SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

SNA Paper 1
A network perspective on social capital,
knowledge networks and innovation

Prepared by: Andries du Plessis and Rory Moore

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or
reproduced for distribution outside the client organization without prior written approval from
Innovation Agency.

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

Table of Contents

1 Introduction........................................................................................................................3

2 Social capital: a function of relations.................................................................................4

3 A network approach...........................................................................................................6

4 Research tools: SNA and organisations.............................................................................8

5 Conclusion .......................................................................................................................10

6 Works Cited .....................................................................................................................12

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

1 Introduction

In an effort to explain the power of relationships and how information can lead to action
Gladwell uses the example of Paul Revere in his much acclaimed book The Tipping Point
(2006). As a real connector, Paul Revere managed to rally American colonists along the
route to Lexington via the towns west of Boston in the wake of a British military
onslaught. At the same time that Revere began his epic horse ride, William Dawes set out
to do exactly the same. Riding along a different route, carrying the same warning message
and visiting more or less the same number of towns Dawes’ efforts, however, amounted to
very little. The action and non-action of colonists along the respective routes did not,
however, equate to political sentiment as has been initially thought but relates to
relationships, trust and social capital. Revere was well-known and trusted, Dawes less so.

This historic event and the roles of Revere and Dawes help explain numerous principles
related to social capital, information exchanges within a community and the value of
relationships in bringing about action. The influence of social capital and attempts to
understand the role of patterns of connectivity among members of a specific network are
not limited to civil society. In Social Networks and Organizations Kilduff & Tsai (2007,
pp. 1-2) use the same example of Paul Revere and William Dawes to illustrate the power
of networks:

“The moral of this tale is that the network of relationships within which we
are embedded may have important consequences for the success or failure
of our projects”.

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

2 Social capital: a function of relations

Numerous studies, including organisational studies, explore the role of social capital. In
this the role of a network perspective becomes apparent since there is general consensus
that relations carry with them potential
Social capital is the goodwill that is
value. In turn, relations exist within
engendered by the fabric of social
networks and as such can be measured and
relations; which can be mobilised to
analysed using Social Network Analysis
facilitate action.
(SNA).

Although the concept of social capital has been in existence for some time in Sociological
studies it was brought to the fore in 1995 when Putman published “Bowling alone:
America’s declining Social Capital”. At the time Putnam received widespread attention,
including an invitation from Bill Clinton, the President of America at that time.

Social capital is roughly understood as the goodwill that is engendered by the fabric of
social relations which can be mobilised to facilitate action. However, the definitions for
social capital vary depending on whether
one focuses on the substance, the sources, or
Social networks are primordial; they have
the effects of social capital. (Adler & Kwon,
a history that long predates systems like
2002)
Facebook and Friendster, and even the
first email message. Ever since anyone
Organisational studies about social capital
exchanged help with anyone else, social
investigate various aspects thereof and ways
networks have existed, even if they were
in which it influences organisations. In their
mostly invisible.
review of the prospects of social capital and
its application within organisations, Adler & Kwon (2002, p. 17) claim that the concept is
gaining currency, stating that it is a powerful factor explaining people’s relative success in

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

a number of arenas relevant to organisations. Of particular interest is the link between

social capital and intellectual capital. (Nahapiet & Ghoshal, 1998)

Of particular interest to the Innovation Agency is the close link between social capital,
networks, knowledge diffusion and innovation. This is reiterated by Borgatti & Foster
(2003) who state that “[p]robably the biggest growth area in organisational network
research is social capital, a concept that has symbiotically returned the favor and helped to
fuel interest in social networks.”
As enterprises adopt tools like email,
Social capital surely affects innovation. In message boards, blogs, wikis, document
this regard the work of Inkpen & Tsang sharing, and activity streams, they
(2005) is paramount. They examine how generate a number of social network data
social capital dimensions of networks affect structures. These networks contain
the transfer of knowledge between network information that has significant business
members. Importantly, their study emanated value by exposing participants in the
from the recognition of a theoretical gap in business network who play critical and
research where the key concepts of networks, unique roles.
social capital, and organisational knowledge
transfer intersect. Mindful of this gap, the Innovation Agency hopes to contribute to the
growing body of knowledge about social capital, social networks and innovation.

