Structural Holes: The Social Structure of Competition. - book reviews

Administrative Science Quarterly,  June, 1995  by Gerald R. Salancik

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Network analysis corrects a tendency in organizational theory to focus on the trees rather than the forest, on the actions of individual organizations rather than on the organization of their actions. Since it is fitting that organizational theory address organization, the reviews of Ronald Burt's book Structural Holes by David Krackhardt and Steven Andrews offer an opportunity for reflecting on the promise of social network analysis for organizational theory. Much of its promise has yet to be realized, in that social network analysis has been used mainly as a tool for analyzing data about organizations rather than for understanding organizations per se. Thus we know that personal interaction patterns in organizations are associated with power, turnover, information flows, attitudes, promotion opportunities, and social support. Beyond a single organization, we know that firms cluster because of their involvements on each other's boards and that such clusters relate to community influence, to corporate giving, to the adoption of defenses against corporate takeovers, or to the prices firms pay when acquiring other firms. We know also that network positions are related to power and that the structure of resource dependence relations shadows how firms conform to the demands of other firms or how they extract profits from one another.

Since many of these and similar findings could have been obtained without the aid of network analysis, it behooves us to ask what role a network perspective might uniquely play beyond acknowledging and highlighting the importance of social relations for organizational and interorganizational affairs. But first we need to remind ourselves what networks are and how they come into being. Networks are constructed when individuals, whether organizations or humans, interact. When many individuals are involved, the resulting structure can be analyzed to derive many facts about the individuals or the network. Who reaches the most other individuals (centrality)? Can every individual be reached by every other individual (connectivity)? How many individuals are reached by any individual, on average (network size)? Do some individuals interact only with one another (clique)? Do two individuals interact with the same set of other individuals (structural equivalence)? Do some sets of individuals interact only with some other sets of individuals (blocks)?

And, of course, if we know other facts about the individuals or about the nature of their interactions and relationships, we could derive other facts or examine other phenomena. Do individuals with overlapping networks have overlapping knowledge structures? Shared values? Common behavioral patterns? Do structurally equivalent individuals behave similarly? Do individuals with similar demographics interact more (homophily)? Do communications between some individuals flow in one direction only (hierarchy)? Do individuals interact more readily with those with shared values and knowledge?

Burt's book, and the earlier work it summarizes, doesn't address these questions per se, but they are the standard stuff of network analysis. For the most part, network analysis in organization theory has confined itself to evaluating how extant networks affect either the flow of information and resources to individual actors (organizations or individuals) or how individual actors gain prestige or influence through their positions in networks. Less common has been an interest in how networks affect the flow of demands and obligations. Burt is an exception in that he explicitly addresses how a network position can be a source of constraint as well as a source of goods and information. Constraint comes when everyone you know knows each other, and it definitely dampens your presentations of self. For a firm with customers who all know one another, the constraint is in cutting profitable individual deals with them.

By including costs and constraints, Burt's work puts network analysis squarely into the realm of resource dependence by recognizing interactions as purposeful strategic action as well as the happenstance of our lives. Yet like much network analysis, and much resource dependence analysis, the perspective is the individual actor and how particular network structures affect the individual, rather than the organization of individuals. Ultimately, his concern is with pointing out that some network positions are better to be in than others, namely, those that provide for least constraint and take least effort to maintain while still providing the most access to flows of information or other goods. And in taking this individual-actor perspective, much is missed about the other major concern of resource dependence theory: the collective nature of organizational action and the role of networks in maintaining stable collective structures by enabling coordination among interdependent parties.

There is a danger in network analysis of not seeing the trees for the forest. Interactions, the building blocks of networks, are too easily taken as givers. Partly, this is because of the perspective of the network analyst, whose purpose is to focus on the forest. The interactions that make it up are only necessary as a starting point. Yet why interactions exist cannot be ignored when considering the role of networks in a theory of organization. Although some interactions in organizations may be idle, and formed by mandates or the happenstance of people meeting and liking one another, many others likely arise because parties interact to achieve, plan, coordinate, or decide on their individual and collective activities. The network structure reflects much about the functioning of organizations and, possibly, their coordination failures or achievements.