Playing Well Together: Creating Corporate Social Capital in Strategic Alliance Networks

1. Playing Well Together:Creating Corporate Social Capital in Strategic Alliance Networks David Knoke University of Minnesota Presented at Social Capital and Social Networks – Bridging Boundaries Ohio State University, June 20-21, 2005

2. “The longest meeting I have with [Time Warner CEO] Dick Parsons is when we sit down once a year and talk about human resources,” says Turner chief Phil Kent. It may not seem like the best use of a CEO’s time, but it turns out to be a very big deal. All those synergies? Well, you don’t get them if units don’t play well with one another. Parsons may achieve what his predecessors failed to do: dismantle Time Warner’s fiefdoms. Division heads say they’re now encouraged to work together, and they often do so in ways that give them advantages over the competition.” • Stephanie N. Metha. 2006. “Will Wall Street Ever Trust Time Warner?” Fortune 151:11 May 30:84.

3. SOCIAL CAPITAL Social Capital Resources accruing to an ego actor through direct & indirect relations with its alters that facilitate ego’s attainment of its expressive or instrumental goals Diverse conceptualizations of an actor’s social capital: • “inheres in the structure of relations between persons and among persons” (Coleman 1990:302) • “at once the resources contacts hold and the structure of contacts in the network” (Burt 1992:12) • “resources embedded in a social structure which are accessed and/or mobilized in purposive action” (Lin 2001:12)

4. Mobilizing Social Capital Job-seekers, entrepreneurs, work teams try to deploy their network ties to acquire the use of resources held by their alters. But, they may not always succeed in gaining access. Johnson & Knoke (2005) argued that volume of social capital to which ego actually has access is the aggregate of resources that ego could probably mobilize from its alters: SCi= ego i’s social capital from the J alters in its ego-network pji= ego’s perceived probability of access to use alter j’s resources Rj = total resources controlled by alter j that could be useful to ego i • Find a simultaneous equation solution for all J actors in the system • Create plausible quantitative measures of the two variables • Identify network and environmental conditions that change the probabilities of resources flowing across the links from alters to ego

5. How much SocCap could EGO mobilize? R1=4 p1=.8 p4=.5 R4=6 p1=.5 p4=.8 EGO R2=7 p1=.2 R5=3 p1=.2 R3=5 p1=.8 R6=9

6. Corporate Social Capital Corporate Social Capital (CSC)Social relations embedded in work-related organizational roles (e.g., workers, teams, executives, owners), not in their personal networks. “Corporate social capital, then, refers to: The set of resources, tangible or virtual, that accrue to a corporate player through the player’s social relationships, facilitating the attainment of goals.” (Leenders & Gabbay 1999:3) Social liabilityincurred as transaction-cost opportunism (self-interest with guile) “[A manager’s] ‘dark side’ of social capital …might also limit his ability to change the composition of this network as required by his task environment” (Gargiulo & Benassi 1999:299). • You’re obliged to reciprocate a sponsor’s assistance and advice • - Your friendship with an inept team leader blocks your promotion • - Your mentor insists that you build & paint his boat dock • - Attending the boss’ soirée thwarts your plans to watch the Big Game

7. Strategic Alliance Networks Corporate social capital relations span multiple levels of analysis from individuals, to workteams, to firms, and organizational field network (Kenis & Knoke 2002). At the IOR level, repeated alliances generate a strategic alliance network form of CSC. Strategic alliance: at least two partner firms that (1) remain legally independent; (2) share benefits, managerial control over performance of assigned tasks; (3) make contributions in strategic areas, e.g., technology or products(Yoshino & Rangan 1995). Strategic alliance network“the set of orgs connected through their overlapping partnerships in different strategic alliances” (Knoke 2001:128; Todeva & Knoke 2002). Firms are closely tied to one another through many direct alliances or many indirect ties through third firms (i.e., partners-of-partners).

8. CSC through SANs A firm’s ties to organizations in a strategic alliance network increases its probability of accessing and using the valuable resources held by the firm’s partners, including their: • Financial resources, credit extensions • Knowledge, information, technologies/patents • Marketing expertise, country/culture penetration • Org’l status, corporate/brand reputations • Trustworthiness and low risk (moral hazards) Organizations aware of such CSC advantages may act strategically in pursuing new alliances, partnering with firms that maximize its CSC portfolio. At the field-net level, an evolving strategic alliance network comprises a collective CSC structure which simultaneously facilitates and constrains the opportunities for its member firms.

9. Global Information Sector Basic CSC concepts could help to explain the evolution of the strategic alliance network in the Global Information Sector (GIS). This sector increased collaborative agreements exponentially 1990-2000, creating a complex web of overlapping partnerships. • Five NAICS info subsectors (publishing; motion pictures & sound recording; broadcasting & telecomms; info services & data processing) plus computer, telecomm, semiconductor manufacturing industries • 145 multinational corporations: 66% USA, 16% Europe, 15% Asia • Alliance & venture announcements in news media from 1989 to 2000 • Total of 3,569 alliances involving two or more GIS organizations Next two figures show mean strategic alliances among 30 most-active firms & MDS distances/clusters on dyads’ # of annual partnerships. Altho Japanese firms have higher probability of mobilizing resources from compatriots, what corporate social capital difficulties are they creating for themselves by concentrating strategic alliances so heavily on other Japanese partners?

12. References Burt, Ronald S. 1992. Structural Holes: The Social Structure of Competition. Cambridge, MA: Harvard University Press. Coleman, James S. 1990. “Social Capital.” Pp. 300-321 in Foundations of Social Theory. Cambridge, MA: Harvard University Press. Gargiulo, Martin and Mario Benassi. 1999. “The Dark Side of Social Capital.” Pp. 298-322 in Corporate Social Capital and Liability, edited by Roger Leenders and Shaul Gabbay. Boston: Kluwer. Johnson, LuAnne R. and David Knoke. 2005. “’Skonk Works Here’: Activating Network Social Capital in Complex Collaborations.” Advances in Interdisciplinary Studies of Work Teams 10:243-262. Kenis, Patrick and David Knoke. 2002. “How Organizational Field Networks Shape Interorganizational Tie-Formation Rates.” Academy of Management Review 27:275-293. Knoke, David. 2001. Changing Organizations: Business Networks in the New Political Economy. Boulder, CO: Westview. Leenders, Roger Th. A. J. and Shaul M. Gabbay (eds.). 1999. Corporate Social Capital and Liability. Boston: Kluwer Academic Publishers. Lin, Nan. 2001. Social Capital: A Theory of Social Structure and Action. New York: Cambridge University Press. Todeva, Emanuela and David Knoke. 2002. “Strategische Allianzen und Sozialkapital von Unternehmen.” (“Strategic Alliances and Corporate Social Capital”) Kölner Zeitschrift für Sociologie und Sozialpsychologie. Sonderheft 42:345-380. Yoshino, Michael Y. and U. Srinivasa Rangan. 1995. Strategic Alliances: An Entrepreneurial Approach to Globalization. Cambridge, MA: Harvard University Press.