvalue
Closeness Centrality
• The measure focuses on how close an actor is to all the other actors in
the set of actors
• An actor is central if it can quickly interact with all others
• The geodesics, or shortest paths : minimum distance
• Actor Closeness Centrality : a function of geodesic distances
depends not only on direct ties but also on indirect ties
Closeness Centrality

• Group Closeness Centralization

• The variance of the standardized actor closeness indices

• Standard statistical summary of the actor degree indices is
the variance of the closeness
Related theories
• Social Capital, Structural Holes, Simmelian ties:
• “…the ability of actors to secure benefits by virtue of membership in
social networks or other social structures” (Portes 1998)
• Alejandro Portes (1998) SOCIAL CAPITAL: Its Origins and Applications
in Modern Sociology, Annual Review of Sociology 1998. 24:1–24
• Ron Burt (2004) Structural Holes and Good Ideas, American Journal of
Sociology 110: 349–399
• Strong and weak ties
• Small world
• Scale-free networks
• Network diffusion
David Krackhardt (1999) The ties that torture: Simmelian
tie analysis in organizations, Research in the Sociology
of Organizations 16: 183-210
Structure matters (but is not always enough) & Strong and
Week ties
• Structure:
• In some contexts structure is a necessary, but not sufficient, condition
for social capital
• The most beneficial structural position may depend on the topic
– Job seeking
– Social support
• Social network evaluation and intervention does not always mean you
should connect the dots
– Facebook model is to suggest connections
– Sometimes there are reasons for not connecting
• Strong and week ties:
• The most beneficial tie may not always be the strong ones
• Strong ties are often connected to each other and are therefore
sources of redundant information
• Mark Granovetter (1973) The strength of weak ties American Journal of
Sociology 78-1361-1381.
Small world phenomenon & Scale free
network
• Small world phenomenon:
• Being linked, seemingly by chance, through someone via a friend or
acquaintance
• Stanley Milgram (1967)The Small World Psychology Today 2:60–67.
• Peter D. Killworth, H. Russell Bernard and Christopher McCarty (1984)
Measuring Patterns of Acquaintance Current Anthropology 25:381-397
• Duncan Watts and Steven Strogatz (1998) Collective dynamics of
'small-world' networks Nature 393 (6684): 409–10
• Scale free network:
• Scale free refers to the power law structure of networks as the number
of actors increases
• Networks tend to form hubs
• Entry of physicists into SNA
• Albert-László Barabási and Réka Albert (1999) Emergence of scaling in
random network. Science, 286:509-512.
Network Diffusion
• Network Diffusion
• Network structures can often aid or impede the flow of information and the
adoption of innovations
• Diffusion of innovation is the basis for peer to peer network interventions
• Coleman, James, Elihu Katz, and Herbert Menzel. 1957. The diffusion of
innovation among physicians. Sociometry. 20:253-270.
• Valente, Thomas W. 1996 “Social network thresholds in the diffusion of
innovations” Social Networks 18:69-89.
• Klovdahl, A. S. (1985). Social networks and the spread of infectious diseases:
The AIDS example. Social Science Medicine, 21(11), 1203-1216.
• Boundary definition:
• Boundaries can be defined:
– Geographically (a village)
– Socially (an organization)
– Through connections (snowball)
• The idea is that actors within the boundary are in some way affected by their
social position
• This excludes the effects from those outside the boundary
Two kinds of Social Network Analysis
Whole (Complete, Sociocentric) Personal (Egocentric) Network
Network Analysis Analysis
• Focus on interaction within a • Focus on effects of network on
group individual attitudes, behaviors
• Boundary defines social space and conditions
• Collect data from members of a • Use attributes of personal
group about their ties to other network to represent social
group members context
• Collect data from respondent
(ego) about interactions with
Examples of actors and their networks network members
Companies (alters)
in the Fortune 500
Children in a preschool Countries in the European
Employees in an office Union
Customers of AT&T mobile phone service Baboons in a troupe
NGOs working in the Amazon Organisms in the Chesapeake
Bay
Web sites around the world
Network visualization and examples
• Network visualization references
• Linton Freeman (2000) Visualizing Social Networks. Journal of Social
Structure 1, 1
• Skye Bender-deMoll and Daniel A. McFarland (2006) The Art and
Science of Dynamic Network Visualization Journal of Social Structure 7,
2
• Christopher McCarty, Jose Luis Molina, Claudia Aguilar, Laura Rota
(2007) A comparison of social network mapping and personal network
visualization. Field Methods 19: 145-162

• Other concepts of Networks:

