What’s Alter Got to Do with It? A Consideration of Network Content and the Social Ties That Provide It

Abstract

The strength of weak ties is among the most important theories in the social sciences. One paradoxical element of the theory has been widely understood and valued—that weak ties connect disparate regions of social structure. Less appreciated, however, is the arguably more paradoxical implication that someone only weakly connected to another would provide value beyond that which is provided by the recipient’s (ego’s) strong ties. Once this paradoxical feature of the theory and associated empirical literatures is acknowledged, the interests of the resource provider (alter) demand consideration. To do so faithfully requires first, the concession that different types of content can be transmitted across ties (e.g., financial, informational, physical, social) and content varies in important ways that relate to alter’s interests and concerns. This article considers social network content and the strength of ties that provide different forms of it. The case of startups is used as a fruitful strategic research site because of the varied resources required at various stages of the startup process. Novel insights are proposed concerning what content flows across different types of social relationships in the context of “nascent” entrepreneurship. Examples from other contexts such as job search are also discussed to exemplify scope. Importantly, this article takes the perspective of the resource provider, alter, and considers her concerns about trust, misuse, and unauthorized transfer in dyadic exchange. In the process, a second paradoxical feature of the theory is identified and theorized, which usefully reveals the boundaries of exchange.

Keywords

social networks content exchange alter’s interests entrepreneurship

Social networks are an important area of study in sociology, computer science, epidemiology, and economics (e.g., Burt 1992; Easley and Kleinberg 2010; Emirbayer 1997; Emirbayer and Goodwin 1994; Erikson 2013; Gulati and Singh 1998; Jackson 2008, 2014; Klovdahl 1985; May and Anderson 1987; Uzzi 1997, 1999). One of the seminal and central findings in the literature concerns the paradoxical “strength of weak ties” (Granovetter 1973, 1974). As is now well and widely known, Granovetter’s path-breaking work found that recently employed professional, technical, and managerial workers were more likely to find work through contacts that can be characterized as acquaintances (or weak ties)—individuals one does not see or speak with often—rather than close connections. According to the theory, the latter should be more motivated to help an individual find work, whereas the former should be comparatively better able to afford access to novel information, which is regarded as more important than the prospective resource provider’s motivation. This premise is one paradoxical part of the theory—that a comparatively tenuous tie can be more important than a robust one for an important outcome.

I argue here that this is not the only paradoxical aspect of the theory. Starting with Granovetter to the present day, studies of relational networks have focused nearly exclusively on the advantages ego derives from her network connections or position (e.g., Burt 1992; Granovetter 1973, 1974, 1983). The interests and concerns of the resource provider, alter, are largely ignored.¹ Ego is thus the star of relational stories, and alter is an unnamed actor whose interests and motivations are not explored. But alter’s concerns and interests are a key part of any story entailing exchange (Emerson 1962; Homans 1958). Indeed, what makes the original strength of weak ties theory paradoxical and compelling is not merely that someone is inclined to hear something new or novel from someone she does not see very often but also that another actor is willing to provide substantial value to someone she’s not especially close with. It is this possibility that contradicts economistic arguments rooted in self-interested behavior (Blau 1964).

In addition, although information flow has been the primary focus of most network studies, a variety of other task or ends-enabling content (e.g., financial, physical, reputational resources) is transferred across, or refracted by, network ties in many settings of sociological, managerial, economic, or organizational interest (Burt 2008; DiMaggio 2011; Elfring and Hulsink 2003; Erickson 2014; Jack 2010; McLean 2017; Pachucki and Breiger 2010; Podolny 2001; e.g., Aral and Van Alstyne 2008; Greenberg and Fernandez 2016; Podolny and Baron 1997; Yakubovich 2005).

That varied content can be conveyed across different network ties substantially complicates analysis of relational effects, particularly when coupled with a neglect of alter’s concerns about the transfer of this varied content. Given the heterogeneity in network content, it is far from obvious that information is the resource linking network mechanisms to outcomes of interest in all or even most contexts of social interest (Burt 2008; Lin 2001; Salancik 1995). For example, in entrepreneurship—a phenomenon of substantial importance given its implications for economic development and inequality (Baumol, Litan, and Schramm 2007; Cagetti and De Nardi 2006; Steinmetz and Wright 1989)—a heterogeneous network may be correlated with starting a business because it affords diversity of information (e.g., Davidsson and Honig 2003). Such a network may also be correlated with access to heterogeneous resources (e.g., physical capital, financial capital) provided by different types of alters whose relationships with ego have different meanings (Birley 1985; Bosma et al. 2004; Kim, Longest, and Aldrich 2013; see also Bourdieu 1983; Fuhse 2009).

Once one acknowledges that different forms and quality of content are likely transferred across different ties, sociologically meaningful concerns are exposed for inquiry and explanation. First is the observation that not all content is of equal cost and value to the content provider (Reagans and Zuckerman 2008). In terms of quality, for example, not all information is equally useful and valuable. Thus, a weak tie (alter) might provide an entrepreneur (ego) with information that is novel from ego’s perspective but mundane from alter’s—something she tells everyone or tells everyone close to her (strong ties) first as a “priority rule,” which holds in other contexts such as job search as well (Boorman 1975; Kim and Fernandez 2016; Marin 2012). However, if the information is of high perceived value from alter’s perspective, it stands to reason she is unlikely to share it with someone she does not know well and thus is unlikely to trust or have reciprocal transactions with (see generally Blau 1964; Molm, Schaefer, and Collett 2009). Ignoring network content and alter’s concerns obscures these considerations.

