Network theory examines the notion of an informal organization and demonstrates the importance of people's networks of relationships (Burt, 1995; Krackhardt & Kilduff, 1990). We assert that a large part of the work in an organization is done through social relationships and hence suggest that informal social structures offer much explanation of organizational phenomena such as social capital, knowledge transfer, organizational learning, communication, and leadership and power. In fact, informal social networks can potentially enable, but also constrain behavior at work through informal sub-communities of organizational members.
Any complex organization has sub-communities of people that are linked to each other through formal reporting structures and informal structures such as friendship networks. The social network is typically defined as "a specific set of relations among a defined set of persons with the additional property that the characteristics of these linkages as a whole may be used to interpret the social behavior of the individuals involved" (Mitchell, 1969, p.2)
Informal networks are those channels that carry information and connect organizational members through routes not prescribed by the organization. Networks provide its members with many opportunities such as tracing task information, work standards and expectation, rumors, and social norms. Common hobbies and activities as well as interpersonal attraction, among other factors, play an integral role in the development of informal social networks. It is not hard to imagine the factors that contribute to the formation and growth of informal social networks, which can include lunch schedules, family ties, social relationships and common origins.
The positions that people inside the informal network occupy are important to analyze. According to Lamertz and Aquino (2004), an informal network position analysis considers the dyadic relationships and adds informal relationships to the direct relationships specified in the network. These network positions aid in the explanation of informal status and social power. Further, they indicate the distribution of resources and the relationships with potential partners in resource exchanges as well as members' associations with popular members of the network (Bonacich, 1987; Burt 1976; Freeman, 1979; Lamertz & Aquino, 2004).
Past research has provided some tools to investigate the network structures with regard to variations in exchange and social behaviors (Uehara, 1990). One of the traditional tools is network density, which is defined as the extent to which links between people actually exist (Mitchell, 1969). Another important tool is network intensity, which is the degree to which individuals are prepared to honor obligations, or feel free to exercise the rights implied in their link to some other person (Mitchell, 1969). These tools examine the communication among members, which incorporates informal pressures, normative pressures, and facilitation of exchange of support (Mitchell, 1969) According to Allen and colleagues, "the existence of informal social networks within organizations has long been recognized as important." (Allen, James, & Gamlin, 2007, p. 179). Adler and Kwon remind us that "a growing number of sociologists, political scientists, economists, and organizational theorists have invoked the concept of social capital in the search for answers to a broadening range of questions being confronted in their own fields." (Adler & Kwon, 2002, p. 17). Yet research that offers a collection of implications of these informal networks is scant.
The purpose of this paper is to offer a review of the literature on informal social networks with special regard to organizations and to develop research propositions with regard to some organizational behavioral outcomes of these informal social networks. The next section of this paper addresses the formation of informal social networks and the importance of social exchange and dual exchange theory with regard to informal social networks. Following that we turn to organizational behavior outcomes of informal social networks such as social capital, knowledge transfer, organizational learning, communication, and leadership and power. We conclude with managerial and research implications of our discussion and propositions.
We first draw attention to how informal social networks form in today's organizations.
FORMATION OF INFORMAL SOCIAL NETWORKS
We are all familiar with the clique of smokers that congregates outside the building and exchanges the latest information and/or gossip, about the organization or the people inside of it. Much important "insider" information passes through the channels of sub-communities such as these formed on the basis of friendship or things that people have in common.
Informal networks form on the basis of many different mechanisms. People associate with each other and are drawn to each other through interpersonal attraction, common tasks, common schedules and geography, shared interests, and common backgrounds. But there are also self-interests that members of a shared informal network pursue. Individuals seek out their own personal benefit by belonging to informal networks of other people, which will be discussed later in this paper.
A basic view point in informal network formation is a common understanding that the whole is greater than the sum of the individual members' contributions. This is how the formation of an informal social network becomes desirable in the eyes of the members or potential members of the network. Jackson and Wolinsky (1996) bring up the issue whether a network is efficient or will form in the first place if individual members can leave it. This certainly presents a threat to the stability of a network, when individual members have an incentive to leave the network. However, stability in networks can potentially create inefficiencies. This hints at the trade-off between network flexibility and stability. Networks need to be stable in their entirety to make relationships reliable and predictable for the individual players in it, but at the same time the members need to have some flexibility in order for them to have opportunities to create new beneficial relationships. In other words, there is a cost-benefit logic that underlies membership in informal social networks in that there ought to be an incentive for the members to a part of the network that outweighs the cost on not being a member or, alternatively, become a member in another social network. The basis for the creation and dissolution of informal social relationships lies in the social exchanges between the members of a network or an organization.
Researchers often use social exchange theory (Blau, 1964) to explain many interaction based phenomena in organizations. The following section offers a brief review...