• Physical:
• Computer: Ethernet, WWW, VPNs
• Infrastructure: Roads, Rivers, Electric
• Biological:
• Cellular Level: Catalyst Interactions
• Genomic Level: Gene Interactions
Social Networks
Prof Bill Rand : Complexity in business BMGT 8080L, 2008
Why care about social networks
• Why care about social networks?
• Failure of Mass Media
• Examining Associative Networks of Brands
• Consumer-Generated Content
• Global Marketing Challenges
• Diffusion of Innovations
• Network Effects:
• Positive and Negative
• Direct and Indirect
• Technology and Business Practices
• Interorganizational relationships
• Knowledge Networks
• Networks of Employees and Hires
• Moving beyond CRM
Why social networks might be
different?
• Why social networks might be different?
• Limited number of connections
• Social Identity
• More Transitive
• Homophily/ Assortative Mixing
• Definition of network?
• Nodes/ Actors:
• People, organizations, knowledge
• Vertices
• Links/ Ties/ Relationships:
• Friendships, money flows, coauthorship
• edges
Some definitions
• Neighbor:
• Individual “tied” to another individual
• Ego: Focus of analysis
• Egocentric network: focused on an individual
• Alter: Node who is not the ego node
• Sociocentric network: not focused on an individual
• Properties of Links:
• Directionality
• Reciprocity/ symmetry
• Multiplexity
• Strength:
• Intensity: duration and frequency
• Valence: depth
• Homophily
Structural properties
• Transitivity:
• i→ j and j→ k then i→ k
• Structural Balance:
• Valences match up
• My friends of my friends are my friends
• Density
• Clustering and Triadic Closure
• Centrality and Centralization:
• Types of Centrality
• Degree: popularity
• Closeness: reachability, path length
• Betweenness: influence, information access
• All Path: information centrality
• Eigenvector centrality
• Centralization is how centered the network is
• Average path Length
• Average Clustering Coefficient
Subgroups
• Social Cohesion:
• Social circles, clusters
• Adjacency Matrix
• Tie Severing
• Clique:
• N-clique: all actors connected by shortest path of length n, or less and no
other actor in the network has a shortest path distance of n or less to all
members
• K-plex: all actors are directly connected to n-k other members
• K-core: all actors have ties with at least k other members
• Structural equivalence:
• Common neighbors and common indirect contacts
• Adjacency Matrix
• Blockmodeling
• Isomorphism:
• Similar expectation as a result of structural location
Homophily and transitivity and Small worlds
• Homophily and transitivity:
• Densely connected subgroups consisting of similar people
• Stifles innovation and information?
• But individuals who are homophilous on non-correlated attributes
spread information
• Can use homophily to spur innovation
• Small worlds:
• Milgram experiment:
• From Omaha to Boston
• Contacting one individual
• Median # of steps: 5.2 (6 steps)
• Only 29% actually arrived
• Hollywood actors, the power grid, neural network and c. elegans
• Local Clustering can still have short path lengths
Social Networks: Theory and Applications
Yong Tan, Micheal G. Forester School of Business, University of
Washington
I. Economic and Social Networks:
Stability and Efficiency
• The aims are to
• develop a systematic analysis of how incentives of
individuals affect the formation of networks
• align with social efficiency
• Value functions:
• Different network configurations lead to different values of overall
production or overall utility to a society. These possible valuations
are represented via a value function.
• The set of all possible value functions is denoted V
• Different networks that connect the same individuals may lead to
different values
• Value function can incorporate costs to links as well as benefits
• A value function keeps track of how the total societal value varies
across different networks
Allocation rule & efficiency
• An allocation rule
• is used to keep track of how that value is distributed among the
individuals forming a network
• is a function Y: G ×V → RN such that ∑iYi(g, v) = v(g) for all v and g
• depends on both g and v. This allows an allocation rule to take full
account of an individual i’s role in the network
• A network g is Pareto efficient relative to v and Y if there does not
exist any g’∈G such that Yi(g’,v) ≥ Yi(g,v) for all i with strict inequality
for some i.
• This definition of efficiency of a network takes Y as fixed, and hence
can be thought of as applying to situations where no intervention is
possible
• A network g is efficient relative to v if v(g) ≥ v(g’) for all g’∈G.
• This is a strong notion of efficiency as it takes the perspective that
value is fully transferrable
• Unlimited intervention is possible
• g is efficient relative to v if g is PE relative to v and Y for all Y
Pairwise Stability
• A network g is pairwise stable with respect to allocation rule Y
and value function v if :

• A network is pairwise stable if it is not defeated by another

(necessarily adjacent) network
• It is a weak notion as it considers only deviations on a single
link at a time and only deviations by at most a pair of
individuals at a time
• It is not a sufficient requirement for a network to be stable over
time.
• Existence of pairwise stable networks:
• In some situations, there may not exist any pairwise stable network.
Each network is defeated by some adjacent network, and that these
“improving paths” form cycles with no undefeated networks existing
• An improving path is a sequence of networks {g1, g2, …, gK} where each
network gk is defeated by the subsequent (adjacent) network gk+1.
Dynamic Model of Network Formation
• Since network structure affects economic outcomes, it is
crucial to know which network configurations will arise
• Process of network formation in a dynamic framework is
analyzed
• Formation process is found to be path dependent, thus
the process often converges to an inefficient network
structure
Degree Distribution & Small-world model