The spread of intellectual capital within knowledge networks involves resource exchanges.
Adler & Kwon (2002, p. 19) note this when they refer to studies done about resource
exchanges, the creation of intellectual capital and cross-functional team effectiveness.
Intellectual capital and knowledge networks all relate to social capital and the flow of
information among people (referred to as actors) within networks. Relationships carry
(potential) value; the absence of a link (or tie) signals the lack of a relationship.
Relationships among people are not the same – resultantly, patterns of connectivity

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

emerge. These patterns can have far-reaching implications in an organisation especially

since it influences the role and reach of key individuals. In network analytical terms the
role and network position of such key role players can be calculated and analysed.

For us at the Innovation Agency one thing is clear: Insight into information flow for the
purposes of innovation necessitates an understanding of the inner workings of networks
per se. It is supported by Burt’s (1992) claim that certain configurations of relationships
with others confer significant information and control benefits. Clearly, this view is rooted
in a long sociological tradition viewing a person’s position in a social network as
determinant of opportunities and constraints (Welmann, 1988). Citing Krackhardt (1992)
this is substantiated by Inkpen & Tsang (2005) who state that the configuration of a
network structure determines the pattern of linkages among network members (actors).
Such elements of configuration as hierarchy, density, and connectivity affect the flexibility
and ease of knowledge exchange through their impact on the extent of contact and
accessibility among network members. These network indices are further explained in
related whitepapers.

3 A network approach

Network theories have a long-standing tradition in the social sciences dating back to the
1930s and the work of Moreno, amongst others. Other influences also played a role in the
development of Social Network Analysis (SNA). For a detailed history of the development
of SNA, refer to John Scott (2009).

However, SNA has not stayed within the domain of the social sciences. During the 1990s
network theories started to emerge in virtually every traditional area of organisational
scholarship too, including studies about leadership, power, turnover, job satisfaction, job

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

performance, entrepreneurship, stakeholder relations, knowledge utilisation, innovation,

profit maximisation, and vertical integration amongst others. (Borgatti & Foster, 2003, p.
1005)

An upsurge in communication technologies since the 1980s has had a profound impact on
companies and the flow of information, as well as changes in organisational forms.
Amongst others, all kinds of networks have come to spread within and between
companies. Driven by ideas about the central place of knowledge in what has become
known as the knowledge economy, these
and related developments have resulted in an Social network analysis of organisations
increased awareness of social networks. It is, offers a form of MRI or x-ray image of the
however, not limited to attempts at organisational structure of the company.
understanding what is happening inside These images illustrate the way the
organisations, but also between members of the organisation are actually
organisations. structured in contrast to the formal
hierarchies of traditional “org-charts”.
Of all the changes affecting organisations a
realisation of organisational forms beyond the formal structures are most profoundly
expressed in organisational network analyses. Resembling a shadow organisation that
differs from the formal organisational chart network theorists and organisational network
analysts state that the majority of individual knowledge transfers do not follow formal
hierarchies or neatly plotted processes; transfers are instead driven by personal and
informal communications – alternative pathways are often hidden unless exposed through
an Organisational Network Analysis (ONA). Molina (2006)

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

4 Research tools: SNA and organisations

Notably, Müller-Prothmann (2005) argues that such social constructivist views of

knowledge exchange consider single individuals as well as social aggregates and their
structural patterns. This demands a set of tools and methods to analyse personal
relationships and flows of informal knowledge exchange. These are generally referred to
as Social Network Analysis (SNA). With the proliferation of SNA in organisations SNA is
at times also referred to as Organisational Network Analysis (ONA). A further distinction
is also made in terms of business network analysis. Durant-Law (2010) states that Business
Network Analysis (BNA) is a diagnostic
methodology that elicits the capacity of an Just as Lord Kelvin (1824-1907)

organisation to effectively engage in its encouraged careful measurement as the

activities. According to him, BNA uses both method of advancing science, the sciences

SNA and ONA methods, but extends the of collective action, collaboration, and

analysis beyond people or organisations to productive communities require new

include, amongst other things, data flows forms of measurement.

and policy relationships. However, Anklam

(2005) states that “whether you call it social-network analysis (SNA) or organisational-
network analysis (ONA), it’s about identifying the key networks within organisational
boundaries, understanding the structure of personal and group relationships among them,
and using this understanding to make a difference to business performance.”