This article thus attends to social network content and the network ties that provide different forms of it. Contrary to prior work, focus is devoted here to alter’s concerns rather than ego’s performance outcomes. The setting of startups is employed as a strategic research site in the Mertonian (Merton 1987) sense because of the varied resources required in the process of converting a perceived novel idea into a commercial enterprise. Attention is devoted to relational embeddedness—that is, the nature of dyadic ties rather than to structural embeddedness or network configurations (Moran 2005; Nahapiet and Ghoshal 1998; Simsek, Lubatkin, and Floyd 2003). This focus is appropriate because the latter do not relate directly to the transmission of all forms of network content and network advantage is often derived from first-order connections (Burt 2007).

The argument developed in the following is that contrary to conventional expectations, the primary value afforded by weak ties vis-à-vis strong ties in a host of settings is not valuable information or introductions (i.e., resources that can be provided in theory to many individuals but, once made, cannot be controlled efficaciously by alter). Rather, a curvilinear relationship exists between tie strength and the transmission of varied network content as a function of the (perceived) ease in preventing misuse and unauthorized transfer of the content and its finiteness, which in turn has two facets that may moderate these effects.²

When these related dimensions are theoretically attended to, it follows for two reasons that weak ties are less likely than strong ties to provide valuable finite resources such as financial capital or generally nonrival resources such as information or introductions when they lead to finite ends rather than skill-based human capital, which is human capital that is embedded in an individual and nontransferable, in and of itself, as is the case of information. (I define terms and elaborate on this distinction in the following.) First, in relative terms, norms and self-interest incent the transfer of resources that are finite to those relationally close rather than distant. Second, uncertainty about ego’s trustworthiness and alter’s fear of resource misuse and unauthorized transfer diminish inclination to provide theoretically nonfinite resources that can be difficult to define, delineate, document, and thus protect via relational mechanisms or formal contracts.

This article considers this argument in the context of “nascent” entrepreneurship and in particular, dyads including founders and their helpers who provide resources without an equity stake in the business. This restriction is imposed so that transfers are not rooted in common economic interest (Aldrich 2005; Reynolds and Curtin 2007; Ruef, Aldrich, and Carter 2003). Examples from other settings are also offered throughout this article to suggest broader applicability. I attempt to enrich our theoretical understating of why varied resources are transmitted across different types of social relationships by offering this theory and to demonstrate the utility of considering relationships and the nature of the resources conveyed across them in a unified framework that should be of more general sociological interest. This follows because prior work has focused primarily on the informational opportunities afforded ego by specific types of relationships without sustained consideration of the concerns alter may have in providing value of varied kind. Once alter is “brought back in” to the story, distinct predictions can be made concerning content in social or economic exchange in varied institutional contexts. In the process of this exposition, I also provide a distinction between information and skill-based human capital as well as information that alter believes is clearly and proximally linked to finite outcomes as opposed to information that is not regarded as clearly and proximally leading to finite outcomes.³ Context is presented in the next section linking network ties, varied content, and entrepreneurship to situate the argument.

Strategic Research Site: The Sociology Of Entrepreneurship

Networks pervade the study and practice of entrepreneurship. Research in the sociology of entrepreneurship has argued that the quality of dyadic ties (relational embeddedness) can influence business startups in several ways at different stages of the founding process (Aldrich and Kim 2007; Bhagavatula et al. 2010; Hoang and Antoncic 2003; Sorenson and Stuart 2008; Stuart, Hoang, and Hybels 1999; Stuart and Sorenson 2005; Thornton 1999). Broad streams of research include those concerning: the transmission of entrepreneurial values and preferences from parents to children (Aldrich, Renzulli, and Langton 1998; Greenberg 2014; Halaby 2003; Kohn, Slomczynski, and Schoenbach 1986; Miller and Swanson 1958; Sørensen 2007; see more generally McLean 2017; Pachucki and Breiger 2010); how one’s prior place of employment, co-workers, or peers influence subsequent attempts at and performance in business ownership (e.g., Burton, Sørensen, and Beckman 2002; Gompers, Lerner, and Scharfstein 2005; Lerner and Malmendier 2013; Nanda and Sørensen 2010; Phillips 2002); and how network ties and structures facilitate the acquisition of information or legitimacy or influence funding decisions (Aldrich and Fiol 1994; Renzulli, Aldrich, and Moody 2000; Sorenson and Stuart 2001; Stuart et al. 1999; Stuart and Sorenson 2003). A host of other resources may also be transmitted across networks including human capital (e.g., Laband and Lentz 1983; Lentz and Laband 1990), emotional support, consolation, and counsel (see generally Ibarra 1993).

Viewed from a particular perspective, entrepreneurship is inherently a network phenomenon (Burt 1992) insofar as it entails novel combinations of ideas and/or commodities. Schumpeter (1934) argued that these combinations result in new: goods/quality of goods, methods of production, markets, sources of supply, and industry organization (see also Swedberg 1991).⁴

This perspective, in addition to others such as entrepreneurship as arbitrage (e.g., Kirzner 1979), implies that weak ties should be valuable (Granovetter 1973), numerous structural holes (Burt 1992, 2004), which afford information advantages that facilitate creativity, innovation, and entrepreneurship (e.g., Ruef 2002). This mechanism entails identifying markets or network clusters where individual factors (including information assets) or factor costs are known and then acquiring, recombining, reprocessing, and/or simply reselling them in markets or clusters where these same factors are unknown or their combined value is unclear.

Consistent with these arguments, empirical research has demonstrated that individuals with bridging ties or heterogeneous discussion networks are more likely to advance in the startup process and actually open a business (Davidsson and Honig 2003; Greve and Salaff 2003; Renzulli et al. 2000). However, in the majority of studies that investigate the link between networks and startup founding processes and outcomes network content is limited to information by virtue of study design or theoretical focus. The quality and nature of the information itself has rarely been directly measured, which remains a more general issue in network research as it is analytically difficult to measure all the content conveyed across ties. Whether an exchange is primarily social or economic in nature also often goes unmeasured (Blau 1964) and must be presumed based on the nature of the tie and context. Thus, to the extent that varied discussion networks are also networks that afford access to heterogeneous resources more generally (e.g., physical or financial capital) and such resources (individually or combined) are the proximate causes of outcomes, incorrect inferences may be drawn about social networks and entrepreneurial outcomes.

