Olav Sorenson
Research

My current research agenda sits at the intersection of organizational ecology and social networks. In particular, I am interested in how social networks affect transactions and shape the geography and evolution of industries. Beginning with my dissertation, I have also thought about how firm structure influences the process of organizational learning. In addition, I have written a few papers with Lee Fleming on the topic of science and innovation. For a complete publication list, please see my CV (pdf).

I have investigated these issues in a wide variety of settings including: automobile manufacturing, banking, biotechnology, computer manufacturing, film production and distribution, footwear manufacturing, machine tool manufacturing, management consulting, restaurants, television broadcasting and venture capital. My ongoing projects involve advertising, the U.S. film industry, venture capital and the Italian television broadcasting industry.

Below, you can find links to reprints or preprints of my papers along with topics and abstracts. For topics that occur frequently in my research, I have adopted abbreviations in the keyword section: organizational ecology (ORGECOL), social networks (SOCNET), entrepreneurship (ENT), industrial geography (INDGEO), organizational learning (ORGLEARN) and technology management (TIM). If you have difficulty downloading a paper, it probably means that you do not have electronic access to the journal in which the paper has been published. If so, please send me an e-mail and I will send you a copy.

• The mobilization of scarce resources (with Bjørn Lovås; Draft date: 11/29/06; Topics: SOCNET, ORGECOL) ABSTRACT: We examine how the ability of one actor to gain access to resources controlled by another depends on two factors: (i) the number of mutual acquaintances connecting the prospective lender and borrower, and (ii) the scarcity of the resources in question. We argue that the incentives to renege on an agreement grow as the resources being traded become increasingly scarce. Mutual acquaintances, however, dampen these incentives, and therefore become more important to facilitating exchange as demand for the good of interest rises. Our analysis of qualitative and quantitative evidence from a study of senior partners at an international consultancy confirms that relations supported by a set of mutual acquaintances become more valuable as the resources garnered from them become increasingly scarce.
• The evolution of venture capital investment networks (with Toby E. Stuart, Harvard; Draft date: 12/5/05; Topics: SOCNET, ENT, INDGEO) ABSTRACT: Despite a wealth of research on the value of brokering and boundary-spanning relations, few have considered from where such relations arise. Indeed, most existing theories of network formation, whether based on homophily or structural constraint, imply that actors will form highly cohesive, homogenous clusters. Yet real interorganizational networks also include many ÔdistantÕ tiesÑisolated links between parties that vary on multiple social dimensions. To explain these patterns, we propose a theory of network formation based on the characteristics of ÔeventsÕ, or the places and times where actors meet. In particular, we argue that distant relations form when organizations participate in two types of events: unusually popular ones (e.g., fads), and those with little partner risk. In an empirical corroboration of our thesis in the formation of syndicate relations between venture capital firms, we find that the likelihood that socio-demographically distant connections form increases with several attributes of the target company investment ÔeventÕ: (1) the recent popularity of investing in the target firmÕs industry, (2) investment syndicate size, (3) target company maturity, and (4) geographic proximity of the lead VC investor to the target company.
• Corporate demography and income inequality: Vertical and horizontal sorting as sources of regional wage dispersion (with Jesper B. Sørensen, Stanford; Forthcoming: American Sociological Review; Topics: ORGECOL) ABSTRACT: We examine how income inequality depends on corporate demography, or the number and diversity of employers in a labor market. Drawing on insights from economics and sociology, we identify two distinct mechanisms linking corporate demography to wage dispersion. Increasing vertical differentiation Ð variation in the ability of organizations to benefit from a given set of inputs Ð tends to amplify wage inequality as the most desired workers pair with the most productive and highest status employers. Increasing horizontal differentiation Ð variation in the types of organizations Ð in a region meanwhile reduces inequality as workers can more easily find employers interested in their unique sets of attributes and skills. Our analysis of Danish census data provides support for each thesis: Within an industry, the number of firms operating in a local labor market increases wage dispersion. However, the variety of industries offering employment within a region and variation in the size of employers in a region reduce wage inequality. These factors also mitigate the extent to which vertical sorting increases inequality.
