Intrafirm Network Structure and Firm Innovation Performance: The Moderating Role of Environmental Uncertainty

Abstract

An interpersonal network within a firm serves as a primary knowledge base for organizational innovation. In this article, we propose that intrafirm network connectivity, which is measured by the transitivity of an intrafirm network, has a nonlinear effect on firm innovation performance. Furthermore, on the basis of the literature on environmental contingency, we propose that two dimensions of environmental uncertainty (i.e., environmental munificence and dynamism) moderate the influence of intrafirm network connectivity on firm innovation performance. To examine our hypotheses, we collect the profiles of firms in the pharmaceutical and biotechnology industries from the COMPUSTAT database and patent data from the United States Patent and Trademark Office database for the period of 1991–2012. Our longitudinal study finds an inverted U-shaped relationship between intrafirm network connectivity and firm innovation performance, and such a relationship is moderated by environmental munificence but not by environmental dynamism.