• Probability that a vertex of has degree k follows binomial

distribution
• In the limit of n >> kz, Poisson distribution
• z is the mean
• Small world model:
• Watts-Strogatz (1998) first introduced small world mode
• connects regular and random networks
• Regular Graphs have a high clustering coefficient, but also a
high diameter
• Random Graphs have a low clustering coefficient, but a low
diameter
• Characteristic of the small-world model
• The length of the shortest chain connecting two vertices grow
very slowly, i.e., in general logarithmically, with the size of the
network
 Scale-Free Network
• A small proportion of the nodes in a
scale-free network have high
degree of connection
• Power law distribution
• A given node has k connections
to other nodes with probability as
the power law distribution with
exponent γ ~ [2, 3]
• Examples of known scale-free
networks:
• Communication Network -
Internet
• Ecosystems and Cellular
Systems Scale-free networks cannot be broken by random
• Social network responsible for node removal
spread of disease ‘Attacks’ can bring them down: hackers’ attacks,
major servers (DNS) downed by a computer
virus
Centrality and Prestige
• Prominent actors are those that are extensively involved in
relationships with other actors
• The focus of involvement :
• A central actor as one involved in many ties
• Most appropriate for non-directional relations
• The difference between the source and the receiver is less
important than just participating in many interactions
• Most access or most control or who are the most active brokers
• A prestigious actor as one who is the object of extensive ties
• Focusing solely on the actor as a recipient
• The relational is directional : In-degrees are only distinguishable
from out-degree for directional relations
Types of prestige
• Degree prestige: calculating in-degree: actors who are prestigious tend to
receive many nominations or choices:
• calculate numbers of actors adjacent to actor i
• Proximity Prestige:
• Influence domain of actor i: Reachability
• the set of actors who are both directly and indirectly linked to actor j
• consists of all actors whose entries in the j-th column of the distance matrix or the
reachability matrix
• How proximate the actor is to the actors in its influence domain
• Proximity as closeness in its influence domain
• Number of actors in actor i’s influence domain:
• The average distance:
•
• The fraction of the actors in the set of actors who can reach an actor

• As actors who can reach i become closer, on average, then the ratio becomes larger
Terminology
• Structural equivalence:
• Actor i and j are structurally equivalent if actor i has a tie to k, iff j
also has a tie to k, and i has a tie from k iff j also has a tie from k
• Helps to reduce graph
• Measures of subgroup cohesion:
• A measure of degree to which strong ties are within rather than
outside is given by the ratio
• the average strength of the ties within and the denominator
is the average strength from subgroup members to
outsiders
Why Is Social Capital Important?
• Using an example of OSS
• OSS is developed by voluntary developers through individual
incremental efforts and collaboration.
• New contributions to the code often involve, to a large extent, a
recombination of known conceptual and physical materials (Narduzzo
and Rossi 2003, Fleming 2001).
• Developers with better access to and familiarity of such materials are
advantaged in their code development efforts.
• Because information about and knowledge of resources often lies spread
across developers in the community, social capital, i.e. a developer’s
access to resources from a network of relationships, may emerge as a
key factor that differentiates those who are more productive than others.
Network Relationships and Knowledge Benefits

• Relationships among developers in a network provide them with two

types of knowledge benefits — resource sharing and knowledge
spillovers.
• Resource sharing allows them to combine know-how and physical
assets
• Knowledge spillovers provide information about current design
problems, failed approaches, new breakthroughs, and opportunities.
Network Elements – direct vs. indirect ties
• Network Elements – Direct Ties
• Developers who work together on a project share direct ties
with each other.
• These ties provide opportunities for repeat, intense
interactions and are conducive for resource sharing as well
as knowledge spillover.
• The knowledge acquisition depends on knowing who knows
what and developers with large number of direct ties are
likely to be privy to such information.
Network Elements – direct vs. indirect ties
• Network Elements- Indirect Ties:
• Indirect relationships (where two developers do not work together but
can be reached through mutual acquaintances) are less likely to provide
opportunities for repeat interactions and, hence, are not conducive to
resource sharing. However, knowledge spillovers do not require repeat
interactions and, hence, indirect relationships will be conducive to them.
• Developers in a relationship also bring with them the knowledge and
experience from their interactions with other partners. Hence, a
developer’s relationship with another developer provides it with access
to not just its own partners but to its partner’s partners.
Network Elements – Network Cohesion
• Cohesiveness means that ties are redundant
• To the degree that they lead back to the same actors
• Such redundancy increases the information transmission
capacity in a group of developers having cohesive ties
• It promotes sharing and makes information exchange
• Speedy
• Reliable
• Effective
• Information between two developers in a cohesive group
can flow through multiple pathways; this increases the
speed as well as reliability of information transfer.
Network Cohesion (2)
• Cohesiveness in the group
• gives rise to trust, reciprocity norms, and a shared identity
• leads to a high level of cooperation
• facilitate collaboration by providing self-enforcing informal
governance mechanisms
• Cohesive ties enable richer and greater amounts of
information and knowledge to be reliably exchanged
• The groups also provide meaningful context for information
and resource sharing
• The trust among the members in the group affords them to be
creative
• This creativity helps in coming up with alternative
interpretation of current problems, or novel approaches to
solve these problems
Network Elements – Structural Hole
• Cohesion
• Lead to norms of adhering to established standards and
conventions
• Potentially stifle innovation
• The standards, conventions and knowledge stocks vary
across groups.
• Structural holes are the gaps in the information flow
between these groups.
• Developers who connect different groups are said to fill
these structural holes.
• Teams composed of developers who span different
groups may have several advantages.
Structural Hole (2)
• Teams composed of developers who span different
groups may have several advantages.
• Technical or organizational problems and difficulties of a developer
in one group can be easily and reliably relayed to developers in
other groups. The solutions for these problems may be obvious to
someone and would be quickly and reliably relayed back.
• Each group has its own best practices (organizational or technical
perspectives) which may have value for other groups. The
developers who connect these groups can see how resources or
practices in one may create value for other and synthesize,
translate as well as transfer them across groups.
• Resource pooling across groups provide developers opportunities
to work on different but related problem domains, which may help
them in developing a better understanding of their own problems.
Measures
• Direct Ties
• Indirect Ties (Burt 1992)