• Brokers and competitive advantage (with Michael D. Ryall, Melbourne Business School; Forthcoming: Management Science; Topics: SOCNET) ABSTRACT: The broker profits by intermediating between two (or more) parties. Using a biform game, we examine whether such a position can confer a competitive advantage, as well as whether any such advantage could persist if actors formed relations strategically. Our analysis reveals that, if one considers exogenous the relations between actors, brokers can enjoy an advantage but only if (i) they do not face substitutes either for the connections they offer or the value they can create, (ii) they intermediate more than two parties, and (iii) mutual dependence does not lock them into a particular pattern of exchange. If, on the other hand, one allows actors to form relations on the basis of their expectations of the future value of those relations, then profitable positions of intermediation only arise under strict assumptions of unilateral action. We discuss the implications of our analysis for firm strategy and empirical research.
• Science, social networks and spillovers (with Jasjit Singh, INSEAD; Published: Industry & Innovation, 14 (2007): 219-238; Topics: TIM, SOCNET) ABSTRACT: Although prior empirical research has established an association between science and the widespread diffusion of knowledge, the exact mechanism(s) through which science catalyzes information flow remains somewhat ambiguous. This paper investigates whether the knowledge diffusion associated with science-based innovation stems from the norm of openness and incentives for publication, or whether scientists maintain more extensive and dispersed social networks that facilitate the dissemination of tacit knowledge. Our analysis supports the first mechanism: We track the movement of knowledge with patent citations, and find that science-based innovations diffuse more rapidly and widely, even after controlling for the underlying social networks of researchers as measured using information on prior collaborations. We also find that publication and social networks act as substitutes in the diffusion of knowledge.
• Social structure and exchange: Self-confirming dynamics in Hollywood (with David Waguespack, U of Maryland; Published: Administrative Science Quarterly, 51 (2006): 560-589; Topics: SOCNET) ABSTRACT: This study uses data on the U.S. film industry from 1982 to 2001 to analyze the effects on box office performance of prior relationships between film producers and distributors. In contrast to prior studies, which have appeared to find performance benefits to both buyers and sellers when exchange occurs embedded within existing social relations, we propose that the apparent mutual advantages of embedded exchange can also emerge from endogenous behavior that benefits one party at the expense of the other: actors offer better terms of trade and allocate more resources to transactions embedded within existing social relations, thereby contributing to the ostensible advantages of such exchange patterns. Findings show that not only do distributors exhibit a preference for carrying films involving key personnel with whom they had prior exchange relations, but also they tend to favor these films when allocating scarce resources (opening dates and promotion effort). After controlling for the effects of these decisions, films with deeper prior relations to the distributor perform worse at the box office. The results suggest that, rather than benefiting from repeated exchange, distributors overallocate scarce resources to these prior exchange partners, enacting a self-confirming dynamic.
• Niche width revisited: Organizational scope, behavior and performance + tables (with Susan McEvily, U of Pittsburgh, Charlotte Ren, Purdue, and Raja Roy, Tulane; Published: Strategic Management Journal, 27 (2006): 915-936; Topics: ORGECOL) ABSTRACT: Although strategy research typically regards firm scope as a positional characteristic associated with performance differences, we propose that broad contemporary scope also provides insight into the routines that govern firm behavior. To attain broad scope, firms must repeatedly explore outside the boundaries of their current niche. Firms with broad niches therefore operate under a set of routines that repeatedly propel them into new market segments, expanding their niche. These niche expansions, however, involve risky organizational changes, behavior that disadvantages generalists relative to specialists, despite the positional value of broad scope. Empirical analyses of machine tool manufacturers and computer workstation manufacturers support this conjecture: i) generalists introduce new products at a higher than optimal rate, thereby increasing their exit rates; and ii) generalists also more frequently launch new models with novel features or targeted at new consumer segments rather than improving only incrementally on existing products, further accelerating their odds of failure. After adjusting for these behavioral differences, broad niche widths reduce exit rates, suggesting that they provide positional advantages. The paper discusses how this phenomenon may help to explain the diversification and multi-nationality discounts.
