Explaining Clustering in Social Networks : Towards an Evolutionary Theory of Cascading Benefits

Individual and organizational actors enter into a large number of relationships that include benefiting others without ensuring the equality of reciprocal benefits. We suggest that actors have evolved mechanisms that guide them in the choice of exchange partners, even without conscious calculation or bookkeeping of gain and loss. One such mechanism directs actors to membership in clusters, which are homogeneous groups of actors densely connected among themselves and only loosely connected to other groups. We suggest that clusters offer network externalities, which are not possible in sparse networks, thus conferring cascading benefits on the actors contained in those clusters. Using this logic, one can understand the omnipresence of clustering in social networks of individuals and firms. We review the benefits and challenges associated with clustering and use the logic of cascading benefits to derive empirical predictions. [Winner of Citation of Excellence as one of the 50 most important articles published in business in 2006, following a review of 15,000 published papers by Emerald Management Reviews. We benefited from presentations at the Academy of Management (Honolulu), the American Sociological Association (Philadelphia), and the International Institute of Sociology (Stockholm)]