• n: total number of developers in the network

• wij: number of developers that lie at a path length of j
from i
• zij: decay associated with the information that is received
from developers at path length j

• fij: number of developers that i can reach within and including

path length j
• Ni: total number of developers that i can reach in the network
Measures (2)
• Network Closure or Structural Hole (Burt 1992)
• Network Cohesion is indirect structural constraint
• Computed as:

• Where
• Mi → number of direct ties for developer i
• piq → proportion of i’s relations invested in the relationship with j
Social Capital and OSS Success
• Singh, Tan, and Mookerjee (2007)
• Data
• 5191 projects and 10973 developers
Data Collection
• The challenge is determining network boundary
• Two approaches
• Whole network
• Not easy
• Ego-centric
• Problematic
• Snowballing
Social Networks and Marketing.

Van den Bulte, Christophe and Stefan Wuyts (2007), Cambridge, MA: Marketing Science
Institute.
Related theories
• Social capital (7 pages):
• Resource of direct contacts
• Number/strength of ties
• Closure and local clustering
• Bridge positions, spanning, structural holes
• Strength of weak ties
• The dark side of social capital
• Network among customers (16 pages):
• Social contagion and new product
• Social influence and existing brands
• Transaction networks
Social capital
• Idea: how are the social networks tied to social capital?
• Resources of direct contacts;
• Number of ties
• Strength of ties
• Closure and local cluster
• Bridge positions spanning structural holes
• Strength of weak ties
• Resources of direct contacts:
• Resource level
• Resource diversity
• Alters’ social capital (“ego”; “alter”)
Social capital
• Number of ties
• Strength of ties
• Always better than weak ties
• Being strong:
• High frequency
• Long-standing
• High-valence
• Multiplicity
• Closure and local Clustering
• Bridge positions spanning structural holes
• Weak ties can be strong: e.g. job hunting
Network among customers
• Contagion through networks
• Products, technology, disease, gossip
• Reasons for contagion:
• Awareness and interest
• Belief updating (revision/confirmation)
• Normative pressure
• Competitive concerns
• Complementary network effects (number of prior adoptions)
• Social network structure and contagion:
• Macro level:
• Transitivity
• Clustering & “Bridges”– academic research in different fields
• Customer’s acceptance threshold
Networks among customers
• Social network structure & contagion (cont. )
• Micro-level:
• Direct ties matter? Types of ties: association with the incentives
(belief updating, normative pressure, competitive concern…)
• Overall network density and structure
• Networks among Customers:
• “Opinion leaders”: True or false?
• There are generalized opinion leaders
• They are a particular type of people
• One is either opinion leader or opinion seeker in a network
• They are up to date about new products
• Early adopters of new products
• Have central location in the network
• Engaging in many conversations about new products
Networks among customers
• Other issues:
• Buzz marketing – do not exploit network structure
• Viral marketing (WOM online)– considers contagion dynamics
while ignoring the network structure (Hotmail AD)
• Social influence and existing brands:
• How does information spread?
• Preference and belief on brands
• Transaction networks
Related theories
• Intra-organizational networks (6 pages):
• Power
• Disseminating market knowledge within the firm
• Employee recruitment and Turnover
• Industrial buying
• Inter-organizational networks (7 pages):
• Coordinating channels
• Accessing resources through alliances
• Gaining status from one’s network
• Managing competition
• Adopting new suppliers, technologies, and practices
Characteristics of Organizational Networks
• Intra-Organizational • Inter-Organizational
Networks Networks
• Power • Coordination of
• Dissemination of Channels
knowledge • Accessing ressources
• Employee recruitment • Gaining Status
and Turnover • Managing Competitions
Intra-Organizational Networks
• Power
• Associated with Central positions in workflow, advice, and
friendship neworks
• Related to measures of centrality: degree, closeness(related to
access, especially to dominant actors in the firm), betweenness
(information control)
• Research shows that closeness to important actors in the firm is
related to both power and promotion. However link of causality not
clear.
• Burkhardt and Brass (1992) show that centrality preceded
power
• Kilduff and Krackhardt (1994) concluded for the firm they
studied that the perception people have of the quality of your
network is associated with your reputation.
• In another study, Krackhardt (1990) shows that accurate
perception of the network structure is linked to power.
Intra-Organizational Networks
• Dissemination of Knowledge
• Market information must be shared
• How Marketers obtain information? Through their Network?
• Most rely on Market reports and Mkt information systems
• Little work is done on how marketers network affect their knowledge
of the market.
• Complexities are involved
• Under conditions of high uncertainties, Bankers relied on strong ties for
support on closing deals
• Transactions in which they used sparse approval networks more likely to
succeed than when they used dense approval network.
Intra-Organizational Networks
Disseminating Knowledge (ctd)
• Little work on the role of social networks
• Most work pertain on innovation:
• The Boundary-spanning actors
• Innovation comes from people holding a boundary-spanning
position. Allen (1997) Hutt, Reingen, and Ronchetto (1988)
• Actors with those positions have high betweeness centrality and
span structural holes between their formal unit and the rest of the
network. They are key actors for the flow of ideas.
• While they may not continually be involved in projects, They are very
important to projects because they act as mediators or bridges
between people during projects.
Intra-Organizational Networks
Disseminating Knowledge (ctd)
•Most work pertain on innovation:
• Strong ties vs weak ties
• Strong ties are related to the ability to mobilize
ressources to get project going. a
• Strong ties to many actors or access to many actors
through strong ties critical.
• May be less effective in locating novel information but
good in conveying complex information
• Weak ties good for search of useful information in
other subunits but bad in the transfer of complex
knowledge
Intra-Organizational Networks
Disseminating Knowledge (ctd)
• Closure or local clustering
• Affect willingness and motivation of individuals to
invent time, energy and effort in sharing kowledge
with others
• Teams with high closure among team members,
but with low closure among their contacts
tended to be more efficient.
• Lack of Redundancy
• Ability to access pool of nonoverlaping information
• Greater confidence in information received
• Results of Study:
• combining closure and non redundancy boost innovation. Reagans
and Zuckerman (2001), Uzzi and Spiro (2005).
Intra-Organizational Networks
Disseminating Knowledge (ctd)
• Organization of the company for creativity and innovation
• Adequate networking critical for success
• Example of PARC: Successful in generating new ideas, but
operated independendly of from corporate headquaters, and
from commercial divisions. Failed to get their new product
commercialized.
• Example of 3M: Created intermediary unit to link innovation to
market. OTC acted as a technology broker to find new
applications.
• Companies can organize themselves as constellation of
communities of similar activities. Insight will be obtained to know
who will benefit from interracting with whom. Companies will be
more efficient.
Intra-Organizational Networks
• Employee Recruitment and Turnover
• Metric important especially in the service industry
• Formal network referral programs
• Employers are provided with a wider pool of applicants
• Readily available support for newly hired employees
• Referrals are more productive, perform better, and longer
committment than non referrals. Castilla (2005)
• Cost savings. Fernandez, Castilla, and Moore (2005)
Intra-Organizational Networks
Employee Recruitment and Turnover(ctd)
• Employee Turnover
• Network effect: Social contagion. Krackhardt and Porter(1985,
1986). People will leave following people of similar position in the
advice network.
• However the friends of the leavers became more satisfied with the
company and remained longer than those who were not friends with
the leavers.
• Employee advancement
• Networks within the firms are used for advancement
• Minorities suffer disadvantage because network s structure makes it
less easy to use informal sources of information.
• Customer porfolio may affect career pattern. Beckman and Philips
(2005).
Inter-Organizational Networks

• Network effects on Coordination

• Closure and Reputation
• Efficient cooperation exists when actors know and remember
other actors prior actions
• Information concerning one supplier for example flows quicker
in network with high closure
• When network density and network centrality are high,
reputation mechanism is most effective.
• Case of Antia and Frazier (2001). Study on how franchisor enforces
contract when contract violation occurs. Enforcement is weaker in
cases of higher density and centrality. Other network members
view severe enforcement as unfair. Leads to negative backslash
against franchisor who is now seen unfair.
Inter-Organizational Networks
Network effects on Coordination(ctd)

