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Networks and Institutions
Jason Owen-Smith and Walter W. Powell
INTRODUCTION
Research on institutions and networks has proceeded on largely separate trajectories over the past few decades. The former is more associated with work in organizational and political sociology, and the latter serves as the wellspring of research in economic sociology. To be sure, a number of loose link- ages exist between the subfields. For exam- ple, many institutional studies presume that professional or inter-organizational networks serve as conduits for the diffusion of appro- priate practices and ideas. Indeed, much institutional research conflates ‘simple’ dif- fusion with ‘deep’ institutionalization. Meanwhile, research on networks often con- siders how categorical or status variations in network structures shape social comparison and stratification processes. But these points of intellectual cross-fertilization have remained undertheorized.^1 We think there is much to be gained from a more analytically driven dialogue between these literatures. We argue that networks and institutions mutually shape one another. Over time, this co-evolutionary process creates,
sustains, and transforms social worlds. The cognitive categories, conventions, rules, expectations, and logics that give insti- tutions their force also condition the forma- tion of relationships and thus the network structures that function as the skeletons of fields. But networks are more than just the scaffolds and circulatory systems of organi- zational fields. They are also the source of ‘horizontal’ distinctions among categories of individuals, organizations, and actions, as well as ‘vertical’ status differentials. While institutions shape structures and condition their effects, networks generate the cate- gories and hierarchies that help define insti- tutions and contribute to their efficacy. Thus, any effort to understand institutional processes must take networks into account, and vice versa. Our argument draws on core concepts from institutional and network theory that are utilized across both lines of work. Despite their portability, however, they have rarely been theoretically integrated. Using institu- tional theory, we highlight the under- theorized relational aspects of both fields and logics. Starting in network theory, we
emphasize the important institutional fea- tures of embeddedness and social capital. Our goal is to do more than review existing points of contact or stimulate joint discus- sion. We aim to provide a roadmap for future research that will directly address two critical animating questions. First, how do institu- tional practices and forms emerge from networks? Second, how do institutionalized categories and conventions shape the structure and effects of networks? We begin with a brief excursion through several canonical works in institutional analysis, highlighting the implicit, but nonetheless strong, network underpinnings of these theoretical arguments. For symme- try, we select several well-known empirical studies that directly measure network effects to account for the transmission of institu- tional practices and structures. Next we revisit four foundational ideas – organiza- tional field, institutional logic, embedded- ness or the non-contractual basis of contract, and social capital – which contain both network and institutional insights that are, we contend, indissoluble. We then develop answers to our key questions about emergence and constraint against this background.
NETWORKS ARE CARRIERS OF
INSTITUTIONAL EFFECTS
In their classic paper, Meyer and Rowan (1977) observed that the formal structures of organizations ‘dramatically reflect the myths of their institutional environments.’ They argued that organizations are driven to incor- porate practices and procedures defined and buttressed by widely prevalent, rationalized concepts in the larger society. These prac- tices were institutionalized through profes- sional standards and prestige hierarchies, and reinforced by public opinion. Consequently, Meyer and Rowan contended that the build- ing blocks of formal organization ‘litter the societal landscape.’
This canonical article incorporated net- work ideas in several key ways, although subsequent work has tended to overlook its structural aspects. In part, this neglect may be traced to a contrast that Meyer and Rowan emphasized between organizations where survival depended on managing the contin- gencies of boundary-spanning relations and others that had to respond to ceremonial demands which were present in their environments. This continuum suggested that managing relational networks involved mat- ters of coordination and control, while more institutionalized settings necessitated efforts at symbolic management. But Meyer and Rowan also emphasized that all organiza- tions are embedded in both relational and institutionalized contexts. They stressed that the complexity of relational networks gener- ated ‘explosive organizing potential,’ and this greatly increased both the spread and number of rationalized myths. Central to this process of transmission and standardization were trade and professional associations and inter- organizational coalitions. The generative potential of networks as transmission channels is readily apparent in the Meyer and Rowan paper. Similarly, DiMaggio and Powell (1983) argued that the great rationalizers of the latter half of the twentieth century were the professions and the modern State. The growth and elabora- tion of professional networks spanning organizations contributed, they argued, to the rapid spread of various models of organizing. Networks were also essential components of DiMaggio and Powell’s conception of an organizational field, which emphasized both connectedness (Lauman, Galaskiewicz, and Marsden, 1978) and structural equivalence (White, Boorman, and Breiger, 1976). The institutional development of an organiza- tional field hinged on: (1) increased interac- tion among participants; (2) the development of well-defined status orders and patterns of coalition; (3) heightened information shar- ing; and (4) mutual awareness and respon- siveness. The twin imprints of the relational sociologies of Harrison White and Pierre
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and the objects of inquiry vary, we argue that these prominent papers carry a common mes- sage that networks are shaped by social com- parison processes in which institutionalized categories are highly influential.
