Abstract
While some studies have found a significant link between information technology (IT) and firm performance, others have observed negative or zero returns on IT investments. One explanation for the mixed findings is that the causal link from IT to firm performance may be mediated. However, previous information system (IS) research has paid relatively little attention to such mediators. In this chapter, we develop a conceptual framework in which social network plays a mediating role in the relationship between IT usage and firm performance. Specifically, IT usage helps organizations strengthen inter- and intra-organizational networks, which, in turn, enhance firm performance.
TopBackground
The origin of social network theory can be traced back to the late 1800s. Tönnies (2001) argues that individuals who share values and beliefs are linked by social ties. Durkheim (1997, 1982) models the modern society as “organic solidarity”, which emphasizes the role of cooperation between differentiated individuals with independent roles.
In 1900s, the further development of social network analysis has rested on three cornerstones. The first one is sociometric analysis developed by researchers working on small groups with techniques of graph theory. One of the distinguished achievements in the sociometric analysis is made by Moreno (1934), who pioneers the systematic recording and analysis of social interaction in small groups, especially in classrooms and work groups. The second one is the investigation of interpersonal relations conducted by the Harvard researchers in 1930s. One such investigation is known as Hawthorne Studies led by Warner and Mayo. The third one is the examination of community relations in tribal and village societies by the Manchester anthropologist. Gluckman, a central figure at Manchester, makes great contribution to the development of structural approach during his investigation of community networks in southern Africa. In 1960s and 1970s, the three strands of research have been brought together and the contemporary social network analysis has emerged (see Scott, 2000 and Freeman, 2004 for the history of social network analysis).
Social networks have become one of the hot research areas in recent years. The network research has boomed in management as well as in other disciplines (Borgatti & Foster, 2003). A social network is comprised of nodes and ties. Nodes are actors (i.e., individuals, groups, and organizations) in the network, while ties are the relationships between the actors. Social network theory1 suggests that social networks actors are embedded within ties, which facilitate or hinder their actions and performance.
Key Terms in this Chapter
Network Centrality: Describes the extent to which the focal actor occupies a strategic position in the network by virtue of being involved in many significant ties.
Strong Tie and Weak Tie: The strength of a tie is “a combination of the amount of time, emotional intensity, intimacy, and the reciprocal services that characterize the tie” (Granovetter, 1973, p. 1361). For example, ties to friends are strong ties whereas ties to acquaintances are weak ties. Strong ties enable individuals to gain more resources from their contacts than weak ties.
Network Density: Measures “the extent to which all possible relations are actually present” (Scott, 2000, p. 32).
IT Usage: Refers to an organization’s ability to use IT to meet business needs and improve business process.
Network Closure: Describes the extent to which actors are strongly interconnected (Burt, 2001).
Social Network Theory: Suggests that actors are embedded within the network and an actor’ behavior and performance are dependent on its position and relationship in the network.
A Social Network: Is comprised of nodes and ties. Nodes are actors (i.e. individuals, groups, and organizations) in the network while ties are the relationships between the actors.