• Closure and Cooperative norms

• Network closure increases sense of community
• Leads to creation of norms for standard behaviors
• Violation of clear and detailed norms leads to more severe
group sanctions .
• Closure and protection against exploitative brokering
• Mitigation of information transfer problems associated with
network structural holes
• Example: when vendor is between supplier and buyer, he may
select what information taken uptream to pass downstream. A
corrective action to undertake by the buyer could be to increase
closure and reducing the structural hole in the information network,
by directly building ties with suppliers for example.
Inter-Organizational Networks
Network effects on Coordination(ctd)
• Network structure and Affective commitment
• Network structure will affect the degree to which firms desire to
maintain particular relationships. This is the calculative
commitment . Geyskens et al. (1996)
• However with some specific partners, network structure may also
favor affective commitment regarless of economic consequences.
Existence of strong ties and closure which create sense of
community and identification are the explication. Uzzi (1997)
Inter-Organizational Networks
Network effects on Coordination(ctd)
• Adverse effects of Social Networks in Channel
Coordination
• Desire to maintain network can hinder firm’s economic imperatives
• Networks can create the possibility of mutiple actors colluding
against one other. Simmel (1950) leading to distrust.
• Density of Networks can interefere with enforcing of regulations.
• Exercising punishing power may intensify inter-firm conflict.
Inter-Organizational Networks
• Accessing Resources through alliances
• Firms make alliances to cope with competition
• Access complementary technology for complex products(
example, Apple, Sony and Sharp)
• Access complementary marketing resources ( example Pepsico
and Starbucks to commercialize some of their products,
Doubleshot and Frappucino)
• Issues: Network that facilitate the assimilation of knowledge also
increase the risk of leakage, as a firm’s partner in the network
could have ties with one of the firm’s competitors.
Inter-Organizational Networks
• Gaining status from one’s network
• People make inferences about a firm based on its network. To not
confuse with reputation
• Reputation
• signal of quality and an indication of future behavior that is based largely
on the positions that occupants hold
• I expect this firm will do well because it has performed well in the past
• Status:
• there is an assumption that prior action or achievements at some point
led to one’s position, but it is because of the positions them selves that
occupants are accorded respect or not
• expect this firm will do well because it is connected to several prestigious
firms
• Study shows that law firms that belonged to a cluster of equivalent law
firms that served more profitable clients than themselves could
negotiate higher prices . Uzzi and Lancaster (2004).
• Study shows that network status facilitates market entry for commercial
bank into investment banking. Jensen (2003)
Inter-Organizational Networks
• Managing Competition
• Managers of competitive firms may form friendships
• Networks characterized by strong ties, local closure and overall
density often lead to higher performance for competing firms.
Ingram and Roberts(2000)
• Information exchange
• Collaboration
• Mitigating competition
• Advantageous in cases when customers would love to play
competitors against each other. Friendship networks between
competitors help firms contain the extent of competitve behavior,
like in the case of the Sydney Hotel Industry. Ingram and Roberts
(2000)
• Density increases the chance of detection of bad conduct. Baker
and Faulker (1993): centraly located managers in price-fixing
conspiracy have higher chance of being found guilty.
Inter-organization networks
• Multi-firm contacts may soften competition. The gain from aggressive
competitor behavior in one market may be weighed against the danger of
retaliation by the competitor in other markets.
• Occurs when firms encounter the same rivals in many markets
• May suggest inverse U -shaped relationship between structural equivalence
and extent of competitive intensity between firms.
• Potential benefits of social capital:
• Improved coordination
• Access to resources
• Control over flow of resources
• Status
• Five substantive areas where structure of inter-org network
matters:
• Coordinating channels
• accessing resources through alliances
• gaining status
• managing competition
• adopting new suppliers. Technologies and practices
Coordination of channels
• Issues studied:
• Power and conflict
• Development of long term relationship over time
• Theories:
• social psychology and social exchange theory to channel dyads
• transaction cost approach
• Game theory approach focused on stylized network structure
• Go beyond dyads
• Dyad relationship issues (saturated field without network):
• Relational affect and attitude
• Relationship continuity and trust
• Personal attachments
• History of inter firm cooperation
• Coordination failure due to poor incentive alignment
• Governance implications of triadic or network structure
• E.g. qualifying and selecting upstream by apparel companies, and integration
