Entrepreneurship, business and network references

From InterSciWiki

http://www.hks.harvard.edu/davidlazer/files/syllabus/STM504_syllabus.pdf

Gulati, Ranjay. 1995. "Social Structure and Alliance Formation Patterns: A Longitudinal Analysis." Administrative Science Quarterly 40:619-52. http://www.jstor.org/sici?sici=0001-8392(199512)40%3A4%3C619%3ASSAAFP%3E2.0.CO%3B2-5

Ronald Burt, 2001. “Structural Holes versus Network Closures as Social Capital” in Nan Lin, Karen Cook, and Ronald Burt, Social Capital: Theory and Research. http://gsbwww.uchicago.edu/fac/ronald.burt/research/SHNC.pdf

P643: By focusing on the dyad as the unit of analysis, this study provides empirical support for the importance of social network and strategic interdependence factors in bringing firms together as alliance partners. It demonstrates that the social context resulting from cumulative prior alliances influences alliance formation between firms. It shows that interorganizational networks are not only valuable conduits for information about specific organizational practices but that they also provide an important impetus for guiding the choice of partners in new ties. The observed social structural effects result from both the direct and indirect ties of firms With each other. Previously allied firms are likely to engage in further alliances. This finding for the role of direct previous ties supports Larson's (1992) inductive field study, in which she observed that firms entered alliances with each other repeatedly. An important catalyst for repeated alliances is the availability of information for each partner. Information about another firm's reliability as a partner, its operations, and possible alliance opportunities becomes available only once an

P644 alliance is in place. Hence, over time, each firm acquires more information and builds greater confidence in the partnering firm. Concomitant with this process is an increase in the likelihood of a new alliance. Although prior ties lead to new alliances, the results of this study also suggest that beyond a certain point, additional alliances between two firms start to diminish the likelihood of their future alliances. This confirms the notion of carrying capacity, implying that there are limits to the number of alliances two firms can sustain (Baum and Oliver, 1992). Fears of overdependence may also put a brake on the number of ties two firms will seek. In addition, at some point, the informational benefits of a durable shared history peak and start to diminish as alliances complete their life courses and end. The study also shows that the time elapsed since a previous alliance influences new alliance formation, and the effect is inverse and U-shaped. A repetitive-momentum argument would suggest that as the duration since the last alliance increases, the likelihood of the organization engaging in the initial action again diminishes (Amburgey, Kelly, and Barnett, 1993). In the dyadic context, for the first several years after an alliance forms, however, firms' enhanced mutual awareness actually increases the likelihood of their forming another alliance. Over time, this effect gives way to diminishing information as past alliances end, and the momentum for forming new alliances declines. The results also provided evidence of the informational benefits of indirect ties between firms, both one-level-removed ties of path distance two and more distant ties. Previously unconnected firms are more likely to enter an alliance if they have common partners. Furthermore, the greater the distance between two firms in a social network of prior alliances, the less likely they are to ally. These findings suggest that the social network of indirect ties is an effective referral mechanism for bringing firms together and that dense co-location in an alliance network enhances mutual confidence as firms become aware of the possible negative reputational consequences of their own or others' opportunistic behavior. One of the managers I interviewed described this process as follows: We have close working relationships with most of our alliance partners. As a result, we are familiar with many of their own goals and capabilities. Since they also know about our specific skills and needs, many new deals are created interactively with them. In some cases we realize that perhaps our skills don't really match for a project, and our partner may refer us to another firm about whom we were unaware.... An important aspect of this referral business is of course about vouching for the reliability of that firm. Thus, if one of our longstanding partners suggests one of their own partners as a good fit for our needs, we usually consider it very seriously. The results also suggest the relevance of dyadic interdependence in guiding alliance formation. These results confirm prior research on ties between human services agencies (Litwak and Hylton, 1962; Hage and Aiken, 1967; Schermerhorn, 1975; Paulson, 1976; Schmidt and Kochan, 1977; Whetten, 1977) and suggest that interdependent firms. P645 are more likely to seek each other out as alliance partners. The role of interdependence is further confirmed by several financial attributes of firms entering alliances. The results suggest that firms would seek out partners who differ from them in terms of size. Not only does the effect of size differences highlight the role of interdependence, but it is also consistent with ecologists' notion of size-localized competition, according to which firms compete most intensely with others of similar size (cf. Baum and Mezias, 1992; Wholey, Christianson, and Sanchez, 1992). In addition, the relative liquidity of firms matters in their decision to enter an alliance. The greater the difference in liquidity of two firms, the more likely they are to enter an alliance with each other. Differences in performance and solvency made no difference to the decision of two firms to enter an alliance with each other. Strategic interdependence and social structural explanations for alliance formation are not mutually exclusive and could simultaneously affect alliance formation. The interaction results suggest that interesting dynamics occur among interdependence, social structure, and alliance formation. The results indicate that common third-party ties more effectively influence alliance formation in interdependent dyads than in other dyads. Similarly, distance has a negative effect on the likelihood of an alliance among interdependent dyads.