Collaboration Networks, Structural Holes, and Innovation: A Longitudinal Study

TLDR

Direct and indirect ties are generally believed to boost innovation, while structural holes can exert both positive and negative effects on subsequent innovation. The study aims to evaluate how a firm’s network of direct ties, indirect ties, and structural holes influences its innovation output. The authors develop a theoretical framework linking these network dimensions to innovation and test it using a longitudinal dataset of firms in the international chemicals industry. The longitudinal analysis confirms that direct and indirect ties enhance innovation, but increasing structural holes in the interfirm collaboration network reduces innovation, suggesting that optimal network structure depends on members’ objectives.

Abstract

To assess the effects of a firm's network of relations on innovation, this paper elaborates a theoretical framework that relates three aspects of a firm's ego network—direct ties, indirect ties, and structural holes (disconnections between a firm's partners)—to the firm's subsequent innovation output. It posits that direct and indirect ties both have a positive impact on innovation but that the impact of indirect ties is moderated by the number of a firm's direct ties. Structural holes are proposed to have both positive and negative influences on subsequent innovation. Results from a longitudinal study of firms in the international chemicals industry indicate support for the predictions on direct and indirect ties, but in the interfirm collaboration network, increasing structural holes has a negative effect on innovation. Among the implications for interorganizational network theory is that the optimal structure of interfirm networks depends on the objectives of the network members.