Warwick Business School

Assessed Essay Critically evaluate whether or not the development of social networks within and /or among organizations facilitates innovation.

Innovation and Knowledge Work IB96X0

MA Management and Organizational Analysis

Student Id 1161780 Words- 3213 (Excluding footnotes)

Outline The approach of this essay would be to identify two theoretical standpoints in current knowledge management and innovation literature, firstly we would look at social networks as broader concept which act as a channel as well as conduit for information and knowledge flow and secondly, would analyze this concept by addressing and dividing social networks into within and across organizational boundaries to reflect upon the innovation process. Following this we would analyses this approach by using literature from (Carlile, 2002,2004) and (Swan & Scarbrough, 2005) and several others.

Overview Are social connections vital towards development of organizational innovations? , Obstfeld, 2005 (p.100) postulates that it is often the case where organizational innovation often stem from social connections between people, ideas and resources to produce these novel combinations (Schumpeter, 1934). Obstfeld, (2005) characterizes these social connections as networks that actively try to combine knowledge, people and resources. A number of scholars have defined networks offering different perspectives and using broad range of terminology for example (Alter & Hage, 1993, p.46) defined networks as a concept of clusters, that facilitates organizational interaction of exchange while (Schilling & Phelps, 2007) (Kreiner & Schultz, 1993) articles refer to networks as informal alliances of organizations seeking communication and cooperation. Furthermore social scientists like Powell et al. (1996), Brown & Duguid (1991) and Coleman et al. (1966) found networks to reciprocate direct communication. While these terminologies and perspectives might be different, however at a conceptual viewpoint remains the same, firstly, to inhibit patterns of exchange and relationships and secondly to reflect the flow of resources within these networks (Jones et al., 1997, p.914).

The term networked innovation implies in this essay is, as a distinctive category or a type of process (Swan & Scarbrough, 2005, p.916). Having a specific purpose for collaboration, through multiple actors who are continuously involved in communication and exchanging of ideas both in terms of knowledge transfer and co-creation of activities (Valkokari et al., 2009, p.5). The assumption behind this process of networked innovation is basically to combine different actors having different personalities, knowledge, skills and resources to accomplish an innovation. (Vyakarnam et al., 1998, p.159). Moreover, for the first part of this essay Hardy et al., (2003) notions of networked innovation and his focus towards broader concept of collaboration through inter-personal, intra-organizational and inter-organizational relations would be explored.
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Conceptualizing Social Networks and Informal Ties Abundance of research under social science concerning network analysis have been rooted mainly in examining ties and relationships between two actors and their consequences (Powell et al., 2004). Why the word social in networks, because these networks channel and direct information and knowledge flows from position to position within the social structure. (Owen-Smith & Powell, 2004, p.5). As Ruef, (2002, p.429) suggests using Giddens philosophy, that this social structure is seen as both enabling and constraining innovation, where innovation is largely dependent on aspects of individuals relational context i.e. the network ties. Granovetter, (1973, p.1361) defines these ties within a network, in terms of time and intensity of emotions invested in a relationship along with certain degree of reciprocal services offered between actors within the tie, he says weaker the ties, tend to disseminate more knowledge and information and also serve as bridge between disconnected social groups (Ruef, 2002, p.430), thus, are central to the diffusion process as they expose individuals to new ideas (Robertson et al., 1996, p.336). On the other hand, stronger ties, lead to less efficient dissemination and transmission of information because in highly interconnected and closely knit networks individuals know each other and possess the similar pattern of knowledge (Rogers, 1995) and (Ruef, 2002). Paradoxically, recent literature on

different forms of networks especially those of Grandori & Soda, (1995) advocates that, networks especially proprietary and bureaucratic networks do facilitate dissemination of tacit forms of knowledge effectively (pp.201-203). More so, stronger ties do require considerable capital investments and take longer time to evolve compared to informal weaker and might not always be effective (Newell et al., 2009, p.167).

For Powell et al., (2004, pp.5-6) social connections can be divided into two terms mainly channels and conduits. Channels represent linkages between different nodes1 that facilitates information diffusion, moreover his representation channels as suggest weak ties among actors within the network that cause information spillovers. Conduits on the other hand symbolizes formal contractual arrangements for e.g. contracts, licenses etc.) and implies strong ties involving tighter and proprietary conduits as primary source of competitive advantage (p.6).

