DP9980 Network Dynamics and Knowledge Transfer in Virtual Organizations: Overcoming the Liability of Dispersion

Author(s): Neil Gandal, Uriel Stettner
Publication Date: July 2014
Keyword(s): exploitation, exploration, Knowledge Spillovers, Network Dynamics, Open Source, social capital, Social Network
JEL(s): L8
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9980

Product development within and across community-based and geographically dispersed virtual organizations is becoming an increasingly important mechanism through which individual knowledge holders create and disseminate knowledge in joint efforts to generate products. Without the benefits of face-to-face communication, such organizations face a particular set of constraints in their exposure to knowledge and know-how. This ?liability of dispersion? increases the importance of the architecture of network ties that undergird the distinct development efforts, the embedded social structures, and the particular relationships involved in their product-generating efforts. In this paper, we examine whether particular network structures foster knowledge transfer among distinct open-source projects. We conjecture that Star developers?actors characterized by increasing levels of embeddedness and the associated ability to form ties with several projects within a network?serve boundary-spanning functions that facilitate an organization?s ability to collect, assimilate, and apply external information. We find support for this conjecture in our investigation of a network of open-source software projects and developers compiled from a dataset drawn from Sourceforge.net. We also show that becoming part of a giant network component is associated with relatively large changes in project performance.