Organizational Networks

The concept of organizational networks refers to a number of distinct and often disconnected phenomena that can be distinguished conceptually and empirically. Each [Page 683]is linked to different units of analysis and, consequently, often to different literatures. What all approaches have in common, however, is the basic idea that organizations should be viewed from a relational perspective.

Thinking about social networking initially started with a focus on relationships between individuals. But as a consequence of the development by organization theorists using an open systems perspective during the 1960s and 1970s, and then building on ideas developed during the 1980s (based largely on resource dependence theory) and 1990s (often based on extensions of transaction cost economics ideas), scholars became increasingly aware that organizations, especially in business, had to cooperate if they were to compete successfully. Thus, organizations, and not just individuals, were recognized as network actors, providing an important extension of past research on networks. In organizational networks, it is organizations, rather than individuals, that are the nodes of the network. The primary caveat is that organizations consist of individuals. Relationships among organizations are, therefore, initiated and maintained by individuals acting on behalf of their organizations. But since these relationships may be institutionalized and often have implications for the organization as a whole, it makes sense to consider the organizational network as a phenomenon in its own right.

Organizational networks are understood in at least three different ways in the literature. First, every individual organization can be considered and described as a network, since a formal organization can be seen as a special case of a social network. Here the focus is on interpersonal networks within an organization. This perspective is mentioned for the sake of completeness, as networks in which organizations are the nodes are used as examples. Organizational networks are commonly defined as a group of three or more organizations, which are described in terms of specific relationships that may be either present or absent. This definition has three important implications: first, it implies that a relational perspective is being used to study and examine social systems, rather than focusing on the actor-specific characteristics of the organizations that comprise the network. Second, it implies that both present and absent relationships are potentially equally important. For instance, while the presence of a relationship may indicate that two or more organizations are working together, the absence of a connection may reveal gaps in the flow of knowledge and information that may be necessary for network success. Such gaps may be filled through either direct or indirect ties between network members. Third, it implies that relationships between two organizations are not considered to be a network, just as relations between two individuals are considered to be a dyad rather than a network. Consequently, joint ventures, bilateral alliances, and other forms of dyadic partnerships are not taken into account in this discussion. These should be considered as specific types of interorganizational relations.

Within the above definition it is possible to distinguish between two perspectives, as noted by Martin Kilduff and Wenpin Tsai. The first is the serendipitous organizational network perspective, which considers organizations to be part of networks that emerge and are developed in a “bottom-up” manner and without any sort of formal planning to guide or specify network interactions across multiple organizations. The second is the goal-directed network perspective, in which multiple organizations consciously agree to be part of a set of organizations that have a common and explicitly stated goal. Networks of each of these two types may be analyzed as a whole network, or more commonly, as the network of egocentric relationships maintained by each organization within the network. An overview of these two perspectives, focusing on their key characteristics and indicating for each how egocentric or whole network thinking and analysis has typically been utilized, is discussed in the following sections.

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