• Complexity, networks and knowledge flow (with Jan W. Rivkin, Harvard, and Lee Fleming, Harvard; Published: Research Policy, 35 (2006): 994-1017; Topics: TIM, SOCNET) ABSTRACT: Because knowledge plays an important role in the creation of wealth, economic actors often wish to skew the flow of knowledge in their favor. We ask, when will an actor socially close to the source of some knowledge have the greatest advantage over distant actors in receiving and building on the knowledge? Marrying a social network perspective with a view of knowledge transfer as a search process, we argue that the value of social proximity to the knowledge source depends crucially on the nature of the knowledge at hand. Simple knowledge diffuses equally to close and distant actors because distant recipients with poor connections to the source of the knowledge can compensate for their limited access by means of unaided local search. Complex knowledge resists diffusion even within the social circles in which it originated. With knowledge of moderate complexity, however, high-fidelity transmission along social networks combined with local search allows socially proximate recipients to receive and extend knowledge generated elsewhere, while interdependencies stymie more distant recipients who rely heavily on unaided search. To test this hypothesis, we examine patent data and compare citation rates across proximate and distant actors on three dimensions: (1) the inventor collaboration network; (2) firm membership; (3) and geography. We find robust support for the proposition that socially proximate actors have the greatest advantage over distant actors for knowledge of moderate complexity. We discuss the implications of our findings for the distribution of intra-industry profits, the geographic agglomeration of industries, the design of social networks within firms, and the modularization of technologies.
• The competitive dynamics of vertical integration: Evidence from U.S. motion picture producers, 1912-1970 (with Giacomo Negro, Universita Bocconi; Published: Advances in Strategic Management, 23 (2006): 363-398; 3/15/05; Topics: ORGECOL) ABSTRACT: This article investigates the competitive consequences of vertical integration on organizational performance using a comprehensive dataset of U.S. motion picture production companies, which includes information on their vertical scope and competitive overlaps. Vertical integration appears to change the dynamics of competition in two ways: (i) it buffers the vertically integrated firms from environmental dependence, and (ii) it intensifies competition among non-integrated organizations. In contrast to the existing literature, our results suggest that vertical integration has implications well beyond both the level of the individual transaction and even the internal efficiency of the integrated firm.
• Social networks and the persistence of clusters: Evidence from the computer workstation industry (Published: Clusters, Networks and Innovation (2005), edited by Stefano Breschi and Franco Malerba, New York: Oxford University Press, pp. 297-316; Topics: INDGEO, ENT, ORGECOL, SOCNET) ABSTRACT: Nearly all industries exhibit some degree of clustering. Most explanations to date for the persistence of this geographic concentration have focused on arguing that clustering somehow improves the efficiency of production. This chapter, however, argues that these clusters could persist even in the absence of any benefits to collocation because social networks place severe constraints on who can start a new venture in an industry. Both those most likely to perceive an opportunity for a new firm and those most able to mobilize the resources to start one have strong social connections to industry incumbents. Since these ties rarely extend far in space, entrepreneurial activity in any industry tends to concentrate in regions where firms of a similar type already reside, thereby reinforcing the geographic distribution of production. In addition to delineating the theory, the chapter provides empirical support for this thesis from the computer workstation industry, and discusses why industries might vary in their degree of clustering.
• Research on social networks and the organization of research and development: An introductory essay (with David Waguespack, U of Maryland; Published: Journal of Engineering and Technology Management, 22 (2005): 1-7; Topics: TIM, SOCNET) Introduction to a special issue on social networks and the organization of R&D.
• Handbook of Entrepreneurship: Disciplinary Perspectives (edited with Sharon Alvarez, Ohio State, and Rajshree Agrawal, U of Illinois), Berlin: Springer-Verlag (2005).
• Social networks and entrepreneurship (with Toby E. Stuart, Harvard; Published: Handbook of Entrepreneurship (2005), edited by Rajshree Agrawal, Sharon Alvarez and Olav Sorenson, Berlin: Springer-Verlag, pp. 233-252; Topics: ENT, SOCNET ) Review piece on how sociological research on social networks might inform the study of entrepreneurship.