software
Coordination of channels
• Network structure effect on coordination:
• Network closure supports several mechanism relevant to channel
coordination:
• boosting reputational effects
• Boosting emergence of cooperative norms
• diminishing the possibility of exploitative brokering
• Two-step leverage, but one that does not require closure
• Closure and reputation:
• efficient cooperation between two actors is more likely to occur when each
knows and remembers the other's prior actions
• Based on "Iterated Prisoners' Dilemma “ theory
• Theory of iterative game subjected to news travel efficiency
• same idea applies to situations where a focal actor plays the game repeatedly
with a different counterpart in every round, but
• where the focal actor's alters have high closure so they can share
information about the focal actor
• Buyers can communicate the supplier's opportunistic exploitation to other
potential buyers, damaging supplier’s reputation
• Depend on network density, network centrality, easily communicated info.
• E.g. franchise network (higher lead to weaker enforcement)
Coordination of channels
• Closure is:
• psychological terms that describe the desire or "need" some
individuals have for information that will allow them to conclude an
issue that had previously (for them at least) been clouded in
ambiguity and uncertainty
• Closure and cooperative norms:
• Network closure facilitates the emergence of group norms that
serve as standards for appropriate behavior, for
• network closure increases feelings of identification and
commonality with other actors
• Different reaction level of members to clear vs. unclear norms
• detailed contracts are more effective governance mechanisms
for reducing opportunism (under high closure)
• Closure and protection against exploitative brokering:
• Closure can also mitigate information transfer problems
associated with structural holes
Coordination of Channels
• Two-step leverage :
• Triads may also assist actors in accessing and mobilizing resources
indirectly through "two-step" leverage
• Triad may replace direct leverage in a dyad
• contingent upon the third party's willingness and ability to exert
influence
• E.g. dissatisfied customer with dealer contact the manufacturer
• Network Structure and Affective Commitment:
• Network structure in which channel participants are embedded will affect the degree to
which they experience the economic or technical need to maintain a particular
relationship
• this is often referred to as their “calculative commitment“
• Network structure impact on “Affective Commitments” of members:
• Extend to which they want to maintain their relationship with specific partner
regardless of economic consequences
• Due to increase feeling of identification
• personal and business network effect
• results in deviation from maximizing own economic interest both in short and long
term
Coordination of Channels
• Adverse effects of Social Networks in channel
coordination:
• relational continuance can supersede economic imperatives in
case of dose social networks
• possibility of multiple actors colluding against one other actor
leading to distrust that increases the level of opportunism
• exercising punishment power (through reputation, norm
enforcement, or tow-step leverage mechanisms) may intensify
rather than alleviate inter-firm conflict
• Being centrally located or being part of a dense network
constrained a firm from several enforcing contract
Accessing resources through alliances
• Examples:
• E.g. telecom & apple
• Complementary marketing resources: biotech startups
• Identifying network resources
• Need for locating before accessing resources
• About redundancy, not tie strength,
• Weak tie, network non redundancy
• Accessing network resources
• Tie strength: both intensity and valance indicator
• Determines ability to share resources, and leak possibility
• crucial for accessing knowledge that is complex (requiring higher ability
for sharing to take place) and has proprietary value (requiring a higher
motivation).
• Adverse effects of alliance in accessing external resources:
• Knowledge leak
Adopting new supplier, technologies,
practices
• Member of decision making units may use ties with cross boundary
firms to collect info:
• when uncertainty is higher firms turn to stronger rather than weaker ties:
• For support and complex info.
• Under effect of national culture
• Higher degree and betweenness of referral network used outside country
because:
• central intermediaries to introduce them to others abroad
• Decision to avoid closure in foreign countries out of fear of becoming
overly dependent on clique of densely interconnected alters
• Two interconnected subgroups with a high status- low status structure
between them
• Institutionalism:
• This research tradition suggests that “technical” and “utilitarian” mechanisms
such as awareness, risk reduction, and competitive concerns are likely to
operate early rather than late in the diffusion process, whereas
• The opposite is suggested for normative pressures
• e.g. TQM adoption
The Strength of Weak Ties:
A Network Theory Revisited
Mark Granovetter
Weak Ties
❖ Weak Ties
• Ties between Ego and an acquaintance
• Comprise a low-density network