Another line of entrepreneurship research concerns the parent-progeny occupational correlation, which can be construed as a deep dive into a particular strong-tie relationship and the content transferred across it. Prior research has consistently shown that the children of the self-employed are more likely to become self-employed themselves (Dunn and Holtz-Eakin 2000; Hout and Rosen 2000; Lentz and Laband 1990). However, what content flows across this tie that explains the association is still an unsettled question (Aldrich et al. 1998; Greenberg 2014; Sørensen 2007).

Economists studying the intergenerational correlation have focused on the transfer of tangible assets such as financial capital or specific variants of human capital (e.g., Dunn and Holtz-Eakin 2000; Lentz and Laband 1990). Sociological interpretations of the correlation have focused on the transfer of information or preferences and values (Carroll and Mosakowski 1987; Halaby 2003; Kohn, Slomczynski, and Schoenbach 1986; Miller and Swanson 1958). Some attempts have been made to adjudicate among these different mechanisms (e.g., Aldrich et al. 1998; Greenberg 2014; Sørensen 2007). However, data limitations make this a difficult task as indirect measurement strategies are used to extrapolate tie content. Thus, in the intergenerational context like others, the content conveyed across networks that explains the intergenerational correlation in parent-progeny self-employment is unclear.

The preceding sections highlight that network ties vary in kind and strength as well as the content they can convey. Given variation in the type of content that flows through ties, it is important to determine what content likely flows across which types of ties as well as to whom and why or why not. The following sections consider this question in light of the characteristics of varied network content (particularly the finiteness and thus rivalry and excludability of the specific resources) transmitted in entrepreneurship and the resource provider’s (alter’s) concerns about misuse and governance failures (Schrank and Whitford 2011).

Relational Trust And Content Finiteness Dictate What Is Transmitted Across Different Types Of Network Ties

Why should we expect different types of content to flow across different types of network ties? Among the classic explanations is variation in the nature and duration of social relationships and the extent to which they facilitate trust (Coleman 1990). The relative finiteness of a resource—and by implication its rivalry and excludability—is a related consideration as it pertains to (fears of) misuse and unauthorized transfer, which logic dictates is why trust matters in the first place (Olson 1965; Romer 1990; Samuelson 1954).

Relational trust

Relationships between strangers entail additional costs relative to relationships between or among friends or family members. Strangers are less likely to have cognitive trust in one another’s ability or willingness to complete tasks agreed to absent a track record working together (Chua, Ingram, and Morris 2008; cf. Stinchcombe 1965). Conversely, stronger tied relationships are associated with benevolence and competence-based trust (Levin and Cross 2004). Strangers may also have less incentive to refrain from acting strategically and shirking, as is often the case in a one-shot prisoner’s dilemma or in an anonymous spot market (see generally Coleman 1990). Conducting exchange transactions within existing social relationships helps ameliorate this uncertainty or risk (Granovetter 1985).

For example, in a study of the use of network ties in the exchange of consumer goods using 1996 GSS data, DiMaggio and Louch (1998) found that respondents preferred to use social networks when purchasing goods such as a car or home. It is worth noting that these infrequently traded goods also happen to be finite and rival and excludable (e.g., a house). An interesting finding of this article is that individuals prefer to use social networks when they are the buyer (49.7 percent) of, for example, a car rather than the seller (18.5 percent). By contrast, 31 percent of respondents expressed a preference for selling a car to a stranger compared with 20.6 percent who prefer to purchase a car from a stranger. Buyers of these respective products are also more likely to be satisfied with their purchases. The motivations underlying the use of networks in consumer transactions thus appear to be strategic and asymmetric: Individuals prefer to benefit from greater trust and social obligations when purchasing goods by socially embedding transactions. However, they prefer to minimize the extent to which these same forces bind when selling similar goods. Hence, it is evident that trust matters in exchange and that individuals are mindful of social structures and associated monitoring, obligations, and potential sanctioning when considering exchange partners. But trust is only part of the story. Content is also key as preferences and action vary based on its nature.

Content finiteness

When resources are finite, they may be transferred to individuals closer to the provider than others for a second reason: People are more likely to provide those relationally close with them access to quantitatively more and more scarce resources than those further removed and certainly more than to strangers (see e.g., Healy 2004; Schoeni and Ross 2005; Simmons, Klein, and Simmons 1977). Research in entrepreneurship also supports the hypothesis that family is a frequent source of funding (Zimmer and Aldrich 1987). Parents often engage in such resource transfers with little expectation of receiving resources of equal or greater value in return (Logan and Spitze 1996); that is, parents are often altruistic with respect to their children (Becker 1991; but see Altonji, Hayashi, and Kotlikoff 1997).⁵

When dyadic history and affective bonds are absent, rational belief that finite resources will not be misused or transferred without consent can be fostered by formal and informal contracts such as those pertaining to employment (Baker, Gibbons, and Murphy 2002; see also Canales and Greenberg 2015). Stinchcombe (1965) observed as much in his famous liability of newness thesis; that is, that contracts and institutional structures that help clarify and specify expectations, remedial rights, and responsibilities can foster and maintain a belief that value provided will be duly remunerated. However, such a belief hinges on the expectation that what value is afforded can be reasonably defined, delineated, or demarcated, along with its provenance (see generally Bolton and Dewatripont 2005). Informal and formal contracts are better suited to protecting interests associated with content with clear boundaries whose provenance can be clearly established.

