Network closure's impact on firms’ competitive advantage: The mediating roles of knowledge processes

This study draws on the knowledge management and social network disciplines to examine the effect of network closure on organizations’ competitive advantage. We hypothesize that the level of network closure affects an organization's capability of knowledge identification, knowledge transfer, kn...

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Bibliographic Details
Published in:Journal of engineering and technology management 2011-03, Vol.28 (1), p.2-22
Main Authors: Chai, Kah-Hin, Yap, Chee-Meng, Wang, Xiaoyang
Format: Article
Language:English
Subjects:
Competition
Competitive advantage
Dynamic environment
Dynamics
Encounters
Flux
Impact analysis
Institutionalization
Knowledge identification
Knowledge management
Knowledge protection
Knowledge transfer and institutionalization
Least squares method
Management
Network closure
Networks
Organizations
Petrochemicals industry
Social integration
Social networks
Studies
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Summary:This study draws on the knowledge management and social network disciplines to examine the effect of network closure on organizations’ competitive advantage. We hypothesize that the level of network closure affects an organization's capability of knowledge identification, knowledge transfer, knowledge protection and knowledge institutionalization; these capabilities in turn affect an organization's competitive advantage. Thus, we model network closure as indirectly affecting an organization's competitive advantage. A Partial Least Square (PLS) analysis of the survey data of 78 Chinese petrochemical firms shows that network closure can both enhance and decrease an organization's competitive advantage. Network closure enhances an organization's competitive advantage by facilitating knowledge protection and transfer (via institutionalization), but decreases competitive advantage by hindering knowledge identification. Environmental dynamics that the organizations encounter are observed to moderate the effect of network closure. Combining our results with the findings from the literature, we propose that organizations operating in a dynamic environment, where the domain knowledge is in a state of flux, need to place great importance on knowledge identification; such organizations should choose a sparse network that allows them to receive diverse knowledge. In contrast, organizations operating in a stable environment should opt for a dense network to protect their knowledge and facilitate transfer of required knowledge.
ISSN:0923-4748
1879-1719
DOI:10.1016/j.jengtecman.2010.12.001