• Complexity theory (Published: Blackwell Encyclopedic Dictionary of Management: Organizational Behavior (2005), edited by Nigel Nicholson, Pino Audia and Madan Pillutla, Cambridge, MA: Blackwell Publishers, pp. 56-57)
• Science and the diffusion of knowledge (with Lee Fleming, Harvard; Published: Research Policy, 33 (2004): 1615-1634; Topics: TIM, SOCNET) ABSTRACT: Scientists, social scientists and politicians frequently credit basic science with stimulating technologicla innovation, and with it economic growth. Despite a substantial body of research investigating this general relationship, relatively little empirical attention has been given to understanding the mechanisms that might generate this linkage. This paper considers whether more rapid diffusion of knowledge, brought about by the norm of publication, might account for part of this effect. We identify the importance of publication by comparing the patterns of citations from future patents to three groups of focal patents: (i) those that reference scientific (peer-reviewed) publications, (ii) those that reference commercial (non-scientific) publications, and (iii) those that reference neither. Our analyses strongly implicate publication as an important mechanism for accelerating the rate of technologicla innovation: Patents that reference published material, where peer-reviewed or not, receive more citations, primarily because their influence diffuses faster in time and space.
• Social networks, informational complexity and industrial geography (Published: The Role of Labor Mobility and Informal Networks for Knowledge Transfer (2004), edited by Dirk Fornahl, Christian Zellner and David Audretsch, Berlin: Springer-Verlag, pp. 79-96; Topics: INDGEO, TIM, SOCNET) Confirming a speculation from the Sorenson, Rivkin and Fleming paper, "Complexity, networks and knowledge flow," this paper demonstrates that the informational complexity of the technology in an industry can partially account for the degree to which that industry clusters. In particular, industries drawing on highly complex knowledge tend to concentrate in geographic space.
• Science as a map in technological search (with Lee Fleming, Harvard; Published: Strategic Management Journal, 25 (2004): 909-928; Topics: TIM) ABSTRACT: A large body of work argues that scientific research increases the rate of technological advance, and with it economic growth. The precise mechanism through which science accelerates the rate of invention, however, remains an open question. Conceptualizing invention as a combinatorial search process, this paper argues that science alters inventors' search processes, by leading them more directly to useful combinations, eliminating fruitless paths of research, and motivating them to continue even in the face of negative feedback. These mechanisms prove most useful when inventors attempt to combine highly coupled components; therefore, the value of scientific research to invention varies systemattically across applications. Empirical analysis of patent data support this thesis.
• Social networks and industrial geography (Published: Journal of Evolutionary Economics, 13 (2003): 513-527; Topics: INDGEO, SOCNET) ABSTRACT: In many industries, production resides in a small number of highly concentrated regions; for example, several high tech industries cluster in Silicon Valley. Explanations for this phenomenon have focused on how the co-location of firms in an industry might increase the efficiency of production. In contrast, this article argues that industries cluster because entrepreneurs find it difficult to access the information and resources they require when they reside far from the sources of these valuable inputs. Since existing firms often represent the largest pools of these important factors, the current geographic distribution of production palces important constraints on entrepreneurial activity. As a result, new foundings tend o arise in the same areas as existing ones, and hence reproduce the industrial geography. In support of this thesis, this article reviews empirical evidence from the shoe manufacturing and biotechnology industries.
• Geography and strategy (with Joel A.C. Baum, U of Toronto, Advances in Strategic Management, 20 (2003).
• From conception to birth: Opportunity perception and resource mobilization in entrepreneurship (with Jesper B. Sørensen, Stanford; Published: Advances in Strategic Management, 20 (2003): 89-117; Topics: ENT, ORGECOL, INDGEO) ABSTRACT: Studies consistently find regions dense in concentrations of similar firms to be fecund sources of new firms of the same kind. This pattern persists even in industries with negative returns to geographic concentration. Why do these patterns persist? On the one hand, social networks may constrain entrepreneurs' opportunities, making it difficult to mobilize resources in more attractive location. On the other hand, nascent entrepreneurs may systematically misperceive opportunities in such a way as to lead them to continue founding attempts in overcrowded regions. To distinguish between these two processes, we analyze a unique set of data on television stations that contains information on both attempts to start new stations, as well as successful foundings. Our exploratory analysis suggests that nascent entrepreneurs do consistently misinterpret information related to population dynamics. These patterns could easily contribute both to industrial agglomeration and to the fragility of Red Queen dynamics. We discuss the implications of these results both for future research and for public policy.