Interestingly, this point applies to the unlikely communitarian context of academia. As Merton (1988:620) noted, academia creates a paradoxical institutional environment in which “private property is established by giving it away.” He keenly notes, however, that this is preferably done in “public print of articles, monograms, and books that enter archives.” In so doing, provenance and precedence of some bounded idea are claimed despite the general difficulty of sharply defining boundaries of something intangible.

The basic proposition of this article is thus that the nature of the relationship linking the resource provider and founder is shaped by the nature of their social connection, the ease with which misuse and unauthorized transfer of the content transmitted across the relationship can be—and thus is perceived to be—preventable and, concomitantly, content finiteness. The content’s degree of rivalry and excludability underlie these considerations. The stronger the tie in relative terms, the more likely the resource provider trusts that the founder will not misuse or transfer the content without consent. Moreover, the more finite the resource, the more likely one is to provide it to one affectively close. By this logic, weak ties and especially strangers are less likely, on a relative basis, to primarily provide information leading to rival ends or finite resources such as financial capital. What weak ties are comparatively more inclined to provide is skill-based human capital such as training or specific services such as legal assistance the scope and provenance of which can be defined more easily yet are not finite in nature. When weak ties do provide information, it is likely to lead to ends the provider perceives as nonfinite. This logic is fleshed out in the following section.

Network Content More Likely Transmitted By “Strong” Rather Than “Weak” Ties

Information, trust, and fear of misuse and unauthorized transfer

As noted previously, the content generally presumed to flow across networks in entrepreneurship specifically and in strategic and organization management more generally is information (e.g., Burt 2008; Zaheer, Gulati, and Nohria 2000). Moreover, prior research beginning with Granovetter (1973, 1983) has presumed that weak bridging ties are particularly important in conveying nonredundant information (see also Burt 1992; Greenberg and Fernandez 2016).

Information is generally regarded as nonrival because its marginal cost approaches zero and the usage of that information by an additional individual does not prevent its usage by others (Romer 1994; Varian 1998). Thomas Jefferson eloquently described this feature of ideas as well in an 1813 letter to Isaac McPherson.⁶ Open source code is a modern case in point (von Hippel and von Krogh 2003), as is academic work-product.

In addition to near zero marginal costs and potential simultaneous usage, once information is stated, it is difficult to exclude others from accessing and conveying it (Bessen and Meurer 2008). That is, the provider of information has limited, if any, control or residual rights over its usage and diffusion once conveyed in most contexts. This creates a host of problems for alter to the extent that she fears her information will be used in ways she does not sanction with limited odds of favorable recourse. Nobel Laureate Kenneth Arrow ([1962] 2002:171; emphasis added) expressed this thusly:

With suitable legal measures, information may become an appropriable commodity. Then the monopoly power can indeed be exerted. However, no amount of legal protection can make a thoroughly appropriable commodity of something so intangible as information. The very use of the information in any productive way is bound to reveal it, at least in part. Mobility of personnel among firms provides a way of spreading information. Legally imposed property rights can provide only a partial barrier, since there are obviously enormous difficulties in defining in any sharp way an item of information and differentiating it from other similar-sounding items.

Intellectual property law is concerned with defining what information is deemed sufficiently novel to merit legal protection as well as more fundamentally what types of information warrant different protective scope and form in the first place (see e.g., Wagner 2003). However, as noted by Arrow ([1962] 2002), there are enormous challenges in crisply defining the bounds of information, particularly as it is often recombined in various ways or deployed in a different context. Hence, information entails public-goods features (Varian 1998).

It should be noted that the individual possessing information may be concerned about its misuse and unauthorized transfer for reputational reasons as well. This is particularly true if, in principle, only a finite set of individuals can proximally benefit from the resource, as is likely the case in, for example, job search. More precisely, while information qua information is generally nonrival, the ends or outputs to which information may be brought to bear may be rival, excludable, and competitive depending on the nature of the game at hand. Information about a single job opening is a case in point. Although the marginal cost of providing information about the job in se is minimal—particularly via modern digital technologies (see e.g., Shapiro and Varian 1999; Small 2013; Varian, Farrell, and Shapiro 2004)⁷—the end to which this information leads can be rival (Whitmeyer 2007).⁸ And those ends can be used to make inferences about alter or even her community, with attendant reciprocal feedback loops.

For example, if one provides information about employment opportunities to all members of some group to which she belongs without thoughtful consideration of applicant quality, the end result might be a pool of applicants that reflects poorly on other co-group members, including the original source of the information even if the source cannot necessarily be traced directly to the applicants (on this mechanism, see Bashi 2007).

A similar process could occur in venture capital. Consider a scenario whereby a venture capitalist (VC) tells a nonselected (on quality) group of aspiring entrepreneurs about an exciting business opportunity he perceives. In turn, this group seeks VC funding from various VC firms in the local community. As these aspiring entrepreneurs are not selected on quality—and let’s assume further they are of demonstrably low quality—the VCs continue to hear pitches concerning this same underlying business idea that are poorly articulated and substantiated. The VCs will adjudge the quality of those pursuing this idea unfavorably. After hearing many poorly reasoned and supported pitches about the idea, they may update their initial evaluation of the idea as well.

