Social network and institution-based strategy research

Almost two decades ago, Peng (2002) called attention to the promise of institution-based strategy research. The puzzle was to explain differences in strategies around the globe. Building on the work accomplished so far, I ask: Can institution-based strategy succeed when embedded in inappropriate social networks? Institutions and networks are usually studied as separate phenomena, yet each also defines the capabilities of the other. Institutions shape social network contacts and structures because institutions define opportunities for affiliation and the relative value of distinct contacts and network structures. At the same time, social networks shape institutions and organizations’ capabilities for institutional innovation. Thus, the social network in which a manager or organization is embedded can either amplify or counteract success in implementing institution-based strategy. After I review the co-constitutional nature of institutions and networks and discuss a number of sample studies using China as a productive research site, I sketch questions that need to be answered to more tightly integrate network behavior into institutional strategy research, and discuss four emerging areas of research into how network-strategy fit affects performance: (1) network fit to adaptive strategy, (2) network fit to change strategy, (3) institutional dynamics and network-strategy fit, and (4) institutional distance and network-strategy fit.