NETWORKS ARE STAMPED BY
INSTITUTIONAL CATEGORIES
Galaskiewicz and Burt (1991) analyze how corporate officers evaluated nonprofit organ- izations in the Minneapolis-St. Paul region and decided whether to make significant charitable contributions to them. In the Twin Cities, the networks of high-profile corporate philanthropists and leaders of the nonprofit community were closely inter-connected. The authors tested to see whether the spread of evaluative standards operated through the mechanisms of cohesion or through struc- tural equivalence. The frame of reference in the former is the dyad, stemming from a his- tory of past experiences, while the latter is the larger social system. Dyadic influence processes operate on a one-to-one basis, while structural equivalence effects draw on perceptions of similarity rather than direct communication. Consequently, structural equivalence processes are driven by what officers presume others in comparable posi- tions are doing. In a community that is closely knit and in regular contact, one might expect direct interaction and cohesion to trump structural equivalence. Instead, Galaskiewicz and Burt find the opposite. In the Twin Cities, the importance of structural equivalence reflected common norms and standards mag- nified within a professional community while demonstrating how the field’s informal stratification orders conditioned individual acceptance of these norms. As the authors put it, when an opinion comes to be shared within ego’s profession, ‘ego is expected to follow rapidly to avoid the embarrassment of being the last to espouse a belief that has become a recognized feature of occupying
his or her position in the contributions com- munity’ (Galaskiewicz and Burt, 1991: 90). Galaskiewicz and Burt recognize the strong parallels between their account of the Twin Cities nonprofits community and DiMaggio and Powell’s (1983) explanation for how and why organizations, and the structure of organizational fields, change over time. Indeed, they explicitly note that ‘an important component of DiMaggio and Powell’s argument is the network of contacts among organizations or their agents’ (Galaskiewicz and Burt, 1991: 88). Within this philanthropic community, the manner in which evaluative categories varied across organizations could be predicted by how corporate contributions offices were strati- fied within the status hierarchy of their profession. Palmer, Jennings, and Zhou (1993) ana- lyzed the influence of institutional, political, and economic factors on the adoption of the multidivisional form (MDF) by large U.S. corporations in the 1960s. To assess how institutional factors influenced the transition to an MDF, they measured the professional training and social network connections of key organizational decision makers, focusing specifically on elite business school training of corporate chief executive officers and interlocks among corporate boards of direc- tors. They also assessed economic and polit- ical considerations, including corporate strategy and performance, as well as the influence of managerial rivalries, both inside companies and in external coalitions. This impressive effort to test rival theoret- ical arguments found ample support for both economic and institutional factors, but little for an explicitly political view. Both corpo- rate industrial diversity and geographic dis- persion stimulated the adoption of the multidivisional structure. Differentiated companies (i.e., firms involved in multiple unrelated lines of activity) and those with facilities spread across the nation, encounter problems that a multidivisional structure pur- ports to solve. Institutional variables also proved to be robust. Most notably for our
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purposes, networks were critical factors in the transition to a multidivisional form. Corporations in which CEOs had graduate degrees from elite business schools were more likely to adopt the MDF than firms with executives who did not hold elite degrees. Boards of directors with interlock ties to firms that had already adopted an MDF structure also influenced adoption. Not sur- prisingly, corporate board connections to non-MDF firms did not (Palmer et al., 1993: 120). Thus, institutional backgrounds and social connections jointly condition corpo- rate strategies. Davis and Greve (1997) analyzed the dif- fusion of two practices that were adopted by corporations in the 1980s as a defense against hostile takeovers. The ‘poison pill’ and the ‘golden parachute’ were embraced by companies and their managers to raise the costs of an unwanted takeover bid. Both of these practices were initially controversial but came to be adopted by the majority of U.S. corporations. Yet despite their simi- larities, the ‘pill’ spread quickly and the ‘parachute’ diffused more slowly. Interestingly, the channels of social influence varied too. Pills spread through cohesive ties among members of corporate boards of directors, while parachutes were adopted on the basis of geographic proximity. Corporations adopted golden parachutes as other firms in their local metropolitan area did so. This intriguing analysis revealed a puzzle: the same individuals – members of corporate boards – decided to adopt both practices, but the tools spread at different speeds through divergent routes. Davis and Greve ask what factors accounted for these different patterns of diffusion. Social networks provide one compelling answer. Pills spread from one corporation to another across the nation because the corporate director network has a national reach. Boards that shared directors were the conduits through which this mecha- nism to deter hostile raiders spread. Golden parachutes, in contrast, circulated locally. Their diffusion was rapid in some areas, but
in other regions the practice never took hold. In the status-bound corporate world of New York City, for example, protecting the CEO was seen as a duty of boards, but in the more rough-and-tumble entrepreneurial world of Silicon Valley, parachutes were eschewed. The mechanism at work here was social comparison among local elites, who looked to their regional reference groups for a sign of whether their CEO should be protected against unexpected job loss. This ‘parochial’ social comparison process resulted in a slower rate of diffusion than the more national and cosmopolitan transmission of pills through director networks. Davis and Greve point out that these local and national network channels were also characterized by different normative stan- dards. The poison pill was couched in a lan- guage of fending off unscrupulous raiders. This defense was perceived as appropriate and legitimate by board members; and thus championed by them in different corporate settings. Contact with directors in similar industry sectors and in corporations of com- parable status became the venues for diffu- sion of a practice that came to be regarded as accepted and necessary. Parachutes were much more difficult to legitimate. They were perceived by some to reflect naked managerial self-interest, while others saw them as payoffs for weak man- agers. Questions about the appropriateness of parachutes were answered locally, by look- ing to the behavior of central individuals and companies in the regional economy. In short, the relevant networks for diffusion and the pace at which they communicated specific practices were shaped by the broader institu- tional context in which they were situated. Davis and Greve’s analysis affords keen insight into how network configurations are conditioned by institutional forces. Understanding why the same boards take sig- nals about adopting pills from distant, but connected rivals while turning to local com- munity members for signals about the legiti- macy of parachutes requires not only attention to networks, but to the meaning of
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prisms that help render action sensible (Podolny, 2001). Networks are essential to fields in at least two senses: they are both a circulatory system and a mechanism for sensemaking. Fields are shaped by networks, which condi- tion the formation of relationships and help establish their consequences. But it is only against the backdrops of particular fields that rationalities and strategies of action are sen- sible. The relational aspects of fields are the threads that weave together the term’s dis- parate meanings.
