The Economic Power of Social Networks

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The Economic Power of Social Networks

Posted by Kristin Wolff on Jun 7, 2010 7:30:37 PM

Social networks matter. They have always mattered. New (social) technologies are helping us better understand how to work with them.

 

The Strength of Weak Ties
Mark Granovetter posited the strength of weak ties in 1973, launching a field of inquiry with a 1985 update focused on the problem of embeddedness - the idea that economic relationships are embedded inside social relationships. A follow-up in  2005 called for an interdisciplinary approach to the "black box" of social relationship so that their impact on economic behaviors and outcomes could be revealed and better understood.


The Science of Social Networks Applied

Most people understand the economic power of networks intuitively - and use them for job-hunting, learning, caring for their families and communities, and a myriad of other things.


Industry has long attempted to harness the power of networks for generating sales, recruiting talent, entering new markets, and cultivating and applying innovation - inside firms and industries, and more recently, through crowdsourcing.


And at the community level, scholars like Sean Safford have been able to show that the health of social networks have a significant impact on the ability of communities withstand economic disruption.

 

But social networks have been difficult and time consuming to document.


Enter technology.


Today, millions of people leave digital breadcrumbs that make their networks visible - from text messages on mobile phones to updates on Facebook or Twitter.


We are creating more efficient and effective ways to map, measure (and cultivate!) healthy networks, as evidence of their economic power continues to mount.

 

New Netwok Finds

Last week, these gems came across my radar:

 

1. Network Diversity and Economic Development (Nathan Eagle, Michael Macy, Rob Claxton in Science Magazine, May 2010 - summary visible with out subscription). Researchers analyzed cell phone data (in Britain) to reveal the social networks of cell phone users. They found that communities whose residents maintain diverse networks were more prosperous than communities  with less diverse networks. Conclusion?

 

"On  a population level, the surprisingly strong correspondence we  discovered between the structure of social contacts and the economic  well-being of populations highlights the potential benefit of socially  targeted policies for economic development."

 

(A plain-English summary of the same study is available at Futurity here.)

 

2. Social Enterprise: It Takes A Network (Raj Kumar, McKinsey Digital, What Matters). The author argues that the network is (potentially) a more effective organizational structure for meeting "bottom of the pyramid" needs when the goals is to assess impact and not just commercial sales. Significantly, this changes the model for "scaling up" and implies the need for alternatives to program- or organization-based measures as the primary indicators of success.

 

As social network mapping and analysis becomes simpler and more accessible, more of us can invest more time and energy in network weaving - building the social networks we now know really matter.

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1,919 Views Tags: innovation, community, development, rob_claxton, michael_macy, social_networks, mark_granovetter, crowdsourcing, economic_power, sean_safford, social_network_analysis, raj_kumar, nathan_eagle, prosperity
Comments (4)
Jun 9, 2010 6:14 AM Tyler Schenk-Wasson  says:

All of this research on the economic benefit of social network diversity has direct echoes of Jane Jacobs externalities, the basic idea that urban agglomerations have a generative force.

 

This type of geographic-economic analysis is absolutely vital in order to further our understanding of the benefits of cities and urban life. I would like to see more attempts at quantifying the stimulus of urban agglomeration. This can include more than just per capita GDP, but also availability of social services, access to public space, type of housing situation, educational achievement or anything else dealing with quality of life.

 

Of course this type of anyalsis has been done before (and can be done easily now with GIS), but it's time to start really paying attention to the structure of social-spatial networks and the impact they make on urban life. This means comparing cities on a variety of spatial criteria, and their social outcomes.

 

If you are unfamiliar with Michael Storper's work, I would highly suggest reading, Buzz: Face to Face Contact and the Urban Economy. (Storper and Venables, 2004) Unlike the digital networks described above, Storper and Venables attempt to place an economic value on face-to-face contact. As many begin to wonder about information and communication technology's potential for the replacement of geography, Storper points out that certain benefits of proximity cannot be replaced by current technology (or anything else in the foreseeable future.)

 

It is important, when reading the above studies, to recognize that analysis of digital communications networks alone cannot provide a complete picture for policy suggestion. (As the Eagle et. al article points out.) Simply providing your  community with free communications technologies and access to a network of economic opportunities can never substitute for geographic location.
Jun 9, 2010 1:34 PM Kristin Wolff  says in response to Tyler Schenk-Wasson:

Tyler:

Many thanks for your comment. I am aware of Michael Storper, but have not read Buzz  (which I will now promptly reserve at the library). You are so right to  point out that ICT is not a substitute for face-to-face interactions,  but in my view, it has really made a difference in bringing people back into the economic development picture. Specifically, social technologies have:

  1. Made the  impact of social networks on prosperity more visible and easier to  demonstrate. This, in turn, has made the science of social networks more  relevant to the practice of economic development (and other kinds of  policy-making as well), and helped more community leaders, investors,  and key stakeholders see social relationships as more critical (or  certainly less "external") to economic activity in communities than they were a decade ago.
  2. Created a body of knowledge around online  community building that also helps advance collabortive practices offline. Because  online spaces lack the nuance of in-person interactions, the practices  intended to cultivate relationships online must be articulated simply  and clearly, and reenforced in very tangible ways. Familiarity with both  sets of practices helps community managers, facilitators, and network  weavers be more effective in either space.

Finally, I'm struck by  the myriad of ways that ICT and social networking technologies are  bringing together people who are already geographically proximal - from participation in elearning among students living on-campus (up  17%) to bartering via platforms like Neighborhood  Goods to sharing thought hyperlocal news sites like Neighborhood Notes and Everyblock -- even Twitter, which  has helped introduce me countless neighbors, local mentors, and  community resources.

Thanks again for your contribution.
Jun 9, 2010 1:33 PM Kristin Wolff  says in response to Tyler Schenk-Wasson:

Just after I posted that comment, a new Pew Report landed in my in-box. It's called Neighbors Online. Timely indeed.
Jun 11, 2010 5:45 PM Kristin Wolff  says:

Here's a nice summary of the same research referenced above by the Santa Fe Institute.

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