This distinct mechanism is subtle yet important. It implies that a member of a group or community may withhold information about an opportunity—not just an introduction or referral as in Smith (2005)—to ensure that those who pursue the opportunity reflect well on one’s group or community, not just the source of the introduction or referral. This discussion implies that alter’s beliefs about the finiteness of the ends to which information clearly and proximally lead is likely an exacerbating or mitigating factor (statistical moderation) when considering whether to convey the information. The more finite (and rival) the perceived ends to which the information is clearly and proximally linked, the more likely it is to be conveyed to those one is strongly rather than weakly connected to, net of other factors.⁹

The causal clarity and proximity linking information → ends is important. In job search, the linkage can be quite clear and the causal chain only a few links in length. In other settings, the distance may be longer and more ambiguous. Consider, for example, a senior academic star discussing her ideas, and thus providing information, about important lacunae in the literature she has helped develop. Her information and ideas are reasonably regarded as nonrival and nonexcludable. Building on those ideas—or answering them—may, however, lead to desirable publications (the space for which is finite in some sense) and which in turn may lead to an even more finite position in the social structure of the discipline (see e.g., White 1981). In contrast with the labor market example, the causal model implied in this case is far more ambiguous with distal connections between the nonrival information and rival ends. Hence, the perceived clarity and proximity between the information in the causal chain moderates this relationship.

In summary, when one considers the general inability to exclude others from the benefits of information once revealed and the relative difficulty precluding misuse via (relational) contracting, we should observe that stronger rather than weaker ties are the primary media for valuable information that is clearly and proximally linked to finite ends in entrepreneurship between an individual helping the business without an equity stake and a founder (see generally Carpenter, Esterling, and Lazer 2003; Krackhardt 1992; see also Centola and Macy 2007 regarding complex contagions). As noted in the introduction, such a priority rule also applies to other settings such as job search insofar as information about desirable, finite opportunities are likely first offered to those relationally close rather than distant, all else equal. By contrast, in both settings and others, nonrival information that does not clearly and proximally lead to a finite end is conveyed more freely by weak ties. In job search, this may be fairly generic (from alter’s perspective) information about what a specific firm is like to work for (Greenberg and Fernandez 2016). In entrepreneurship, it may be information about what a specific VC firm is like to work with. In both cases, the information is nonrival and does not clearly or proximally lead to a finite end. It may also be regarded as mundane from alter’s perspective but—due to information asymmetries in network structures—may be new and novel from ego’s perspective and thus quite valuable to him or her in job search (see e.g., Greenberg and Fernandez 2016).

Introductions and referrals

Introductions are a fundamental way in which networks develop. They are an important means of finding work (Bashi 2007; Granovetter 1973; Marin 2012; Smith 2005) and the development of strategic alliances among firms (Zaheer et al. 2000). Individuals are thus often selective in terms of whom they introduce and refer in labor markets (Marin 2012; Smith 2005; Smith and Young 2017) because it may serve as a basis for inferences about the trustworthiness, judgment, values, or traits of the introducer or referrer as well as the groups or communities to which they both belong (Bashi 2007).

Referrals and introductions are similar but not necessarily the same. Both exhibit excludability. Referrals also entail rivalry whereas introductions may or may not depend on contextual factors. First, the introducer or referrer gets to choose whom to introduce or refer to others (thus they are excludable). From the perspective of the introducer or referrer, offering one or the other is, however, not necessarily of equal cost; both differ from information or advice. One can, for example, provide many with the same information about an employment or perceived business opportunity. A graduate student at a professional meeting may tell many other graduate students about a potential job or business opportunity in his department at little cost to himself. A venture capitalist might tell all whom she encounters about her belief in the need for a solution to a perceived market problem. Once explicated, those with the information can in turn convey it or act on it at their discretion. Timing may be a critical factor in deriving value from information in some situations (Burt 1992).¹⁰ Broadly, then, the extent to which this is true is likely a function of the rules governing resource allocation, which include the extent to which the end benefits are finite and rival. Notwithstanding these issues, the dissemination of this information does not necessarily entail direct and immediate costs to the provider above those relating to the expenditure of time.

Providing an introduction or referral, however, can entail costs to the introducer or referrer in terms of time, reputation, and status (Smith 2005), and the logics underlying such introductions may vary as well (Smith and Young 2017). Individuals are thus often selective and thoughtful in terms of whom they introduce and especially refer or sponsor because it may serve as a basis for inferences about the trustworthiness, judgment, hard-to-observe traits, or values of the introducer or referrer (see more generally Kulik, Bainbridge, and Cregan 2008). The first two inferences are likely drawn based on performance, whereas extrapolation of hard-to-observe values or traits is based on a homophily assumption (Gompers, Huang, and Wang 2017; Greenberg and Mollick 2017; McPherson, Smith-Lovin, and Cook 2001). In turn, the introducer or referrer is likely conscious of this fact to some degree because of its implications for her reputation (Smith 2005). As vividly described by Bashi (2007), referrers (hubs in her account) in the West Indian communities of New York and London can also be mindful of how those referred impact the reputation of one’s entire community as well. These reputational concerns stem from the two sources noted and reduce the odds of referring someone alter has comparatively less information about and trust in.¹¹

Introductions and referrals can in turn be distinguished as varying shades of gray: An introduction may or may not come with an explicit warrant of quality by the introducer. In its simplest form, an introduction is simply a presentation of one person to another. For example, an entrepreneur walking down the street with a friend might pass her venture capitalist. Social norms and etiquette (and possibly self-interest) dictate the entrepreneur say hello to her venture capitalist and introduce her friend as well if the interaction is more than a couple of seconds or minutes. This social interaction does not, however, necessarily entail any direct warrant in the qualities or attributes of the friend by the funded founder. (That is not to say that the VC will not make any inferences, however.)

When introducing A to C does not preclude also introducing B or D to C as well, introductions can be considered nonrival. A referral, on the other hand, implies a recommendation or endorsement in the quality of the person referred. Thus, an introduction becomes a referral when the introducer also provides some positive statements or signals on behalf of the referred. A distinguished senior faculty member may, for example, hold court at an academic conference and introduce all with whom she is speaking to one another—even if the circle includes individuals she just met or does not know very well. However, if she were to suggest to Professor A that he should meet with her student, b, which is doing wonderful work on a topic of common interest, it would constitute a referral. In turn—and in time—the evaluator will consider how accurately or prescient Professor A was in his evaluation of student b. If, for example, the professor spoke in unwarranted superlatives sans justification—or he proclaims every one of his students the “next big thing”—the discriminating value of his referrals will diminish, as may others’ assessments of his judgment, taste, or probity.