Anklam’s statement comes in the wake of a considerable upsurge in various key findings
by network analysts. According to Borgatti & Foster (2003) network literature is growing
exponentially. They furthermore state that the boom in network research is part of “a
general shift, beginning in the second half of the 20th century, away from individualist,

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

essentialist and atomistic explanations toward more relational, contextual and systemic
understandings”. The landmark contributions to organisational network analysis made by
people like Cross, Parker, Anklam, Borgatti and Stephenson have to be mentioned here. In
their book The Hidden Power of Social Networks: Understanding How Work Really Gets
Done in Organizations (2004) Cross & Parker give managers perhaps one of the first off-
the-shelf practical insights into organisational network analysis.

Supported by a broad range of case studies, in a recent book entitled Driving Results
through Social Networks: How Top Organizations Leverage Networks for Performance
and Growth (2009), Cross & Thomas focus on specific applications of network analysis
that have yielded substantial business impact. In one of the latest books entitled, The
Organizational Network Fieldbook. Best practices, techniques, and exercises to drive
organizational innovation and performance, (2010) Cross, et.al. offer practical examples
in how network analyses and measures can be used to optimise organisations. The
different contributors to this publication, all specialists in their various fields and noted for
their insights into organisational networks, ensure that this publication is filled with proven
practical examples of outstanding quality.

In the meantime, the ongoing efforts of researchers, consultants and others using
SNA/ONA continue to contribute to the growing body of knowledge about informal
networks and other network-related features affecting organisations’ performance. For
example, Stephenson manages to apply her anthropological knowledge and insights about
the inner-workings of communities to companies; she has made significant inroads by
establishing the concepts of social networking among managers and organisational thought
leaders, as is the case with a respected consultant like Anklam.

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

5 Conclusion

At the Innovation Agency we take note of developments within the field of SNA/ONA and
its application to organisational studies. The views of prominent consultants and
researchers reiterate the importance of using a formal set of metrics and indices to
understand the inner workings of (informal) networks found within organisations. The
latest findings of people like Müller-Prothmann (2005) about leveraging knowledge and
using SNA points towards ways to optimise the flow of information for the purposes of
innovation. Furthermore, we acknowledge the fact that a network perspective can be used
in various other ways and that it goes beyond innovation.

Lastly, we take heed of the fact that SNA/ONA is only a means to an end; as Anklam
states SNA is not a “solution”, but it does “provide a key diagnostic component in the
design and management of initiatives and change programmes that involve a social
element of communication, collaboration or coordination.” (2005)

In the second whitepaper we explore SNA/ONA and its analytical concepts in more detail,
the principles behind network analysis and examples of its application within
organisations. We furthermore consider how network analysis can assist managers to
identify important role players, resolve bottlenecks, avoid complete reliance on limited cut
points and how to increase network density should that be considered a way to increase
efficiency. The concept of structural holes and the role of culture carriers and information
brokers are also explored.

In a third whitepaper we outline case studies relying on the existing body of knowledge
relying on an organisational network perspective. We explore key findings, especially

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

those related to innovation. With an increased knowledge of SNA/ONA the Innovation

Agency aims to assist its clients to optimise the flow of information within their
organisations, grow networks and ensure that network structures and patterns of
connectivity are optimised for performance. Through an in-depth literature study and our
own examples, we explore the importance of ensuring that the correct people are
connected; opinion leaders and culture carriers are influential role players – their network
positions are instrumental.

With a growing awareness of the role of Social Media ways to analyse and understand the
power of these expansive collaborative networks necessitate our attention. Managing and
eliciting true benefits from such expansive networks that exist outside the company
necessitates an understanding of large open networks, hence our interest in Social Network
Analysis as a research tool.