Institutional logics
Logics constitute the rules and conventions of a particular organizational field. In broad terms, an institutional logic is the constella- tion of beliefs and associated practices (the schemas and scripts) that a field’s partici- pants hold in common. These packages of beliefs and practices are organizing princi- ples and recipes for action. They have instrumental, normative, and cognitive impli- cations (Friedland and Alford, 1991; Whitley, 1992; Thornton, 2004). Logics pro- vide rationales for action. They are most influential when they are consistent and easily taken-for-granted. But when multiple competing logics are in play in the same set- ting, they can trigger conflict and/or generate new accounts of activity. Three different approaches to the idea of logics rely on relational underpinnings, but their structural features are rarely elaborated. Consider first the idea, drawn from work in the Carnegie School tradition of organization theory, that organizational action is routine- based, rule-governed, and triggered by con- ventions that match concrete situations and actions to the needs of particular positions (Cohen, March and Olsen, 1972; March and Olsen, 1984). These logics of appropriate- ness do more than simply set the grounds for concrete action in particular situations. When strung together across roles, they represent the authority structure of an organization by
‘defining the relationships among roles in terms of what the incumbent of one role owes to the incumbents of other roles’ (March and Olsen, 1984: 23). In contrast to classic Weberian notions of authority, it is the linkages among conventional recipes for action that are central, defining characteris- tics of organizations. When spread across the categorical distinctions provided by orga- nizational roles, logics comprise formal structures. Clemens (1993, 1997) extends the idea of logics by recognizing that the social world is rife with alternative models for organizing any particular endeavor. In her view, organizational repertoires are templates that structure concrete relationships within organ- izations and convey scripts for behavior that link forms of organization to cultural expectations (Clemens 1993: 758). In this sense, logics offer a mechanism by which institutions direct the formation and mobilization of networks, while providing a means for expectations and regulations to exert force upon the participants in a field. The analytic link she makes between institutional logic and organizational form is an important one that deserves further explication. Institutional logics, then, are inextricably tied to concrete structures that define the authority relationships that characterize orga- nizational forms. Logics do more, however, than forge collections of roles into formal organization. Friedland and Alford (1991) offered a now widely held view of logics as central, distinguishing features of fields. In their view, the content of a field’s dominant logic renders networks much more than mere affiliations. Without institutional logics, ‘it will be impossible to explain what kinds of social relationships have what kind of effect on the behavior of organizations and individ- uals’ (Friedland and Alford, 1991: 225). Logics make networks meaningful features of social and economic worlds precisely by disciplining (though not determining) the formation and implications of relationships. The presence or absence of connections and
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the resources that flow through them as well as the meanings that participants and observers attribute to relationships depend upon prevailing logics. The same relation- ship or affiliation may exist under the aus- pices of multiple institutional logics, which provides leverage to elaborate the ways in which relationships carry the social into instrumental exchanges.
Embeddedness: the non-contractual
basis of contract
Classic research in organizational theory (Dalton, 1959; Gouldner, 1954) and a foun- dational work in economic sociology (Macaulay, 1963) demonstrated that even highly purposive economic exchanges are enmeshed in and freighted with social expec- tations. Organizational and economic actions result from a complex lamination of motiva- tions and meanings that participants draw from the various fields in which they partici- pate. Macaulay’s (1963) key finding that businessmen often disregard the legal rights and responsibilities inherent in contract in favor of more social means of dealmaking and dispute resolution underscored how social relations cemented economic transac- tions. His study offered a starting point for Granovetter (1985) who, drawing on Polanyi’s (1957) insight that market relation- ships are embedded in both economic (con- tract) and non-economic (friendship, familial) institutions, illuminated how concrete social relationships shape economic activity. Granovetter’s (1985: 500) argument that social relationships are fundamental to eco- nomic processes has been highly influential. Nevertheless, we concur, to a degree, with critics of the embeddedness perspective (Krippner, 2001; Lie, 1997) who argue that a purely relational view of market activity loses some of the evocative features of Polanyi’s original, more institutional defini- tion. Social ties are fundamental to eco- nomic relations, certainly. What we find more interesting is the insight that economic relationships (as well as any other collective social activity) can be understood in terms of
multiple institutional arrangements and logics, only some of which are instrumental. Relationships matter precisely because their meanings are variable and depend on the ori- entations of participants to the various logics and contexts them sensible. Return, for a moment, to Macaulay’s (1963:
- discussion of contract and consider the oft-cited example of a businessman who notes: ‘You don’t read legalistic contract clauses to each other if you ever want to do business again. One doesn’t run to the lawyers if he wants to stay in business because one must behave decently.’ There is certainly a story about trust, forbearance, and the shadow of the future implicit in these statements. Much less explored, however, is the idea that ‘behaving decently’ is defined against a partic- ular social and institutional backdrop. The idea that lawyers should be excluded is not because they are personal strangers but because they view the same relationship through a different institutional lens, which helps explain why they find the business- man’s approach ‘startling’ (Macaulay, 1963). As Macaulay noted, where businessmen see orders that can legitimately be cancelled, lawyers see the same exchanges as contracts whose violation carries strongly negative con- sequences. Economic exchange has a non- contractual basis, but that bedrock is both relational and categorical. The meaning of a relationship and the actions appropriate to it depend jointly on the parties to the tie and the broader institutional and professional milieus to which they belong. Put differently, rela- tionships are multiply embedded and the social entanglements that make economic exchange possible are the joint outcome of both networks and institutions. We make a similar claim about our final concept, social capital, which more closely situates individ- ual activities in both fields and networks.