• Geography and strategy: The strategic management of space and place (with Joel A.C. Baum, U of Toronto; Published: Advances in Strategic Management, 20 (2003): 1-19; Topics: INDGEO) Introduction to edited volume on geography and strategy.
• Asymmetric selection among organizations (with William P. Barnett, Stanford, and Aimee-Noelle Swanson, UCLA; Published: Industrial and Corporate Change, 12 (2003): 673-695; Topics: ORGECOL) ABSTRACT: We discuss the creation of organizations and their survival as distinct selection processes, and consider the significance of their divergence. In particular, to understand the implications of entrepreneurial booms, we propose the possibility of asymmetric selection, where entry selection and exit selection differ from each other in strength. An observed increase in founding rates hence may reveal a decline in the selection threshold for entry—implying lower average fitness among boom-time entrants. When such an expansion occurs, organizations born during these periods of heightened entry should suffer higher failure rates if the fitness threshold for survival remains stable or becomes more stringent. We also discuss other processes that might educe founding waves, and explain the different implications of these accounts for our empirical model. Estimates of the model support our theory of asymmetric selection in two out of three markets using a comprehensive dataset describing organizations in the U.S. computer industry.
• Strategy as quasi-experimentation (Published: Strategic Organization, 1 (2003): 337-343; Topics: ORGLEARN) An essay on the possibility of bringing an organizational learning perspective to strategic management.
• Liquidity events and the geographic distribution of entrepreneurial activity (with Toby E. Stuart, Harvard; Published: Administrative Science Quarterly, 48 (2003): 175-201; Topics: ENT, INDGEO, SOCNET, ORGECOL) ABSTRACT: In this paper, we examine the ecological consequences of intial public offerings (IPOs) and acquisitions, specifically how the spatial distribution of these events influences the location-specific founding rates of new companies. We explore whether relatively small spatial units (metropolitan statistical areas) in close geographic proximity to firms that recently have been acquired or experienced an IPO exhibit high new venture creation rates and whether the magnitudes of these effects depend on regional differences in statutes governing the freedom of employees to move between employers. Count models of biotechnology firm foundings establish three findings: (1) IPOs of organizations located contiguous to or within an MSA accelerate the founding rate within that MSA, (2) acquisitions of biotech firms situated near to or within an MSA accelerate the founding rate within the MSA, but only when the acquirer enters from outside of the biotech industry, and (3) the enforceability of post-employment non-compete covenants, which is determined at the state level, strongly moderates these effects.
• Interdependence and adaptability: Organizational learning and the long-term effect of integration (Published: Management Science, 49 (2003): 446-463; Topics: ORGLEARN, ORGECOL) ABSTRACT: A growing body of research documents the role that organizational learning plays in improving firm performance over time. To date, however, this literature has given limited attention to the effect that the internal structure of the firm can have on generating differences in these learning rates. This paper focuses on the degree to which interdependence—and in particular one structural characteristic that generates interdependence, vertical integration—affects organizational learning. Firms face a trade-off. In stable environments, vertically integrating severely limits the organization's ability to learn by doing because boundedly rational managers find the optimization of operations difficult when making highly interdependent choices. As the volatility of the environment increases though, integration can facilitate learnin-by-doing by buffering activities within the firm from instability in the external environment. Thus, firms with a high degree of interdependence suffer less in these environments. Tests of these hypotheses on the growth and exit rates of computer workstation manufacturers support this thesis.
• The geography of opportunity: Spatial heterogeneity in founding rates and the performance of biotechnology firms (with Toby E. Stuart, Harvard; Published: Research Policy, 32 (2003): 229-253; Topics: INDGEO, ENT, SOCNET, ORGECOL) ABSTRACT: One of the most commonly observed features of the organization of markets is that similar business enterprises cluster in physical space. In this paper, we develop an explanation for firm co-location in high-technology industries that draws upon a relational account of new venture creation. We argue that industries cluster because entrepreneurs find it difficult to leverage the social ties necessary to mobilize essential resources when they reside far from those resources. Therefore, opportunities for high tech entrepreneurship mirror the distribution of critical resources. The same factors that enable high tech entrepreneurship, however, do not necessarily promote firm performance. In the empirical analyses, we investigate the effects of geographic proximity to established biotechnology firms, sources of biotechnology expertise (highly-skilled labor), and venture capitalists on the location-specific founding rates and performance of biotechnology firms. The paper finds that the local conditions that promote new venture creation differ from those that maximize the performance of recently established companies.