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SNA Paper 1: A network perspective on social capital, knowledge networks and innovation

6 Works Cited

Adler, P. S., & Kwon, S.-W. (2002). Social Capital: Prospects for a New Concept. The
Academy of Management , 27 (1), 17-40.
Anklam, P. (NY). Inside Knowledge. Retrieved January 21, 2011, from Inside Knowledge:
http://www.ikmagazine.com
Borgatti, S. P., & Foster, P. C. (2003). The Network Paradigm in Organisational Research: A
Review and Typology. Journal of Management , 29 (6), 991-1013.
Burt, R. S. (1997). The contigent value of social capital. Administrative Science Quarterly ,
42, 339-365.
Butts, C. T. (2008). Social Network Analysis with sna. Journal of Statistical Software , 24
(6), 1-33.
Christakis, N. A., & Fowler, J. H. (2009). Connected: The Surprising Power of our Social
Networks and How They Shape Our Lives (First Edition ed.). New York: Little, Brown and
Company.
Cross, R., & Parker, A. (2004). The Hidden Power of Social Networks. Understanding how
work really gets done in organizations. Boston: Harvard Business School Press.
Cross, R., Singer, J., Colella, S., Thomas, R. J., & Silverstone, Y. (Eds.). (2010). The
Organizational Network Fieldbook. Best practices, techniques, and exercises to drive
organizational innovation and performance. San Francisco: Jossye-Bass.
de Lange, D., Agneessens, F., & Waege, H. (2004). Asking Social Network Questions: A
Quality Assessment of Different Measures. Metodološki zvezki , 1 (2), 351-378.
Degenne, A., & Forsé, M. (2007). Introducing Social Networks. (A. Borges, Trans.) London:
SAGE.
Durant-Law, G. (2010). Microsoft PowerPoint - GDL_BNA_Seminar_UC2010. Retrieved
January 25, 2011, from Knowledge Matters: http://www.durantlaw.info/

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Fombrun, C. J. (1982). Strategies for Network Research in Organizations. Academy of

Management Review , 7 (2), 280-291.
Gladwell, M. (2000). The Tipping Point. How little things can make a big difference.
London: Little Brown Company.
Gladwell, M. (2006). The Tipping Point. How little things can make a big difference.
London: Little, Brown Book Group.
Hatala, J.-P. (2006). Social Network Analysis in Human Resource Development: A New
Methodology. Human Resource Development Review , 5 (1), 45-71.
Inkpen, A. C., & Tsang, E. W. (2005). Social Capital, networks, and knowledge transfer.
Academy of Management Review , 30 (1), 146-165.
Kilduff, M., & Tsai, W. (2007). Social Networks and Organizations. London: SAGE.
Knoke, D., & Yang, S. (2008). Social Network Analysis. Quantitative Applications in the
Social Sciences , 7 (154), 1-133.
Krackhardt, D. (1992). The strength of weak ties. In N. Nohria, & R. G. Eccles (Eds.),
Networks and Organizations: Structure, form and actions. Boston: Harvard Business School
Press.
Molina, J. L. (2006). The informal organizational chart in organizations. An approach from
the social network analysis. Gazeto Internacia de Antropologio , 1, 32-45.
Müller-Prothmann, T. (2005, August). Leveraging knowledge communication for Innovation.
Framework, methods and applications of Social Network Analysis in Research and
Development. Freien Universitat Berlin.
Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational
advantage. Academy of Management Review , 23 (2), 242-266.
Scott, J. (2009). Social Network Analysis: A Handbook (2nd ed.). Los Angeles: SAGE.
Sugarman, B. (2010). Magic from social networks that talk to management: four cases. The
Learning Organization , 17 (4), 288-302.
Tsai, W., & Ghoshal, S. (1998). Social Capital and Value Creation: The role of intrafirm
networks. Academy of Management Journal , 41 (4), 464-476.

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Welmann, B. (1988). Structural Analysis: From method and metaphor to theory and
substance. In B. Welman, & S. D. Berkowitz (Eds.), Social Structures: A Network Approach.
New York: Cambridge University Press.

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