Networks, Information & Social Capital

Abstract

This paper investigates how information flows enable social networks to constitute social capital. By analyzing the information content encoded in email communication in an executive recruiting firm, we examine the long held but empirically untested assumption that diverse networks drive economic performance by providing access to novel information. We show that diverse networks provide diverse, novel information, and that access to novel information predicts productivity and performance. But whether diverse networks deliver novel information depends on a tradeoff between network diversity and communication channel bandwidth: as networks become diverse, channel bandwidth contracts. As network diversity and channel bandwidth both enable access to more novel information, diverse networks provide more novel information (a) when the topic space is large, (b) when topics are distributed non-uniformly across nodes and (c) when information in the network changes frequently. Diverse networks are not just pipes into diverse knowledge pools, but also inspire non-redundant communication even when the knowledge endowments of contacts are homogenous. Consistent with theories of cognitive capacity, bounded rationality, and information overload, there are diminishing marginal productivity returns to novel information. Network diversity also contributes to performance when controlling for the performance effects of novel information, suggesting additional non-information based benefits to structural diversity. These analyses unpack the mechanisms that enable information advantages in networks and serve as a 'proof-of-concept' for using email content to analyze relationships between information, networks and social capital in organizations.