The Organizations and Markets group at Chicago Booth investigates the sociology of business, management, markets, and society through an emphasis on the role of social structure. Our leadership in this area is due to our success in bringing decades of sociological research to bear on economic activity. Many aspects of social structure, such as social networks, are now hot topics in business. But social networks is just one example of an area that the Organizations and Markets group has been on the forefront of well before its current popularity, and continues to be an area we advance.
Our work typically falls into two broad themes. First, we study social networks in economic life from the sociological tradition and teach courses on the role of networks in strategy, management, and innovation in both MBA and executive MBA, and non-degree executive education programs. These courses serve as platforms for sharing and building upon our intellectual strengths. Two of the selected papers featured here and described below present groundbreaking research in this area. Second, we investigate how social structures influence the emergence of new markets, technologies, and products. This novel research, with ties to marketing and strategy, is noted in the third and fourth papers in this issue. Research in this second area naturally flows into our courses on technology and organizational strategy.
With that in mind, I invite you to read and enjoy the four featured articles.
Understanding the Power of Networks
The first article presents pathbreaking research by Ronald Burt. The article reflects part of his new book (Neighbor Networks, Oxford University Press) in which he counters longstanding assumptions about the benefits of diverse networks, as well as how one’s preferences are influenced by their social network position. Most of us believe that if we are diversely connected to people who are themselves highly connected, then we are better off. However, Burt’s findings suggest that this reasoning, which lies at the core of understanding how information flows in interpersonal networks, is flawed. Having well-connected friends has little value per se. Rather, having diverse networks is advantageous because exposure to different views makes one a better, broader thinker. The implications for this work are substantial, from the logic for selecting mentors and protégés to the construction of teams and groups. It will surely spark years of debate within and outside of academic circles.
Universities and the Evolution of Knowledge Networks
“Forums vs. Fountains,” the second paper, features work by Sean Safford, an authority on regional economic development (especially with U.S. Rust Belt cities). Safford’s paper considers cases where economic regions seek improvement through technological advancement and use universities as an important means to that end. It is easy to claim that universities are critical for regional knowledge networks. Beyond this, however, it is unclear what type of role universities should take. Safford contrasts two popular models by matching Akron, Ohio, and Rochester, New York, two Rust Belt cities suffering a similar downfall in the late 1970s and 1980s, but varied on how they choose to have local universities play a central role in the redevelopment of their technological communities. His findings provide evidence that a more passive forum approach where constituencies were brought together by the university and encouraged to coordinate outperformed a more active fountain approach where the university centrally coordinated knowledge. In other words, the forum approach has provided more advantages to a region attempting to recover from an economic downfall, in part by creating more cohesive within-region technology networks.
How Customers Influence the Evolution of New Products
The third piece of research is by Steven Kahl, a scholar on the history and strategy of technology. He examines the relationship between consumer use of technology and industry evolution. In the paper included here, Kahl questions the standard theory in which an industry’s technological standard and design is selected and retained through forces largely driven by the producers (firms). This traditional view tends to ignore the role of consumers in not only which technology they select, but in how they use that technology. Kahl reminds us that when a technology (such as computers or automobiles) enters a market there is often no single way that it is used, and often its use is beyond the intention of that technology’s producer. At the same time, this heterogeneity of use substantially shapes industry evolution. Using the introduction of the manufacturing software industry in 1954, Kahl shows that without understanding how software technology was used by consumers and the role of social relations between early producers, early consumers, and market intermediaries, we will substantially misunderstand the evolution of one of the key industries of the last 60 years.
Category Perceptions and the Evolution of New Categories
The fourth article introduces research by Elizabeth Pontikes, another rising star in the sociology of organizations and markets. She has conducted a fascinating and intuitively appealing study using data on 4,000 software companies and their patents. In this work she asks why two equally novel technologies may not be similarly marketed and consumed as novel. Specifically, she examines the relationship between the social structure of a market and whether entrepreneurs market their technologies as novel. She finds that an entrepreneur’s claim of novelty is dependent on the overall structure of product categories, even when the “actual novelty” (measured using patents) of that entrepreneur’s innovation is taken into account. Her work provides evidence that whether a technology is accepted as novel depends on the structure of the product category space. It is easier to understand whether something is novel in a clear, well-defined product space (such as videoconferencing). Conversely, there are fewer positive returns to marketing a technology as novel in product spaces that are not well defined (such as e-business applications).
Together these four studies represent Chicago Booth and the Organizations and Markets group’s tradition of pathbreaking work. Enjoy!