Node- represents actors, members, employees and organisation within a network 1161780

Networks as Informal Ties: Intra-Organizational Perspective on Communities of Practice

A tool for mobilizing talent and knowledge across the enterprise has always been recognized by the creation and use networks socially; these intra-organizational networks stem formally through the operational or organizational structure or informally through meets, events and interests or hobbies of employees and provide pathways to information and knowledge sharing (Eva & Maria, 2011). Most large corporations have dozens of these informal networks which go by the name of peer groups, communities of practice and functional councils (Bryan et al., 2007, p.1). The essay would focus on communities of practice to opine the notion of innovation in relation to social networks.

Communities of practice are groups of people who share a concern, a set of problems, or a passion about a topic, and who deepen their knowledge and expertise in this area by interacting on an ongoing basis. (Wenger et al., 2002, p.4)

This specific institutionalized form of intra-organizational network was developed to tackle the knowledge management issues throughout the organization, and has been steadily developing and the literature surrounding this area has been heavily studied too (Probst & Borzillo, 2008). For McDermott, (2004) these networked structures have been developed to expedite and share best practices within organizations functional departments. Everest & Lesser, (2001) identified few distinct advantages, first of these were that, communities promoted easier dissemination and transfer of explicit knowledge among members and created repository type of databases where members could exploit tools and best practices and a like. Secondly, communities enabled organizations to rapidly identify and meet customer needs. Thirdly to facilitate organizational as well as employee learning by building social capital (Lesser & Storck, 2001), furthermore, as a mean to mentor and develop relationships within the organization. Lastly and more importantly for this essay, communities provide an important and initial spark of innovation to generate new products and services (p.39). In reflection of the merits, there are also three structural dimensions of these CoP that make them effective (Snyder et al., 2003), where domain represents the field of knowledge the CoP brings together, which gives it its collective identity and context (p.8). Whereas, Wenger, (2004, p.3) expresses that, CoP is not just a task to be carried out but represents an area of knowledge that need to explored and developed. The second dimension community stands for the relationships inside the CoP and to whom the CoP is relevant to share and address problems (p.3). The third and the last dimension of CoP is practice, suggests that members are practitioners of a specialized field and expertise which they accumulate to address problems and to innovate (Wenger, 2009).
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A CoP distinguishes itself from than any other intra-organizational network for example cross-functional teams and project/operational teams because unlike teams, the role of CoP and its members is not defined and its progress and evaluation is not based on any predetermined targets. Targets are quantified in relation to the practices developed and exchanged within the CoP. Finally
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as mentioned before, the

members share the same passions and interests in a particular body of knowledge which may not be the case in functionally heterogeneous teams (Somech, 2006) within the same organization as many

members may have different needs and would come from different functional areas. A prime example to illustrate these features and differences of CoP is the case of Xerox3, here representatives of Xerox, who worked on field and were assigned to repair broken machines used to share their experiences over informal meetings for example over breakfast, lunch or coffee, these experiences which were narrated ranged from horror stories of non-repairable machines to war stories. It was found that these informal conversations in relation to their experiences shared a lot of knowledge, learning occurred and solutions to the problems were found.

Though all is not good, since most knowledge is emerges from external sources outside the firm, there is a considerable risk that the organization would overlook potential opportunities from a larger poll of knowledge, while on the other hand failing to prevent leakages from within the organization. (Simrad & West, 2005, p.4). However, some communities of practice also create knowledge boundaries themselves. Aspects of social closure where the communities may not allow outside penetration granting them exclusive rights and ownership of specialized knowledge databases may be destructive towards fostering of innovation (Swan, 2012).

Networks as Alliances and Affiliations: Inter-Organizational Perspective

Organizations are likely to learn and innovate together when all chose collaborative learning strategies of high transparency and receptivity (Larsson et al., 1998, p.300). For Hardy et al., (2003, p.323) this inter organizational collaboration is a relationship that is negotiated in an ongoing process, which doesnt rely on market or hierarchical mechanisms of control. They infer that these collaborative arrangements include wide range of activities for example strategic alliance, consortiums and joint ventures. Insights into these collaborative would reflect degree to which they facilitate innovation.
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Have researched on functionally heterogeneous teams to facilitate innovation but not included as part of discussion. Xerox also created an online community Eureka", a knowledge management system 1161780

