A Strategic Model of Frictional Knowledge Networks: Linking Behavior and Structure

Abstract

We contribute to research on networks and knowledge by modelling frictional knowledge networks, i.e., situations where knowledge flows imperfectly over network ties. Our model has behavioral and structural components: agents invest to generate but also to codify knowledge, as to reduce frictions, and the ties in the network connect agents that seek knowledge from alters. We compare behavior and structure for the case when the agents individually incur the cost of establishing direct ties and when there is a broker incurring the cost of connecting alters while taking actions to reduce frictions. The generation, circulation, and accumulation of knowledge, and the structure of the network supporting the knowledge flow, stem from the agents' independent decisions when participating in a network formation game. The equilibrium analysis of behavior and structure adds to our understanding of network formation and the circulation of knowledge within and across organizations.