• Navigating the technology landscape of innovation (with Lee Fleming, Harvard; Published: Sloan Management Review, 44 (2003): 15-23)
• The Red Queen in organizational creation and development (with William P. Barnett, Stanford; Published: Industrial and Corporate Change, 11 (2002): 289-325; Topics: ORGECOL, ORGLEARN) ABSTRACT: We synthesize organizational learning theory and organizational ecology to predict systematic patterns in the founding and growth of organizations over time. Our central argument is that competition triggers organizational learning, which in turn intensifies competition that again triggers an adaptive response. We modeled this self-exciting dynamic—sometimes referred to as the 'Red Queen' in general evolutionary theory—to explain organizational founding and growth rates among the thousands of retail banks that have operated in Illinois at any time from 1900-1993. We find strong evidence that Red Queen evolution led some organizations to grow quickly and to place strong competitive pressure on rivals. Red Queen evolution also helped establish barriers to entry. However, this same evolutionary process appears to make organizations more susceptible to 'competency traps', ultimately slowing their growth rates and inviting new market entry. Organizations confronted by a widely varying distribution of competitors grow more slowly and are more likely to face new entrants. Overall, the results suggest that processes of organizational creation and growth emerge from ecologies of learning organizations. More generally, we discuss the use of ecological theory and models to study the empirical consequences of organizational learning.
• Interorganizational complexity and computation (Published: Companion to Organizations (2002), edited by Joel A.C. Baum, Oxford: Blackwell Publishers, pp. 664-685) Review piece on the use of complexity theory and computational methods in organizational research.
• The dangers of modularity (with Lee Fleming, Harvard; Published: Harvard Business Review, 79 (2001): 20-21; Topics: TIM) ABSTRACT: By placing a premium on predictability in their product development efforts, companies create a technology landscape that's easier to navigate—but one that may produce fewer true breakthroughs.
• Technology as a complex adaptive system: Evidence from patent data (with Lee Fleming, Harvard; Published: Research Policy, 30 (2001): 1019-1039; Topics: TIM) ABSTRACT: This paper develops a theory of invention by drawing on complex adaptive systems theory. We see invention as a process of recombinant search over technology landscapes. This framing suggests that inventors might face a 'complexity catastrophe' when they attempt to combine highly interdependent technologies. Our empirical analysis of patent citation rates supports this expectation. Our results also suggest, however, that the process of invention differs in important ways from biological evolution. We discuss the implications of these findings for research on technological, evolution, industrial change, and technology strategy.
• Tradeoffs in the organization of production: Multi-unit firms, geographic dispersion and organizational learning (with Pino Audia, UC Berkeley, and Jerald Hage, U of Maryland; Published: Advances in Strategic Management, 18 (2001): 75-105; Topics: ORGLEARN, INDGEO, ORGECOL) ABSTRACT: Firms face a choice in the organization of production. By concentrating production at one site, they can enjoy economies of scale. Or, by dispersing production across multiple facilities, firms can benefit from product-specific efficiencies and enhanced organizational learning. When choosing to organize in multiple units, firms must also decide where to locate these units. Concentrating production geographically can enhance economies of scale and facilitate organizational learning. On the other hand, dispersing facilities might allow the firm to lower transportation costs, reduce risks, and forbear competition. To examine these tradeoffs, we compare the exit rates of single-unit organizations to multiunit organizations and their constituent plants in the U.S. footwear industry between 1940 and 1989. Our results suggest that multunit organizations benefit primarily from enhanced organizational learning, competitive forbearance and the diversification of risk. Nevertheless, these benefits appear to come at the expense of organizational adaptability.