The same social process is evident when a high-status investor or serial entrepreneur refers someone to other investors (Stuart and Sorenson 2005). A referral from an esteemed or respected source is valuable (see e.g., Yakubovich and Lup 2006), excludable, and rival. This last point follows because if a referrer vouches for the quality of all she introduces the discriminating value of her opinion diminishes, as noted previously. Because weak ties have less information and knowledge about alters and because they have less incentive to provide them access to a valued good that is generally more difficult to protect via (relational) contracts, they should be less likely to provide such information and valuable referrals relative to introductions or valuable information relative to referrals. Evidence consistent with this point is provided by Fernandez, Castilla, and Moore (2000), who found that applicants with a network connection did not have better information about what a company was looking for in applicants or information about when the company was in particular need of applicants (i.e., periods in the business cycle when the odds of being hired would be greater).

Financial capital and physical capital and consideration of finiteness

Financial capital and physical capital such as equipment, a building, or land are archetypical finite, rival, and excludable resources (see e.g., Bessen and Meurer 2008). The boundaries of these assets are clearly definable, recognizable, and thus more easily legally defensible. When signing an exclusive lease for a storefront, for example, the benefits (and costs) of operating in the space flow only to the leaseholder. Non-leaseholders are (more) easily excluded from the space by the force of law. So, who is likely to receive physical resources or access to financial capital across networks? Lay intuition, theory, and empirical work suggest that it is those one trusts and/or are relationally close to.

In his work on the New York textile industry, Uzzi (1997) emphasizes the importance of arm’s length and embedded ties in business. Uzzi found that the latter help overcome information asymmetries that undermine trust and also result in what might be considered unremunerated intra-temporal risk sharing or even altruistic behavior. One CEO he interviewed stated:

We never make gifts [i.e., sewing machines, hangers, racks, new lighting] to potential startups unless there is a history of personal contact. Never for a stranger. Only for people we have a rapport with. So, if Elaine [CEO of a contracting firm] wanted to start her own shop I would make her a gift. But for some stranger—never. (Uzzi 1997:52; brackets in the original)

Uzzi (1999:490) observed similar dynamics in midmarket bank lending. In one example, he recounts how a relationship manager’s bond with an entrepreneur led him to design a unique, integrative financing solution at a favorable rate—something he would not otherwise do. As the manager put it: “because of the relationship, because we knew the guy and we really believed in him and trusted him, we gave him the benefit of doubt on the pricing for the first year.” Van Der Gaag and Snijders’s (2005) work on resource generators provides additional evidence that individuals are considerably more likely to believe that family (84 percent) is more likely than friends (13 percent) or acquaintances (3 percent) to “borrow you” a large sum of money (see also Snijders 1999).

Resources More Likely Transmitted By “Weak” Ties: Nonfinite Yet Proximally Excludable Resources

The previous discussion argues that weak ties are less likely than strong ties to primarily provide finite (and valuable) resources such as financial or physical capital as well as information or referrals, particularly when these clearly lead to proximal finite outcomes. This begs the question: What are weak ties more likely to provide than strong ties on a relative basis? A possible answer proffered here is skill-based human capital.

Skill-based human capital

Starting a business requires navigating a labyrinth of requirements. In principle, even the humblest of lemonade stands is subject to numerous rules and regulations when operating in the licit economy. Applicable licenses are required from the Board of Health, for example. A business must also comply with applicable tax law. Professional assistance with such issues generally requires specialized forms of skill-based human capital that can be used to tailor solutions for specific business needs. Members of both the legal and accounting professions in turn often account for the value of the skill-based human capital they offer their clients by the time they exerted on the client’s behalf (see Uzzi and Lancaster, 2004, especially the online supplement). Thus, skill-base human capital occupies an interesting middle ground relative to nonfinite, nonrival resources such as information and rival, excludable, and finite resources such as financial and physical capital.

When comparing what content (e.g., financial, introductions, skill-based human capital) weak ties are most likely to offer, it is likely that the primary form is skill-based human capital such as business services such as legal, accounting, or technical advice as well as information that does not clearly and proximally lead to finite ends. Examples include skill-specific startup clinics or complimentary one-on-one consultations offered by professionals to entrepreneurs independently or through universities, accelerators, and incubators. Job seekers in turn can also avail themselves of job search assistance that entails skill-based human capital such as resume assistance and interview preparation.

In terms of skill-based human capital, this follows because nearly all startups require legal and/or accounting assistance of some sort (and often of a specialized form), and these are skills founders often do not possess—at least not all of them. Given homophily, it is also likely their family members do not possess all said skills either. From the content provider’s perspective, such resources are not theoretically finite, net of opportunity costs, in the same way as financial or physical capital, yet their boundaries and provenance are more easily definable and defensible than high-value information from alter’s perspective. This is particularly true for resource providers bound by an employment contract or other professional services agreements that diminish fear of misuse (Stinchcombe 1965). Community social capital may serve this end by facilitating relational contracting and enforcement (e.g., Bashi 2007).

This point begs an important question: How does skill-based human capital differ from information? Information is an element of general human capital, a point identified by Becker (1962) in an early treatise on human capital. Becker’s concerns were primarily with how contemporaneous or past investments in human capacities impact future income. He noted,

The many ways to invest [in human capital] include schooling, on-the-job training, medical care, vitamin consumption, and acquiring information about the economic system. They differ in the relative effects on earnings and consumption, in the amount of resources typically invested, in the size of returns, and in the extent to which the connection between investment and return is perceived. (Becker 1962:9)

While somewhat coarse, this piece recognizes a difference between explicit information and human capital. It does not, however, provide a crisp distinction.