Social capital
Like ‘embeddedness,’ the voluminous and disparate uses of ‘social capital’ have
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studies that examine the genesis and dynam- ics of institutions and networks. In the fol- lowing section, we abstract from our foregoing discussion to sketch an analytic framework that takes up this challenge.
CONTEXT OR CO-CONSTITUTION?
We have documented a set of analytic con- nections between networks and institutions. Canonical works in neo-institutional theory rely explicitly on network imagery and mechanisms, while exemplary empirical pieces demonstrate that networks are central to explanations of institutional phenomena. Likewise, four master concepts – field, logic, embeddedness, and social capital – mix both relational and categorical claims. We believe these interdependencies can be understood in two ways. The first, less radical view treats networks and institutions as mutually reinforcing, contextual features of social systems. The second line of argument exam- ines how networks and institutions co-consti- tute one another. Put differently, the first view sees institutions as the landscape and networks as the social relations on that field. The second view argues that fields influence which relations are possible, and how these relations are forged can alter the landscape in profound ways. We hold the second view. Many institutionalists have recognized that networks are important contexts for under- standing institutional process (Jepperson, 1991; Davis, Diekmann, and Tinsley, 1994; Dobbin and Dowd, 2000). Contextual effects are key, but more important, we believe, is the idea that networks and institutions are co- constitutive. In other words, networks shape institutions but institutions sculpt networks and direct their growth. Genesis and change, not just context, are at stake in the merger of structural and cultural approaches to complex social systems. Our argument rests on the idea that categorical distinctions are at the heart of
institutions, and the concrete relation- ships that are the basis of networks have a dual character. Like other well-known duali- ties – between persons and groups (Brieger, 1974), meanings and structures (Mohr, 1998), organizations and environments (Stinchcombe, 1965) – we take meaningful social categories to be defined in large part by relationships’ participants from within and across them (White et al., 1976). At the same time, the likelihood and implications of particular relationships stem from the categories that collaborators occupy and span. As a result, categories and relationships jointly bound and determine action in social systems. Understanding how networks and institu- tions co-evolve to shape social and economic arrangements requires us to attend to the myriad ways that relationships and cate- gories influence each other. We argue that one force behind that shaping is organiza- tions and individuals who strive to navigate settings where multiple institutional logics either co-exist or collide.^2 If logics offer tem- plates for action and organizing while ren- dering existing and potential relationships meaningful, then settings where multiple logics overlap will be particularly fertile ground for institutional entrepreneurship. Some of those in structural locations that engage multiple logics – as in art and com- merce, patient care and administrative efficiency, or altruistic medical donations and income generation – can use their circumstances to forge new opportunities or craft multivocal identities. In settings where numerous logics reflect conflicting or incompatible demands, ambiguous identities and multiple networks offer room to maneu- ver. Still, the tensions that are generated by ambiguity, multiplicity, and contradiction can be daunting to individuals and organizations. Practical action draws on both relation- ships and categories, and, in so doing, links networks and institutions. Such efforts are most visible in settings characterized by con- flicting logics, multiple audiences, and
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ambiguous categories. Participants in spe- cific fields draw on categories and associated logics to make sense of their worlds and direct their relationships and affiliations. At the same time, relationships and affiliations offer participants disparate types and amounts of capital, depending on their insti- tutional context. Continuity and change in categorization systems and network struc- tures alike depend on discernable patterns in the formation of ties and affiliations. How, then, do we explore the generative relationship between networks and institu- tions? A thorough-going elaboration of a ‘network-institutional’ research program is beyond the scope of this chapter. We opt instead to reconsider some of our own work on the evolution of the human therapeutic and diagnostic biotechnology industry and on the institutional changes that surround the commercialization of academic research. In the former setting, multiple logics of discov- ery associated with different types of organi- zational partners encourage biotechnology firms to create and maintain diverse network ties in order to innovate and develop novel products. These ties span multiple types of organizations to form a field where relation- ships and outcomes alike are stamped by the categorical features of partners. In the latter setting, logics associated with the commercial use of science are imported into the established field of public science, spark- ing both structural and institutional transfor- mations. We address a set of research questions that emerge from treating skilled, but constrained, performances as a mecha- nism linking relationships and categories. The key questions we consider are:
(1) How do the meaning and consequences of relationships depend on the character of the participants? (2) How do the effects of macro-structures depend on the types of participants that comprise them? (3) How do locally situated individuals pull down global categories and draw on external relation- ships in their daily activities? (4) How does situated action escape its local context to alter global categories and external relationships?