❖ Role of Weak Ties

• A crucial bridge between the two clusters of close friends
- Individuals with few weak ties will be deprived of information
and confined to the provincial news and views of close friends.
• Social systems lacking in weak ties will be fragmented & incoherent
- new ideas spread slowly and subgroups separated by race, geography,….
The Impact of Weak Ties on Individuals
❖ Bridging Weak Ties
• Weak ties linking different groups
• Lead to complex role sets and the need for cognitive flexibility.

❖ Weak Ties & Opportunity for Mobility

• Better access to job information through weak ties
• For well-educated groups weak-ties are most likely to be used
but less-educated groups rely on strong-ties for job search.
(Ericksen and Yancey, 1980)
• The weak ties are effective only so far as the weak ties connect the
respondent to a high-status individual. (Lin et al., 1981)
Weak ties are more efficient at reaching high-status individuals.
→ Only bridging weak ties are of special value.
Strength of Strong Ties
❖ Strong Ties
• Greater motivation to be of assistance & easily accessible
• Relative frequency of strong ties are greater for low class.
- low-status individuals are numerous as compared to high-class,
→ easier to pick friends similar to them

❖ Strong Ties & Economic Insecurity

• Under strong pressure, individuals depend on strong ties.
e.g., unemployment, new Ph.D.s (Murray et al., 1981)
• Economic Insecurity and lack of social service
- Reciprocity network in black community (Stack, 1974)
: share with one another because of urgency of their needs
→ provides a minimal level of economic security
Weak Ties in the Spread of Ideas
❖ Weak ties & cultural diffusion (Fine and Kleinman, 1979)
• Children’s culture varying by regions spread via weak ties.
→ homogenous subcultures at the end point of diffusion process.

