Complementary or contradictory? The effects of structural holes and status on innovation

Abstract

This study focuses on the joint effects of the firms’ access to structural holes within social networks and their status within social hierarchy on their innovation performance. The interactions between the firms’ positions in different dimensions of social structures have been rarely examined in prior research despite the fact that they jointly determine the firms’ opportunities and constraints for acquiring important resources, such as knowledge and information, for their innovation activities. In particular, we argue that the effects of structural holes and status contradict, rather than complement, each other because one tends to interfere with the other. We empirically test our theory and hypotheses by analysing the patterns of patent applications and strategic alliances in the US biotechnology industry between 1981 and 2006. While the results support the positive relationship between status and innovation, it is shown that access to structural holes does not significantly affect the biotech firms’ innovation performance on average. Our findings show that the positive effects of structural holes tend to be relatively stronger among lower-status firms, whereas the negative effects become stronger as the firms’ status increases. Finally, we discuss the implications and contributions of this study.