These questions do not exhaust the con- nections between networks and institutions. Nevertheless, we believe that initial answers to these queries will aid in developing a theory of social and economic life that treats networks and institutions as flip sides of the same analytic coin. We begin by revisiting our work on the evolution of inter-organizational collabora- tion in human therapeutic and diagnostic biotechnology. The commercial field of the life sciences provides us with fertile ground to answer our first two questions. We first discuss how the same collaborative activi- ties, for instance joint R&D efforts, have very different implications for biotech firms depending on the organizational form of partners. Here categorically different forms of organization bring different logics to the same activities. As a result, the likelihood and effects of any particular tie depends on institutional features of the partner. R&D undertaken with pharmaceutical firms, for instance, differs dramatically from scientifically comparable research con- ducted with academic, university-based collaborators because pharmaceuticals and universities operate in different selection environments under different institutional logics. Moreover, as the field developed biotech firms and partner organizations become relational generalists. In addition to learning to manage multiple types of activi- ties across stages of product development, biotech firms developed the capacities neces- sary to conducting the same kinds of endeav- ors with different types of partners. Their efforts to develop and maintain network port- folios that include diverse activities and part- ners accounts for the characteristic structure of the industry-wide network. We next turn to analyses of innovation in two densely populated biotechnology regions, Boston and the San Francisco Bay area, to address our second question. These two regional communities are highly produc- tive, but one (Boston) is anchored in a net- work that grew from public sector origins. The other community (SF Bay) is centered
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In the early years of the industry, from 1975 to the late 1980s, most biotech firms were small companies that relied heavily on external support. No biotech firm had the necessary skills or resources to bring a new medicine to market in the early days, thus they became involved in an elaborate lattice- like network of relationships with universi- ties, hospitals, and large multinational firms. The large corporations, despite well- established internal capabilities, lacked access to the cutting edge of university sci- ence. Deficient in a knowledge base in the new field of molecular biology, large firms were drawn to the biotech start-ups that had more capability at basic and translational sci- ence. This diverse distribution of technologi- cal and organizational resources was a key factor driving early collaborative arrange- ments in the industry. A number of institu- tional factors undergirded this collaborative division of labor. The breakneck pace of technical advance has rendered it difficult for any single organ- ization to remain scientifically abreast on multiple fronts, hence linkages to universities at the forefront of basic science have been necessary. The availability of funding also increased rapidly, as biomedicine became a major force in modern global society. The budget of the U.S. National Institutes of Health, a key funder of basic research, nearly doubled in the 1990s during the Clinton years. Venture capital financing flowed into biotech somewhat irregularly in the 1990s, but over the course of the decade grew markedly. Biotech financing by venture cap- ital has always been somewhat counter-cycli- cal. When there was great enthusiasm for the internet and telecommunications start-ups, interest in biotech waned. But when the bloom fell off the internet rose, financing for biomedical ventures went on the upswing. Two factors stood out in shaping the early structure of the field and the nature of its net- works. One is that the different members of the field had varying abilities and competen- cies. Some of the participants were highly specialized, while others had a hand in
multiple activities. For example, universities and public research organizations specialized in basic science and in early stages of drug development. Venture capital firms special- ized in financing. Biotechnology companies, and especially large multinationals, tended to have a hand in many more activities. More recently, public research organizations such as universities have greatly broadened their range of endeavors in the biomedical field. The most dramatic finding of this research was that, over time, all participants in the field had to learn to master a wider array of relationships and move from specialist to generalist roles. That move makes the need to navigate multiple potentially competing logics a key feature of the field. Second, as the field gained coherence and the pattern of reliance on networks solidified, various institutions emerged to facilitate and monitor inter-organizational collaboration. Offices were established on university cam- puses to promote technology transfer, law firms developed expertise in intellectual property issues, and various angel investors and venture capital firms provided financing, along with management oversight and refer- rals to a host of related businesses. As these relations thickened and a relational contract- ing infrastructure grew, the reputation of a participant came to loom large in shaping identities (Powell, 1996). There are two aspects of this analysis that are highly relevant to our current discussion of network and field evolution. One, notable changes in the nature of the actions pursued by the field’s participants accompanied shifts in the field’s characteristic practices, logics, and norms. Two, both the cast of participants and the rules of the game changed as new logics of affiliation emerged and spread. We briefly summarize these two co-evolving trends, and refer the reader to the more exten- sive discussion in the 2005 paper. In the late 1980s, the most active partici- pants in the emerging biotechnology industry were the dedicated biotech firms, pharma- ceutical corporations, and key government agencies such as the National Institutes of
