Homophily and Consolidation in Intra-Firm Collaboration Networks and their Impact on Innovation Output

Luis Rios, Purdue University Krannert School of Management

Abstract: Research in management science has long posited that network structures, specifically the patterns of informal interactions among people, affect information flows and knowledge recombination. Yet, how do different network topologies affect the production of new knowledge and ideas? What features of network topologies are most closely associated with firms’ ability to exploit existing resources and knowledge in the production of ideas, as compared to exploring and developing entirely novel and original ideas? We will use data on 400 firms in the U.S. economy over 10 years to explore the empirical relationship between firms’ internal collaboration networks among employees and their external innovation outputs, such as patents and patent citations. Drawing on prior theories of network structure, we develop hypotheses relating two features of internal networks, homophily and consolidation, to innovation output. We then test the effects of homophily and consolidation on: (i) the quantity of innovations produced and (ii) the novelty of these innovations.