This chapter introduces network agency theory and outlines the book. The central idea is that individual and organizational interests about networking can come out of alignment such that the network ties that individuals form are organizationally suboptimal, thereby reducing the organization's capacity to respond to disruptions, to innovate, and to change. The theory explains how network agency problems emerge, the role of digital technology adoption by organizations in amplifying this misalignment, and the capacity of managers and the function of the executive to resolve agency problems and mitigate their impact.
This chapter describes how and why organizational and individual networking interests become misaligned in the formation of relationships, the density of the resulting networks, and the impact of too many ties on organizational outcomes. The falling cost of networking with the increased use of digital technologies is a key factor in the proliferation of network agency problems as it shifts incentives for individuals and enables them to form too many ties.
This chapter focuses on network agency problems related to the quality of relationships that individuals form, noting that individuals often have incentives to create weaker ties than are necessary to accomplish organizational goals. Digital technologies that enable employees to maintain vast networks of weak ties amplify this effect. Employee motivation to form weak ties is related to the firm specificity of strong ties in organizations. Although weak ties are often associated with heterogeneous resource access in markets, strong ties may be necessary to mobilize the diverse knowledge and resources necessary to achieve heterogeneous objectives in organizational contexts.
This chapter details network agency problems related to prominent network positions, using brokerage relationships that span structural holes as a primary example. Misaligned networking interests emanating from entrenched brokerage positions and ossified bridges are explored. Brokers as a cartel are considered, with the notion of brokerage monopoly developed to explain anticompetitive networking behavior at the group level. Contrary to some expectations, digital technologies can be used to solidify brokerage monopolies and sustain their rents.
This chapter examines network agency problems related to the distribution of social capital in organizational networks. It focuses primarily on the degree distribution of ties, noting that networks often converge to a hub-and-spoke network in which social capital is unequally distributed, with a few hubs possessing far more ties than the average node. Status dynamics lead to social capital inequality in networks, which has an overall negative impact on high-quality collaboration in organizations. Digital technologies are shown to accelerate these dynamics as hubs disproportionately use these tools to cement their advantages.
This chapter summarizes key network mechanisms underlying the impact of four network agency problems described in previous chapters, the misaligned incentives and social capital inducements that are their antecedent causes, and the misaligned political content that misaligned social capital often supports in organizations. The persistence of problems is related to the failure of interventions directed at specific network structures and networking behaviors to fundamentally change the organizational incentives and opportunities underlying misaligned networking. Digital technologies are shown to often support resistance to intervention aimed at resolving network agency problems more than these interventions themselves.
This chapter describes how executives can have a broader effect on organization-wide changes that mitigate the development and impact of network agency problems. The use of managerial digital technologies such as people analytics is discussed, with the rampant adoption of remote-work digital technologies used as a natural experiment to better understand their impact. The development of strategic social capital practices to complement emerging strategic human capital practices is sketched throughout. A new function of the executive is the creation of organizational environments that mitigate network agency problems.
This chapter discusses the implications of network agency theory for organization design and boundary choices in network governance. Network agency issues underlying classic design problems like silos, conflicting coalitions, and inadequate matrix structures are described. Network agency problems are developed as a novel theory of the firm. That is, firms exist and thrive because they better mitigate misalignments in networking incentives than some market forms.
This chapter explores the implications of network agency theory for different types of organizations as they evolve over the life cycle—namely, entrepreneurial and established organizations. Heterogeneity in agency costs related to bonding, monitoring, and intervention is used to explain typical organizational life-cycle differences. Network agency ideas are used to explain fundamental differences in organizational forms for innovation. These forms are closed innovation leveraging corporate structures and open innovation as in open-source communities.
This chapter outlines a research agenda for network agency theory, including central questions to be answered about behavioral antecedents of network agency theory and the impact of misalignment between individual and organizational networking interests. I argue for the most fruitful application of inductive research through case methods, simulation and analytical modeling, and experimentation.