Since knowledge based view of the firm has grown out of resource based view of the firm (Grant, 1996). Similarly for Grant & Baden-Fuller, (2004, p.63) the knowledge based perspectives of strategic alliances have their roots in resource based approaches to alliances. For them knowledge and its sharing became influential resource in alliance formation. Banking upon articles from collaboration literature, we identify strategic alliance as one of a key network initiative that facilitate firstly, creation of knowledge and secondly, the innovation capacity of the alliance. As Narula & Hagedoorn, (1999, p.284) say, there has always been an underlying misconception about collaboration/ cooperative agreements and strategic alliances, where agreements were found to be initiatives and strategic alliances were related subsets of inter-organizational cooperations. There article found two underlying motives for cooperation firstly, cost economizing secondly, long term profits generation. For Larsson et al., (1998) other motives included gaining market access, economies of scale and competence development. Focusing on competence development for both the participating organizations was sought by developing their collective knowledge by means of constructing and modifying their inter organizational environment, working rules and options (p.287). Moreover for Kogut, (1988, p.323), these alliances were vehicles by which tacit knowledge was transferred and shared. Transfer of this tacit knowledge can be seeing with different perspectives by Inkpen & Tsang, (2005), Firstly, to learn with an alliance partner when entering new business domains and secondly, to gain skills and competencies from the alliance partners in order to exploit and access complementarities of partners (Grant & Baden-Fuller, 2004). Conceptually from the knowledge management literature4, learning in this form is reflected through exploration (March, 1991) and knowledge generation (Spender, 1992) whereas gaining skills points towards exploitation of resources and knowledge application.

Several other studies in relation to strategic alliances have identified this transfer and sharing of knowledge particularly (Larsson et al., 1998; Mowery et al., 1996; Kale & Singh, 2009) and (Kale et al., 2000). However for Grant & Baden-Fuller, (2004), the concepts organizational learning and knowledge sharing and transfer in the domain of strategic alliances remain relatively unexplored and imprecise (p.65). For example exploring Mowery et al., (1996) and their empirical research on 792 alliances, reflected that organizational learning within this networks seem to be very complex than previously thought. Traditionally alliances focused in on two or more commercial for-profit organizations but nowadays many firms are engaging in with non-profit organizations and with individuals on contractual
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To provide an understanding of exploitation and exploration in relation to strategic alliances 1161780

basis for new innovative ideas (Kale & Singh, 2009). While most companies rely on internal innovation, where products are developed in house by their R&D teams, however for Kale & Singh, (2009) many organizations nowadays are dependent on alternative external sources of innovation while collaborating with peripheral organizations like universities, government labs and web based talent markets (p.56). Excellent case example on this notion is based on the article of Houston & Sakkab, (2006) and was of P&G5, connect and develop innovation model. Their emphasis towards distributed innovation using open/collaborative processes using their customers, suppliers and academics (Cash et al., 2008, p.5) to co-create products saw their innovation cost reduce and their new product development rise by 50% from peripheral sources.

Contrastingly even these external alliances pose challenges, as mentioned before the reliance on external affiliation to foster innovation and develop new products and services requires considerable openness and relinquishment of organizational control (Mahr et al., 2009, p.3). This according to them would lead to considerable loss of proprietary knowledge and information. Postulations by Cook, (2008, p.64) refer to questioning of beliefs and the role of management and experts and an underlying need for control over certain aspects of new product development like customer experiences and more so on quality assurances.

Analysis While organizations have created communities and have set up alliances strategically to create and tap new business opportunities by opening their knowledge databases and seeking external collaborative alliances; specifically towards distributed and networked innovation models, they must express concerns towards certain other facets of these social networks (Valkokari et al., 2009). This section of this essay will deal with issues in relation towards networks in general which many studies may have overlooked.

Positively in agreement with (Swan & Scarbrough, 2005) and (Fritsch & Kauffeld-Monz, 2010, p.23), innovation should be the specific purpose for creation of such networks, and should encompass both intra and inter-organizational networks, their analysis is a departure from (Hardy et al., 2003) and (Granovetter, 1973) account, where the networks need to recognize the context of innovation and where these entities constantly compete for resources and act as competing agencies and further to resist change (Alter &
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Procter and Gamble