It is clear that pursuant to Becker, information is one of several facets of general human capital. But how should we think about the distinction between explicit information and knowledge that results from schooling, industry, job, and employer-specific experience and training? In turn, how can this distinction be linked to the argument outlined in this article concerning network ties and value transfer?

My contention here is that the distinction between information and the skill-based elements of human capital speaks directly to the ability to (relationally) contract for the provision and protection of each in comparative terms and thus fear of misuse or unauthorized transfer. Knowledge derived from schooling, industry, or job experience or training is embedded in the individual and often can only be fully unlocked by said individual in her applied discretion and judgment, based on precedent and understanding and interpretation of case-specific particulars. This knowledge, and especially this judgment, is tacit (MacKenzie and Spinardi 1995). Hence, the value afforded by a lawyer, for example, in the startup process is in taking case-specific information, her knowledge of case law and legal precedence, and her own (vicarious) experiences in crafting a specific solution to the specific problem at hand based on (relational) contractual details. This is the business model used by many so-called knowledge workers who may be contracted by entrepreneurs, including accountants, designers, consultants, and lawyers.

Information that (alter perceives) leads to nonrival, nonfinite ends versus skill-specific human capital, both of which are likely transmitted by weak ties

Part of what ego learns from alter when skill-based human capital is conveyed includes information, or a sensitivity, concerning what factors one may need to consider in a similar situation. In turn, alter can choose to share this information about what someone in a similar situation should be conscious of. This information can generally be construed as nonrival information given the aforementioned discussion insofar as it has near zero marginal cost and can be used simultaneously by several individuals. Additionally, such general information does not clearly or proximally lead to specific finite ends.

In many social contexts, there are strong normative expectations that such information should be shared, even among strangers, and certainly among individuals weakly connected by a common third-party or group-level affiliation. Universities are a case in point: Faculty with expertise in entrepreneurship, for example, often provide counsel to alumni of the school the faculty never taught or met via a third-party request, or even in the absence of a third-party request given a common group affiliation (Greenberg and Mollick 2017). Entrepreneurial clusters have similar organizing norms that facilitate information flow and transfer (Aldrich and Waldinger 1990; Saxenian 1996; Zimmer and Aldrich 1987). Similarly, alumni of a school often seek employment advice from members of the university community they do not know, and the same is true in the close-knit communities cited previously (see e.g., Portes and Sensenbrenner 1993).

Summary And Conclusions

This article began by acknowledging the remarkable impact and reach sociological theory concerning networks has had within the discipline and science more generally. One of the most influential theories in this respect is Granovetter’s justifiably famous strength of weak ties thesis. This theory has two paradoxical elements. As is widely acknowledged, the first is conveyed in the article’s title, namely, that there is substantial strength or value in relationships that are comparatively tenuous. In particular, they provided access to novel information and connect disconnected social clusters. In this article, I argue that there is an associated theoretical puzzle that merits solving when one considers the other part of the equation—why someone weakly connected to someone else provides her with something of substantial value.

The original thesis elides this issue, due in large part to data limitations. Measuring many forms of content is nontrivially difficult, and focus in Granovetter (1973) was devoted to information assets. Granovetter’s dissertation work also focused on individuals whom had recently found new work, as opposed to identifying the risk set of options and search channels used to generate job offers. The distinction is empirically and theoretically important for reasons Granovetter was clearly sensitized to many decades ago. In particular, to understand the comparative odds that a specific type of social relationship affords value, one must understand and adjust for baseline probabilities associated with different types of social relationships and the likelihood that weak ties should be far more numerous than strong ones. Granovetter (1973:1372, note 18) indicates that Donald Light sensitized him to this issue many decades ago.

With the advent of Internet-facilitated job search and social networks more generally (Small 2013), numerically speaking, there should no longer be any doubt that there are considerably more weak ties in one’s network than strong ties (de Meo et al. 2014). Yet, in empirical research that includes multiple job offers and information about the search channels that led to those job offers, the proportional difference of offers that are associated with weak versus strong ties is small. Greenberg and Fernandez (2016), for example, exploited the fact that MBA students often have several job offers that originated from a variety of search channels. They find that approximately 9.4 percent of offers originated primarily via weak ties, whereas as 8.8 percent originated from strong ties. They code as weak ties faculty and alumni/ae of the MBA program the students did not know prior to matriculation. Strong ties included family and friends known prior to matriculation. As business schools have very large alumni networks—a factor they tout in promotional material as well as numerous faculty members—it stands to reason that the risk set of weak ties who could theoretically offer assistance is far larger than the risk set of strong ties. (The advent of Linkedin as a network for job search makes it feasible, in theory, to estimate this risk set fairly precisely.)

Granovetter was also clearly sensitive to differences in content but reasonably abstracted away from this matter in his seminal work. Yet, he alludes to distinctions between influence and information in the 1973 paper and also calls on future research to consider the variety of content conveyed across ties. This essay does so with a particular aim of focusing on alter’s concerns and interest. To this end, this paper presented theory concerning which types of content flow across different types of network ties and why using nascent entrepreneurship as a strategic research site to think about these issues. Due largely to data limitations, the overwhelming majority of research regarding networks has been unable to shed light on these issues (Snijders 1999). Thus, a simplifying assumption has often been used positing that network structure proxies for information flow (Burt 2008). This assumption has facilitated an expansive body of research concerning the effects of network causes writ large. However, assuming that network structure or relationships primarily convey information flow obviates important questions about what flows in terms of content and quality across different types of network ties resulting in observed reactions (the causes of effects), why, what is given up, and what implications it has.

