Seeing both the trees and the forest: an analysis of the Indian interorganizational network.

Abstract

Economic sociology and organizational theory propose that economic activity is structurally embedded. Structural embeddedness refers to the fact that actors' actions and outcomes are affected by the overall structure of ties in which the actor resides. However, current interpretations of this concept are fairly narrow, and focus on the structure of the immediate network of ties. The assumption is that beyond the first-level of contacts, the structure of ties does not matter. My dissertation broadens the current conception of structural embeddedness to include the structure of second-level contacts, third-level contacts (and so on), until the structure of the overall network of ties is taken into account. I apply this concept of structural embeddedness in the overall network to the network, group, and firm level of analysis. My study is based on the network of publicly traded firms in India. At the level of the network, current theory predicts that interorganizational networks are small worlds, with dense clusters connected to each other with sparse ties. However, research on cross-national differences in organizational activity suggests dense clusters of firms embedded in dense networks of ties, a pattern more consistent with a nested world. I find that the Indian interorganizational network is a hybrid, with portions of the network displaying a small world, nested world, and atomized structure. Firms reside within different social structures, and this research suggests the importance of meso-level variation in firms' social structure. At the level of the group, current business group theory assumes that business groups are large and entrenched within a network of ties. Contrary to this prediction, a focus on structural embeddedness in the overall network suggests that Indian business groups vary widely in their position in relation to the rest of the network, and the large majority of Indian business groups are small and isolated. Finally, at the level of the individual firm, I find that structural embeddedness within the overall network is consequential, and significantly affects firm performance, even after controlling for other firm, industry, group, and network characteristics.