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Health. In these early years, biotech firms lacked the capability to bring novel medi- cines to market, while large firms trailed in understanding new developments in molecu- lar biology (Gambardella, 1995; Powell and Brantley, 1992; Henderson, Orsenigo and Pisano, 1999). Venture capital activity in biotech was limited, and most small compa- nies supported their research and develop- ment activities by selling their lead products to large corporations, which subsequently marketed the medicine and pocketed the lion’s share of the revenues (Powell and Brantley, 1996). A handful of emerging dedicated biotech firms with considerable intellectual property and strong translational research ability were highly sought after as collaborators. This first wave of biotechs founded in the 1970s and early 1980s included Genentech, Centocor, Amgen, Genzyme, Biogen and Chiron, and the most active large corporate partners were firms such as Eastman Kodak, Johnson and Johnson, and Hoffman La Roche. While the commercial logic of young firms selling their lead products to major corporations domi- nated the landscape of the 1980s, a new set of relationships was quietly emerging. The National Institutes of Health began forging R&D relationships with new entrants to the industry, and linking university scien- tists and start-up firms. As the science under- girding biotechnology expanded by leaps and bounds, the intellectual property associated with the science became more codified and legally secure. This, in turn, attracted greater interest from venture capital. By the early 1990s, biotech firms not only had highly prestigious science, evidenced by publica- tions in top-tier journals, but they also had secure legal rights to their intellectual prop- erty in the form of patents. The networks of affiliation began to change, in some respects quite dramatically. By the mid 1990s, the most active participants in the field con- tinued to be dedicated biotech firms, but the large pharmaceutical companies were pushed to the sidelines by the entrance of venture capital firms and universities. Moreover, the
primary locus of activity shifted from com- mercialization to research and development and finance. The industry expanded geographically as well, moving from its early origins in the Bay Area and Boston to San Diego and a handful of other key regions in the United States and Europe (Owen-Smith, Riccaboni, Pammolli, and Powell 2002). Growth in the number of new firms, new partnerships, and new ideas was greatly enhanced by an increase in finan- cial linkages and government research fund- ing. The combination of the growth of private equity markets and national funding for R&D replaced the former reliance on large corporations for support. The older relationship with giant multina- tionals for commercialization activity was a very restrictive one. A small handful of firms had the ability to take a drug to late-stage development and a small set of dominant multinationals could manufacture and dis- tribute the drug worldwide. This commer- cialization arrangement was a downstream activity, involving the sale of a new medical product. One might consider it the last dance in the product life cycle. In contrast, finance is an upstream activity, which fueled research and development, licensing, and subsequent commercialization. Consequently, it enrolled many more participants into the industry net- work. With the addition of more participants, a wider array of organizational forms joined the field. Diversely anchored, multi-con- nected networks are much less likely to unravel than are networks that are reliant on a few forms of organization. Most notably, multiple logics were now at play. Pharmaceuticals began to recognize that they had to learn skills other than devel- opment and commercialization in order to compete with university researchers and ven- ture capitalists for access to cutting edge ideas. The network structure of the field con- tinued to expand throughout the 1990s, as both the number of entrants and the number of ties linking incumbents and new entrants expanded greatly. Indeed, in 1998 more than 1100 new ties were forged. All of the
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of innovative activity pursued in these regions (Owen-Smith and Powell, 2006). In the conceptual terms used earlier, our analyses of innovation in Boston and Bay Area biotechnology draw on two core ideas. First, our earlier work demonstrates that the organizational form of the dominant players in a network shapes the character of social capital in a community. Where universities dominate, a logic of discovery that favors openness and information diffusion prevails and membership alone suffices to increase rates of innovation. In contrast, when for- profit organizations are key players in the network and more ‘closed,’ proprietary logics are at the fore, a central network position is essential (Owen-Smith and Powell, 2004). In addition to shifting the ways that organiza- tions extract benefits from their networks, the different logics associated with partners of disparate form shape strategies for innova- tion, the kinds of connections firms forge and the markets they seek to serve. Recall our description of the different types of organizations — including VC firms, gov- ernment agencies, large multinationals, large public research organizations, and dedicated biotech firms – that comprise this field. These diverse organizational forms were linked by multiple types of affiliations: R&D connec- tions for shared research and development, finance ties reflecting investment, licensing relations that transfer the rights to intellectual property across organizations, and commer- cialization partnerships that include product development, clinical trials, manufacturing, and sales and marketing. We find two notable differences between the Bay Area and Boston regional networks. The Bay Area is larger organizationally and geographically, with many more biotech firms, several major universities, including Stanford and the Universities of California (UC) at Berkeley and at San Francisco (UCSF), and numerous venture capital firms. The Boston network, while denser and some- what smaller, has many more public research organizations, including MIT, Harvard University, Massachusetts General Hospital,