• Finding the right mix: Franchising, organizational learning, and chain performance (with Jesper B. Sørensen, Stanford; Published: Strategic Management Journal, 22 (2001): 713-724; Topics: ORGLEARN, ENT, INDGEO) ABSTRACT: Franchising provides an increasingly important vehicle for entrepreneurial wealth creation and accounts for a large and growing share of business in the retail and service sectors. Chains—which operate in dispersed markets—most frequently use this form of governance. These firms must balance the centralization and standardization required for efficiency with the adaptation needed for success in varied local markets. By adopting an organizational learning perspective, we arge that the mix of company-owned and franchised units affects this balance, thereby influencing chain performance. In particular, the different incentives facing company managers and the entrepreneurs that manage franchises encourage distinct patterns of organizational learning. Franchised establishments provide better opportunities for the firm to learn through experimentation; however, companies find it easier to diffuse this information and enforce standards through their company-owned units. Analyses of franchised restaurant chains in the United States provide empirical evidence of this trade-off.
• Syndication networks and the spatial distribution of venture capital investment (with Toby E. Stuart, Harvard; Published: American Journal of Sociology, 106 (2001): 1546-1588; Topics: SOCNET, ENT, INDGEO) ABSTRACT: Sociological investigations of economic exchange reveal how institutions and social structures shape transaction patterns among economic actors. This article explores how interfirm networks in the U.S. venture capital (VC) market affect spatial patterns of exchange. Evidence suggests that information about potential investment opportunities generally circulates within geographic and industry spaces. In turn, the circumscribed flow of information within these spaces contributes to the geographic- and industry-localization of VC investments. Empirical analyses demonstrate that the social networks in the VC community—built up through the industry's extensive use of syndicated investing—diffuse information across boundaries and therefore expand the spatial radius of exchange. Venture capitalists that build axial positions in the industry's coinvestment network invest more frequently in spatially distant companies. Thus, variation in actors' positioning within the structure of the market appears to differentiate market participants' ability to overcome boundaries that otherwise would curtail exchange.
• The social structure of entrepreneurial activity: Geographic concentration of footwear production in the U.S., 1940-1989 (with Pino Audia, UC Berkeley; Published: American Journal of Sociology, 106 (2000): 424-461; Topics: INDGEO, ENT, ORGECOL, SOCNET) ABSTRACT: Nearly all industries exhibit geographic concentration. Most theories of the location of industry explain the persistence of these production centers as the result of economic efficiency. This article argues instead that heterogeneity in entrepreneurial opportunities, rather than differential performance, maintains geographic concentration. Entrepreneurs need exposure to existing organizations in the industry to acquire tacit knowledge, obtain important social ties, and build self-confidence. Thus, the current geographic distribution of production places important constraints on entrepreneurial activity. Due to these constraints, new foundings tend to reify the existing geographic distribution of production. Empirical evidence from the shoe industry supports this thesis.
• The effect of population level learning on market entry: The American automobile industry (Published: Social Science Research, 29 (2000): 307-326; Topics: ORGECOL) ABSTRACT: Is starting a new business more difficult in an emerging industry or in a mature industry? The density dependent model of organizational ecology maintains that the industry's age is irrelevant; the number of firms currently occupying the market niche determines the industry's competitive structure. Nevertheless, population-level learning predicts historical asymmetry in entry barriers. Over time, the average fitness of the surviving population members increases, making market entry more difficult. At the same time, surviving organizations become increasingly spread out across the resource space, providing niches that new firms can exploit. Thus, industry-level evolution systematically alters the environment both existing organizations and new firms face. I offer a new specification for the founding rate model that synthesizes ecological and evolutionary perspectives. Tests of this model in the American automobile industry support its merit.
• Letting the market work for you: An evolutionary perspective on product strategy (Published: Strategic Management Journal, 21 (2000): 577-592; Topics: ORGLEARN, ORGECOL) ABSTRACT: Managers must choose to allocate scarce resources either to the maintenance of a range of products tailored to heterogenous consumer preferences or to the efficient production of a small number of products. In addition, managers must choose the degree to which they periodically cull the product line. Vigorous selection removes poor performers from the product line, but this action simultaneously impairs the firm's ability to monitor changes in consumer preferences. Empirical evidence from the computer workstation industry reveals that the ideal choice of product variety depends on the competitive ecology of the industry. Product variety becomes less valuable as the total number of products on the market increases, but it increases in value as uncertainty makes the accurate prediction of demand difficult.