Once we acknowledge that different content flows across networks, theory is necessary to explain systematic variation in exchange patterns. Moreover, it is important to consider the concerns of different types of resource providers in affording varied resources. The framework provided here focuses attention on what is given up in network exchange and poses questions about why or why not based on considerations of content finiteness, fear of misuse, unauthorized transfer, contractibility, and trust. This framework thus complements important strands of both network and exchange theory that focus on the social determinants and consequences of exchange. The thesis I presented here is that the relationships underlying exchange matter. The properties of the exchanged resources also matter, as does the larger social context. Focusing on the nexus of the two provides insights into network ties and social or economic exchange.

Implications for entrepreneurship theory and practice

Distinguishing content thus has practical implications. For example, if only information ties are measured, incorrect inferences may be drawn about what types of relationships an aspiring entrepreneur needs to cultivate to increase the odds of success. Prior research has recommended the cultivation of weak bridging that afford information benefits. The rationale for this is compelling: You tend to know what your friends and family members know and tend to share the same contacts. Thus, comparative advantage comes from accessing information outside your local group of friends. What this prior work failed to underscore, however, are the concerns of the resource provider.

This research suggests that entrepreneurs would be well advised to develop a diverse set of helpers not merely in terms of demographics, as prior research suggests, but also in terms of relational categories. This follows because different categories of contacts are likely to afford access to different types of resources that are required to start a new business. Importantly, these different categories of contacts also have different incentives and concerns. The same is true in other settings of sociological concern as well. Thus, when entrepreneurs require financial assistance early in the startup process, it is evident that only family members are, on average, a viable source. Friends tend to provide information and introductions but not tangible resources like physical or financial capital. Finally, strangers and weak ties provide value-added skills such as training, accounting, or legal services that the entrepreneur does not have more direct access to but are more easily (relationally) contracted for.

To test empirically these ideas requires data that include an exhaustive list of the context-specific content that flows across networks, as well as an assessment of their objective and subjective value and novelty, for a richer picture of the benefits and detriments afforded by varying types of network ties. Some self-report methods have been developed to this end, including resource generators (Snijders 1999; Van Der Gaag and Snijders 2005). In this research, six different forms of network content were compared across different forms of social or economic ties. Distinct patterns of exchange were evident across these ties. Notably, strangers (individuals especially well suited to act as bridging ties) were comparatively more likely to offer value-added training rather than information or advice.

Although consideration of content finiteness and risk of misuse and unauthorized transfer provides a framework for understanding network content, there is certainly variation in the value of resources. Considering issues of resource value, in addition to its finiteness and ease of misuse or unauthorized transfer, will provide greater insights into the mechanisms underlying exchange via social or economic networks. Similarly, an empirical approach to content value ranking and ordering would considerably enhance the precision of estimates.

A final matter for more sustained consideration is how a focus on content characteristics shed light on whether exchange occurs within “markets” as defined in economics, hierarchies, or networks imbued with varying degrees of the “social.” Economists increasingly consider “markets for ideas.” Intellectual property regimes are important to that end insofar as they define and delineate boundaries that can facilitate legal usage and sale of ideas as well as the adjudication of disputes. No such mechanism exists, however, for information for the reasons outlined by Nobel Laureate Kenneth Arrow and elaborated in this article. Hence, the master mechanism for useful information exchange is not—and likely cannot plausibly be—the market but rather networks or hierarchies.¹² Communities that foster and maintain enforceable trusts and collective monitoring and efficacy seem particularly well suited to this end (Bashi 2007; Portes and Sensenbrenner 1993). By contrast, markets can, however, be created for the sale of human capital as exemplified by the profusion of businesses such as taskrabbit and Upworks that create markets for human capital that include standardized categories of service offerings, observable pricing information, and rating systems to help calibrate comparable offerings, or to help “commodify” skills.

In conclusion, this article proposes that true vershtan of how relational networks requires a focus on the considerations and interest of the party providing resources (alter), not just the resource recipient’s (ego’s) outcomes. Once alter is brought back into the story, it becomes incumbent on the researcher to consider what she gives up to whom, why, and when.

I argued that those relationally close are, on average, more likely to transfer resources that are finite such as financial capital relative to weak ties. The reasons for this are greater trust that the recipient will reciprocate in some fashion (e.g., providing stipulated but not formalized remuneration) or altruism (see generally Healy 2004; Piliavin and Charng 1990). However, many other resources are also transferred across networks, and the nature of the tie is strongly associated with the nature of the content that flows across the tie. Once this is acknowledged, we should observe that contrary to current wisdom, the primary value afforded by weak ties relative to strong ties in entrepreneurship, in addition to other settings, is not information or introductions but rather, skill-specific human capital and information that leads to nonfinite ends.

I conclude by noting that bringing alter back into relational stories significantly enriches—and further clarifies the boundaries of—“the social” facets of exchanges vis-à-vis market exchange and opens a host of new research opportunities that further contextualize ego-alter exchanges in social structure.

Footnotes

Acknowledgements

A Ewing Marion Kauffman Foundation Dissertation Award provided partial funding for this research, which I gratefully acknowledge and appreciate. I thank Paul DiMaggio, Roberto Fernandez, Toby Stuart, Cat Turco, Jim Utterback, and Ezra Zuckerman, for useful feedback. All the usual disclaimers apply.

Notes

Author Biography

Jason Greenberg is an assistant professor of management at the Leonard N. Stern School of Business, New York University. He earned an MA in sociology from the University of Florida, an MPP from the University of Chicago, and a PhD in Management from MIT. His research interests include competition, crowdfunding, economic and organizational sociology, entrepreneurship, microfinance, social networks (including network experiments), stratification, and team dynamics.

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