Dana Farber Cancer Center, and Brigham and Women’s Hospital among others. The Boston area had many fewer venture capital firms in the 1970s and 1980s, and VCs arrive in the Boston region much later (Powell, Koput, Bowie, and Smith-Doerr, 2002). Neither region housed a large multi- national pharmaceutical corporation during the period stretching from 1970s through the 1990s. Both clusters have structurally cohe- sive networks, but they differ in the demog- raphy of their organizational types. We have shown that the Boston network grew from early origins in the public sector, and that public science formed the foundation or anchor for subsequent commercial applica- tion (Owen-Smith and Powell, 2004; Porter, Whittington and Powell, 2005). Because the Boston biotechnology community was linked by shared connections to public research organizations early in its evolution, this clus- ter manifested a more open technological tra- jectory than a cluster that relied more heavily on industrial R&D. By contrast, the Bay Area was much influenced by the prospecting and matchmaking efforts of venture capitalists, the multidisciplinary science of the UC San Francisco medical school, and the novel efforts at technology transfer at Stanford (Colyvas 2007). The San Francisco Bay Area evolved out of this more commercial and entrepreneurial orientation. Interestingly, both Boston and the San Francisco Bay Area developed from dependence upon a non- biotech organizational form, and these diverse forms, whether they are public science organizations or highly engaged entrepreneurial financiers, helped catalyze the development of the respective clusters. Do these different relational components and logics influence the nature of research and the kinds of medical products that emerged from the companies in these two regions? We explored this question in two ways, by examining the nature of patenting among the participants in the two regions and through a paired comparison of two compa- rable treatments for multiple sclerosis. In a 2006 study, we found a significant difference
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in the patenting activity of biotech firms in Boston and the Bay Area, with Bay Area firms producing roughly 3,800 U.S. utility patents over the period 1988–1999, while Boston area firms generated 1,376. Bay Area firms appear to be much more prolific paten- tors. The highly skewed distribution of patents, however, suggests that the differ- ence results from a small number of excep- tionally productive Bay Area companies (Owen-Smith and Powell, 2006). More interestingly, however, are the con- siderable differences we observe in the cita- tions Boston and Bay Area firms make in their patents. These data suggest that Boston biotechs more routinely engage in exploratory innovative search, which typi- cally yields a few very high impact patents at the expense of numerous innovations with lower than average future effects (Fleming and Sorenson, 2001). In contrast, the domi- nant Bay Area patenting strategy appears to be a more directed and incremental, ‘exploitation’ strategy that is what one might expect of companies supported by investor networks that demand demonstrated progress. Companies that pursue exploitative strategies generally develop numerous related improvements on established compo- nents of their research trajectories. Exploratory Boston area companies are much more reliant on citations to prior art generated by universities and public research organizations, while Bay Area companies rely more on citations to their own prior art. Indeed, 71 percent of the patent citations by Boston companies are to prior art developed outside at biotech firms. How might such differences in patenting be reflected in the kinds of products released by the companies? We used the Food and Drug Administration (FOA) approval records to identify the 58 new drugs developed by Boston and Bay Area biotech firms. Fifty- three of these medicines were approved between 1988 and 2004. All of the drugs that appeared on the market prior to 1988 were developed by just two Bay Area firms, Alza and Genentech. These early approvals no
doubt reflect the commercialization strategy pursued in the Bay Area region. We find that the Boston-based companies had a stronger focus on orphan drugs intended to treat rare diseases for patients with relatively small markets. In 1983, the Orphan Drug Act was created to speed the development of thera- pies for rare diseases by offering tax breaks and regulatory assistance to organizations that would develop medicines for small market medical needs. Many Boston-based firms have chosen to focus on orphan drugs, as one might expect of companies that are enmeshed in networks that are dominated by universities and hospitals. In contrast, Bay Area biotech firms have pursued medicines for larger markets in which the potential patient populations run into the millions, and for which there is likely to be stiff product competition. This high-risk, high-reward strategy shows the imprint of the venture capital mindset. We did a paired comparison of two drugs, Betaseron developed by the Bay Area firm Cetus, which was eventually acquired by Chiron, a Berkeley-based biotech firm, and Avonex, developed by Boston-based Biogen in tandem with Berlex Laboratories, an American subsidiary of the German pharma- ceutical firm Schering-Plough. We compared these similar drugs by looking at FDA label- ing information and patenting citations to prior art. These two drugs are biologically and chemically comparable. Both are thera- pies for the same disease, recurring and remitting multiple sclerosis. Betaseron relies on a set of four patents, three initially assigned to Cetus and reassigned to Chiron following the merger of the two firms, as well as one process patent, which was reas- signed to Berlex Labs. These four patents cite a small group of prior art patents, and in turn, a larger group of second generation citations. In sum, Betaseron rests on a history of some 55 interlocking patents, almost all of which are based on intellectual property owned by companies. Avonex, developed by Biogen, is based on a single compound patent, but it reached
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in daily practice. We draw on examples from Owen-Smith’s (2001) ethnographic work in a multidisciplinary neuroscience laboratory to explore how scientists draw on existing categories and relationships to make sense of and maneuver within their fields. The particular logics associated with different scientists, technicians, researchers, and students, and the varieties of capital (resources) that can be derived from their positions and relationships have primacy in shaping both identities and opportunities. In the H-lab^3 – a large, multidisciplinary academic neuroscience group that conducts fundamental research on olfaction in the moth Manduca sexta – Owen-Smith found that collective opportunities for skepticism were shaped by relative positions within the laboratory as well as expectations based on the ascribed skill and disciplinary affiliations of participants. In the scientific field, skepticism is a core aspect of the logic by which novel claims are validated. In an arena where tacit knowledge made direct replication problematic and the multi- disciplinary insights needed to pursue the research nevertheless resulted in widely dif- ferent competencies, public performances of skepticism and resistance became key fea- tures of training and knowledge production. Even though public episodes of skepticism were clearly improvisational, they occurred against the backdrop of well-understood (though rarely articulated) norms of appro- priateness. Those standards were structured by the relationships (of mentorship, collabo- ration, and sponsorship), categories (disci- plines, methods, audiences), and hierarchies (status) that characterize scientific fields. The stage for particular skeptical performances was thus neither flat nor neutral. Scientists’ career trajectories and the fate of new knowl- edge claims owed much to the skilled per- formance and reception of skepticism. Fligstein (2001) identifies social skill with the ability to induce cooperation from others. 4 This view of skill is apparent in indi- vidual scientist’s abilities to convince skepti- cal peers of the quality and validity of their
