Charles Galunic

A Theory of the Cultural Evolution of the Firm: The Intra-Organizational Ecology of Memes

In this article, we propose a theory of the cultural evolution of the firm. We apply cultural and evolutionary thinking to the questions posed by theories of the firm: What are firms and why do they exist? We argue that firms are best thought of as cultures, as social distributions of modes of thought and forms of externalization. Using the term ‘meme’ to refer collectively to cultural modes of thought (ideas, beliefs, assumptions, values, interpretative schema, and know-how), we describe culture as a social phenomenon, patterns of symbolic communication and behavior that are produced as members of the group enact the memes they have acquired as part of the culture. Memes spread from mind to mind as they are enacted and the resulting cultural patterns are observed and interpreted by others. The uncertainties of interpretation and the possibilities of reinterpretation and recontextualization create variation in the memes as they spread. Over time, firms evolve as a process of the selection, variation, and retention of memes. Our claim is that understanding firms in this way provides a new perspective (what we call the ‘meme’s-eye view’) on the question of why we have the firms we have and, by allowing us to shed the functionalist assumptions shared by both economics and knowledge-based theories of the firm, makes possible a genuinely descriptive, as opposed to normative, theory of why we have the firms that we have.

Players and Purists: Networking Strategies and Agency of Service Professionals

Social capital research has established the performance advantages of networking. However, we know surprisingly little about the strategies individuals employ when networking and, in particular, the underlying agency mechanisms involved. Network analysis tends to presume structural determinism and ignore issues of endogeneity rather than explore how actors draw on schemas, beliefs, and values in developing their networks. This empirical paper induces three networking strategies of newly promoted service professionals operating within two firms (AuditCo and ConsultCo) over a 16-month period. Using a grounded theory building approach, we first establish a set of core categories that capture networking behavior. We then conduct a cluster analysis revealing three distinct networking configurations or strategies: Devoted Players, Purists, and Selective Players. We also reveal the distinct agency involved in each profile and investigate the extent to which these networking strategies correlate with variables that shed light on issues of endogeneity and deepen our understanding of the strategies (including network structure and socialization progress in the players’ new jobs).

Homophily and Individual Performance

We study the relationship between choice homophily in instrumental relationships and individual performance in knowledge-intensive organizations. Although homophily should make it easier for people to get access to some colleagues, it may also lead to neglecting relationships with other colleagues, reducing the diversity of information people access through their network. Using data on instrumental ties between bonus-eligible employees in the equity sales and trading division of a global investment bank, we show that the relationship between an employee’s choice of similar colleagues and the employee’s performance is contingent on the position this employee occupies in the formal and informal hierarchy of the bank. More specifically, homophily is negatively associated with performance for bankers in the higher levels of the formal and informal hierarchy whereas the association is either positive or nonexistent for lower hierarchical levels.

ADDING VALUE TO OTHERS: THE POSITIVE EXTERNALITIES OF SOCIAL CAPITAL.

In this paper, we ask whether social structure can help explain why some employees are better able than others to add value to their peers, as rated by their peers. Our theoretical contribution concerns the distinct influences of two orders of social capital: first-order and second-order. First-order social capital is conceptualized as the social structure of the focal actor. Second-order social is conceptualized as the social structure of the actors boss, a central figure in the life of most managers. Using network sparseness to capture social capital, we find that not only first-order but also second-order social capital has significant effects on peer-to-peer value-added.

Brokerage as a Public Good: The Externalities of Network Hubs for Different Formal Roles in Creative Organizations:

Although much is known about how brokerage positions in social networks help individuals improve their own performance, we know little about the impact of brokers on those around them. Our study investigates brokerage as a public good. We focus on the positive and negative externalities of specific kinds of brokers: “hubs,” who act as the main interfaces between members of their own network community (“network neighbors”) and members of other communities. Because hubs access diverse knowledge and perspectives, they create positive externalities by providing novel ideas to their network neighbors. But hubs also generate negative externalities: extensive cross-community activity puts heavy demands on their attention and time, so that hubs may not provide strong commitment to their neighbors’ projects. Because of this, network neighbors experience different externalities from hubs depending on their own formal role in projects. We use insights from our fieldwork in the French television game show industry to illustrate the mechanisms at play, and we test our theory with archival data on this industry from 1995 to 2012. Results suggest that the positive externalities of hubs help their neighbors contribute to the success of projects when these neighbors hold creativity-focused roles; yet the negative externalities of hubs hinder their neighbors’ contributions when they hold efficiency-focused roles.