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Hage, 1993). It is also important that we look dont look at social networks as simple channels or conduits of information-flow, but more specifically as vehicles for the creation/generation of knowledge (Swan & Scarbrough, 2005) (Spender, 1992). As demonstrated by (Powell et al., 1996) and (Boari & Lipparini, 1999), their studies in networks within Italian industrial districts showed how local firms fostered learning processes collectively to generate knowledge for innovation development. In addition to this, (Fischer, 2001, p.206) says that this creation of knowledge is extremely nonlinear and interactive process when both the tacit and explicit forms of knowledge continuously interact, thus understanding this very nature of knowledge and which part of it is crucial to understanding any network analysis. Furthermore, the very nature of knowledge and its transmission is dependent and determined through the strength of the network and the tie (Reagans & McEvily, 2003). They say the more tacit the knowledge is the more difficult and requires greater effort to covey within the network, moreover the stronger the network, the easier it is to transfer as the motivation to assist others in the network is higher (p.245).

Application of Knowledge Boundaries in context to Networks

Paul Carlile, (2002) work develops a theoretical framework that illustrates knowledge boundaries that need to be overcome while collaborating. His framework depicts three kinds of knowledge boundaries namely syntactic, semantic and pragmatic, that places a prominence on managing knowledge across and within organizational boundaries. Additionally, Carlile also reflects on boundary objects as a means to facilitate and overcome knowledge transfers and boundaries, these objects could include concrete objects or abstract objects. The first boundary i.e. the syntactic boundary is created because of the differences in the grammar, symbols and the language that may be used within and among these networks; this would be because communities and affiliated partners created their own unique and shared language to facilitate their own interaction (Newell et al., 2009). Compared to syntactic, sematic boundaries recognizes the interpretive differences that may exists (Edenius et al., 2010), or the perspective taking in other words is a process where a network or a group accommodates differences in the interpretations so that other networks have full access and visibility to these representations (Newell et al., 2009, p.85). Furthermore, this transition from syntactic to semantic is when the degree of novelty within the innovation process increases, thus making the knowledge difference and interpretations between different actors6 ambiguous (Edenius et al., 2010). Additionally, focusing on cultural, ethical and other softer issues aspects of
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It is assumed that actors within a networks can be individuals within a community or an organization within an alliance 1161780

sematic boundaries (p.136-137). The last boundary of knowledge is the pragmatic one, it is spawned when novelty and dependencies (uncertainties) increases, and where actors involved have different and vested interests for their own incentives (Newell et al., 2009, p.86) this generates different interests between actors that impede their ability to share and assess knowledge (Carlile, 2004, p.560).

To overcome these boundaries, Carlile, (2004) suggests three levels of knowledge processes, where knowledge needs to be transferred, translated and transformed. Under syntactic boundary there is a need to transfer knowledge and this can be done by creating a common language between the actors, while under sematic boundary not only does it needs to be transferred but it needs to be translated (this can be achieved through providing same set of meanings and same datasets) into the same perspectives so that all actors understand each others interpretations. Pragmatic boundary requires knowledge to be transformed so that specialists are able to transform their own knowledge and practice. This transformation can be done with the help of incentives to actors (Newell et al., 2009, pp.85-87).

Within inter or intra organizational networks certain knowledge boundaries are more predominant than others, certainly by interpreting Carlile works it can be inferred that networks though specifically created for knowledge and information dissemination, seem to overcome at least the syntactic and semantic boundaries by intrinsically performing the function of boundary objects and thereby socially binding the actors together, however pragmatic boundaries seem to be more difficult to overcome, (Newell et al., 2009) explains that under this scenario interests of one actor can create negative consequences for others required for effective collaboration.

Conclusion In quest to provide an insight on to social networks and their role in innovation, this essay arrays upon two perspectives, first, the role of communities of practice as networks within the organizational dynamics inducing innovation. This has been observed by the case of Xerox. Secondly, the role of alliances and affiliations as an inter-organizational network has been utilized; here the example of P&G and their initiatives of open/distributed innovation have been sought. This open/distributed innovation model places its view of innovation process as an external phenomenon where organizational control is mediated. Next in the analyses section, it has been highlighted that there is a need to look at innovation as a contextual process, where-by knowledge is not just transfer and shared within these networks but also co-created and generated. Here the emphasis has been placed at the role of knowledge itself. At the end the essay outlines an underlying need to overcome knowledge boundaries applicable to networks.
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Notes 1. It is acknowledged that the role of power and politics within these networks is highly applicable, places a greater influence on the innovation process but due to the word and time constraints it has been intentionally been omitted.

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