findings. Such skilled performances, Owen- Smith’s field-work suggests, are differen- tially enabled by scientists’ disciplinary affiliations. Disciplines have different sta- tuses in the academic field and participants draw on broad expectations of disciplinary competence in assessing scientific claims. Discipline is a means to position an individ- ual and his or her claims in a general status hierarchy and a tool for making sense of their competencies. Bio-physicists, for instance, are accorded different degrees and types of leeway in skeptical interactions than chemists or ecologists, even if their claims do not rest explicitly on the particular com- petencies associated with their discipline. In practice, comparable findings presented by scientists whose disciplines differ can meet with disparate skeptical reactions. Relationships matter equally as much as disciplinary categories, however. New find- ings are also evaluated in light of the individ- uals whose research produced them. Collaboration is a clear example. The vast majority of empirical articles in neuroscience have multiple authors. In the life sciences, authorship apportions credit according to a well-understood formula.^5 Co-authorship has long been understood as a means for scien- tists to invest established stores of profes- sional credibility in findings and colleagues (Latour and Woolgar, 1976), but in categori- cally and hierarchically differentiated fields, such investments can be double-edged. Here, relationships serve as important con- duits of information and material resources, but they are also key prisms for evaluating new claims under conditions where direct monitoring and replication are implausible or impossible. Consider a skeptical performance that takes discipline, status, and relationships into account simultaneously (Owen-Smith 2001: 445 fn). In addition to serving as a means to validate findings developed ‘locally’ in the laboratory, collective skepticism was a means by which members of the laboratory deter- mined which ‘external’ claims could be trusted and whether findings that contradicted
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their own needed to be taken into account. In one instance, Owen-Smith observed a long discussion of a working paper from outside the H-lab that purported to contradict one of the group’s primary findings. The paper gen- erated heated discussions, including one interchange between Beth (a technician in the lab) and Jim, the group’s principal investiga- tor. They discussed a paper authored by Blanca, a post-doc in a Scandinavian labora- tory, and Bill, that laboratory’s principal investigator (PI) and a former student in the H-Lab. In this interaction the categorical implications of Blanca’s discipline (she is a chemist) and of her collaborative relationship with Bill loomed large, as does Bill’s relative status in the field and the legacy of his time in the H-lab.
Beth: You might also want to ask her about her method. Before she came here she worked on really small beetles. That is a really difficult animal. She is an expert with these methods and she has techniques that we do not. Also, she is really good with chemistry. She has a really strong background, stronger than anyone here. So the answer to your implication that she hasn’t thought through her controls is that she probably has! Jim: There’s no question about the chem- istry, but she is working in Bill’s lab and we know that Bill is a little too flamboyant with his methods.
This snippet of conversation is part of a larger, collective skeptical performance that drew on categorically based expectations (e.g. chemists are good at structuring experi- mental controls), ascribed levels of individ- ual skill (e.g. working with a difficult model animal results in better technique), and past relationships (e.g. evaluations of Bill’s scien- tific competency based on his time in the H-lab), as well as present ones (e.g. Jim’s insistence that Blanca’s discipline and skill be interpreted in light of her senior co-author). Such performances were disci- plined by logics of action native to the
broader field (e.g. standards of presentation, means of apportioning credit via authorship), but relied on a mix of local and global stan- dards of appropriateness. In instances like this one, local action and situated performances bring categories, hier- archies, and relationships together in mean- ingful efforts to navigate a field. Global features of the field of neuroscience – a mul- tidisciplinary endeavor that plays out on a status-differentiated pitch where collabora- tions are fundamental to claims-making and evaluation – are apparent in the local interac- tions of skilled scientists. Convincing one another of the validity (or lack thereof) of particular claims required both careful rhetorical effort and the ability to draw the broader field and its conversations into spe- cific performances.
PERFORMANCES CAN CHANGE
FIELDS
Observations in the H-lab clarify some of the ways that categories and relationships get imported into local performances. We also suggest there are (perhaps fewer) instances where situated action can shift the categori- cal and relational features of fields. We offer a pair of examples drawn from Owen- Smith’s field work in a high-profile univer- sity technology licensing office (TLO) (Owen-Smith 2005, 2007) 6. Like the H-lab, the TLO is a university- affiliated workplace situated in a differenti- ated, hierarchical field. Where work in the H-laboratory is focused on scientific attempts to understand the neuroscience of olfaction, the TLO’s goal is to identify, manage and market potentially valuable technologies for ‘society’s use and benefit while generating unrestricted income for research and education.’ The TLO is a bound- ary-spanning administrative unit, the efforts of which are framed as a service to faculty researchers and industrial partners. The office’s staff comprises individuals who
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