Social Networks & Social Capital

Social Networks & Social Capital Rays of Research Presentation Mason A. Carpenter

Networking Like Obama?

Outline • Some definitions • Context • Research • Going forward

Definitions • A social network is a social structure made of nodes (which are generally individuals or organizations) that that are connected together by ties. • Social capital is the resources—such as ideas, information, money, and trust—that you are able to access through your social network.

Definitions • A broker is someone who connects (bridges) different subgroups in a network; subgroups can be functions, departments, divisions, locations, and any other dividing characteristic (age, gender, and tenure for instance) • A connector is someone whom others consult frequently for information, resources, expertise, or decision-making help in the network. • A super connector is someone who makes a disportionate number of connections, or provides a bridge between otherwise unconnected, large networks.

Brokers Connectors or super connectors Direction of resource flow

Ego & Whole Networks The org chart… Networks…how work actually gets done

Managers’ Predispositions • Networks aren’t manageable • = Networking • A time sink • Risky • External (like Facebook) • “Informal”

Syndrome from Disney’s The Incredibles Rare? “If everyone had super powers, there would be no super heroes.”

Rare? • Nationally, more American’s are bowling than ever before, but individual play has largely supplanted team play (Putnam, 2000) • From 1985-2004, the percentage of individuals in businesses who identified a co-worker as a close confidant in their discussion networks declined from 48% to 30% (Kacperczyk, Sanchez-Burks, & Baker, U Michigan working paper 2009)

Who you know, or what you know? • Who you know, determines what you know (and can do).

Pipes vs. Ties

Context - Summary • Managerial biases • Social networks are becoming diffuse • Who you know  What you know • Pipes and ties

Research • Psychology & Sociology • Management & Strategy • Finance

Psychology & Sociology • Milgram’s “Small Worlds” (PT 1967) • Granovetter’s “Getting a Job” (1974) • In a large electronics company, managerial compensation, positive performance evaluations, promotions, and good ideas are disproportionally in the hands of people whose social networks span structural holes (Burt, AJS 2004) • Among managers, bankers, and analysts, social capital resources are dramatically concentrated in the immediate network around a person (Burt, AMJ 2007)

Management & Strategy • Nature of network ties affects how well board directors percieve their ability to contribute to and monitor firm strategy (Carpenter & Westphal, AMJ 2001) • CEO paid more and more strongly linked to firm performance when other social network characteristics were present (Carpenter, Sanders & Gregersen, AMJ 2001) • Non-exec managers paid more when background plugged a strategic network need (Carpenter & Wade, AMJ 2002)

Management & Strategy • Search-transfer paradox. Weak ties promote knowledge of opportunities (information search), but strong ties are needed to access and transfer the actual knowledge and related technology (the transfer issue) (Hansen, ASQ 1999) • Super connectors in science – a disproportionate number of inventions are spawned by a select few scientists; this phenomenon is growing stronger, and such scientists are increasingly mobile across organizations and industries (and despite non-compete clauses) (Flemming & Marx, SMR 2006)

Finance • Geographically proximate stock analysts are more accurate than other analysts (Malloy, JoF 2005) • Mutual fund portfolio managers place bigger bets and yield greater returns from firms they have social network ties to (Cohen, Frazzini, & Malloy, JPE 2008) • Analysts outperform on their stock recommendations when they have social network ties to a focal firm (Cohen, Frazzini, & Malloy, HBS working paper 2008)

Overarching Conclusion • Social networks and social capital are key inputs into value creation and competitive advantage • Weak ties most valuable to access and disseminate knowledge (information search) • Strong ties valuable most valuable to transfer knowledge and access resources (information/resource transfer)

Going Forward • Reasonable to seek a balance between working and networking • Assess your social network IQ • Does the word network make you queasy? • Take a 20-item survey (see Appendix) • Assess your own network • Gladwell’s list of names (see Appendix) • Grid (link to survey in Appendix) • Personal, operational, strategic • Assess your organization’s network • Requires different skill sets to excel • Bridging and brokerage skills • Different managerial mindset • Different reward structure "Worry not that no one knows you, seek to be worth knowing.“ Confucious

Further Reading • Wayne Baker (2000). Achieving Success Through Social Capital. Jossey-Bass. • Ron Burt (1992). Structural Holes. HBS. • Ron Burt (2009 – in press). Neighbor Networks. Oxford. • Mason Carpenter (2010 – in press). An Executive’s Primer on the Strategy of Social Networks. BEP. • Daniel Goleman (2006). Social Intelligence. Bantam. • Martin Kilduff & Wenpen Tsai (2004). Social Networks and Organizations. Sage. Thank you!

Appendix The following page has a 20-item survey on your attitude toward networks. Simply score yourself on a scale of 1 (disagree), 3 (ambivalent), or 5 (strongly agree), and sum your scores. A grid-based Ego network survey is available under “My Bookshelf” heading” http://research3.bus.wisc.edu/course/view.php?id=139

Appendix

From Malcolm Gladwell’s Tipping Point (pp. 39-40). Go through this random list of names and give yourself 1 point for everyone you know with a given last name. For instance, if you know three Johnsons, you get three points. What is your total? Out of 400 people, Gladwell found 5% scored below 20, 3% over 90, 1% over 100, and a range of 16-108 (2-95 in a sample of college students).

Social Networks & Social Capital