❖ Weak ties & scientific innovations

• Scientific field has a center & periphery defined by weak ties to
the center and to other scientific groups
• Marginals can better afford to innovate and the innovations are
adopted
by the center.
• Local bridges and weak ties promote the regular flow of novel
information in differentiated structures. (Friedkin, 1980)
• Most of the influence is carried through strong ties. (Weimann, 1980)
→ Weak ties: marcointegration/ strong ties: microintegration
Weak Ties and Social Organization
❖ Weak ties & peer socialization
• Weak ties can create diverse cultures without becoming similar.
• Weak ties can reduce student alienation and increase social solidarity.
- Racial integration can be achieved by producing enough weak contacts.
e.g., rearranging classroom structure (Karweit et al., 1979)

❖ Weak ties & organization integration

• Weak-tie mode of organizational integration (highly differentiated
system of specialized staff relationship) leads to high morale and
good service (Blau, 1980)
• The group recruited based on weak ties were able to implement
many of aims while that based on strong ties was not successful.
(Steinberg, 1980)
• Weak intercorporate ties can create cooperation and coordination
while intense ties tend to produce competitive and exclusive
relationship.
Hypotheses
• H1: Social hubs are more likely to adopt at the early stages
• Hubs will adopt first due to their greater exposure to an innovation
even though they are not innovators.

• H2a: When hubs adopt, the overall adoption process speeds up.
H2b: Innovator hub adoption has a larger correlation with speed of
adoption than follower hub adoption.
• More connections will be activated once hubs adopt → adoption rate ↑
• Since innovator hubs adopt earlier than follower hubs, they have
more time to influence the network.
• H3: The higher the relative out-degree of a hub,
the greater impact it has on adoption.
• in-degree: the number of people who convey information to hubs
→ related to when a hub adopts.
• out-degree: the number of people to whom hubs convey information
→ the influence of hubs on subsequent adoption
Hypotheses
• H4a: Hubs adoption increases the eventual size of a market.
H4b: Follower hubs have a stronger relation to market size
than
innovative hubs.
• Adoption by hubs → exposure of an innovation to the market ↑
→ market size ↑
• Homophily effect
: follower hubs are more similar to most of the population in terms of
innovativeness → more influence on the main market.

• H5: Hub adoption at an early stage can be used to predict

product
success.
• If hubs do not adopt a product soon after its introduction, this may
impede adoption by those are connected to the hubs.
Discussion
• Empirical validations
• How can we define weak ties & bridging weak ties in an online
social network setting?
• # of in and out degrees to other nodes
• Using self reported information about the relationship

• To what extent do weak ties play a role in product

diffusion?
• Possibly depends on the product category and the extent of
newness
• Are weak ties in one setting still weak ties in a different setting?
Background
• Influence is a combination of personal and social factors
• Personality: “who one is”
• Competence: “what one knows”
• Strategic social location: “who one knows”

• The role of social hubs in the adoption process

• Hubs: individuals with a large number of social ties
≠ Opinion Leaders / innovators
• Even if a hub is not an innovator, a hub is more likely to adopt early
due to the greater exposure.
Maximizing spread of influence through
social network
Kampe et. Al, 2003
Maximizing spread of influence through
social network
• Introduction
• Influence propagation through network
• Initial target
• Cascading
• Research question:
• Which set of individual to select?
• Network: directed graph
• Nodes: active/inactive
• Two representative models
• Linear threshold model
• Independent cascade model
Research opportunity
• Strong graph theory, yet economic, and consumer
behavior theories yet to be developed
• Dynamic is missing, and there is no competing theory,
and empirical equilibrium examination
• Longitudinal networks ?
Web Sites & Tools
• www.insna.org -- International Network for Social Network Analysis
• http://faculty.ucr.edu/~hanneman/nettext/ -- Tutorial for
UCINET/Netdraw
• http://www.redes-sociales.net/ (Spanish social network listserv)
• Ucinet (Whole networks)
– (www.analytictech.com) ($40 for students, $150 for faculty)
• E-net (Batch processing of ego networks)
– (www.analytictech.com)
• Pajek (Whole networks, large networks)
– (http://vlado.fmf.uni-lj.si/pub/networks/pajek/)
• Egonet (Personal networks)
– (http://sourceforge.net/projects/egonet/)
• Vennmaker (Personal networks)
• Siena (Network modeling, longitudinal)
– http://stat.gamma.rug.nl/siena.html
• Network Genie (Online network data collection)
– https://secure.networkgenie.com/
Related Journals
• Social Networks
• Connections
• Journal of Social Structure
American Journal of Sociology, Social Science and
Medicine, Journal of Mathematical Sociology,
Organization Science, Social Forces, Gerontologist