Knowledge Networks: Explaining Effective Knowledge Sharing in Multiunit Companies Morten T. Hansen Organization Science, Vol. 13, No.

3, Knowledge, Knowing, and Organizations. (May - Jun., 2002), pp. 232-248.

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Knowledge Networks: Explaining Effective

Knowledge Sharing in Multiunit Companies

Morten T. Hansen
Haward Business School, Morgan Hall, Soldiers Field Park, Boston, Massachusetts 02163 mhansen @ hbs.edu

Abstract
This paper introduces the concept of knowledge networks to explain why some business units are able to benefit from knowledge residing in other parts of the company while others are not. The core premise of this concept is that a proper understanding of effective interunit knowledge sharing in a multiunit firm requires a joint consideration of relatedness in knowledge content among business units and the network of lateral interunit relations that enables task units to access related knowledge. Results from a study of 120 new product development projects in 41 business units of a large multiunit electronics company showed that project teams obtained more existing knowledge from other units and completed their projects faster to the extent that they had short interunit network paths to units that possessed related knowledge. In contrast, neither network connections nor extent of related knowledge alone explained the amount of knowledge obtained and project completion time. The results also showed a contingent effect of having direct interunit relations in knowledge networks: While established direct relations mitigated problems of transferring noncodified knowledge, they were harmful when the knowledge to be transferred was codified, because they were less needed but still involved maintenance costs. These findings suggest that research on knowledge transfers and synergies in multiunit firms should pursue new perspectives that combine the concepts of network connections and relatedness in knowledge content.
(Knowledge Networks; Multlurzit Firms; Organization Capabilities; Synergy; K n o ~ , l e d g Management) e

Why are some business units able to benefit from knowledge residing in other parts of the company while others are not? Both strategic management and organization theory scholars have extensively researched this question, but differences in focus between the various approaches have left us with an incomplete understanding of what causes knowledge sharing to occur and be beneficial across business units in multiunit firms. In one line of research, scholars have focused on similarity in knowledge content among business units, arguing that a firm
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and its business units perform better to the extent that units possess related competencies that can be used by multiple units (e.g., Rumelt 1974, Markides and Williamson 1994, Farjoun 1998). While this knowledge content view has demonstrated the importance of relatedness in skill base, it does not shed much light on the integrative mechanisms that would allow one business unit to obtain knowledge from another (Ramanujam and Varadarajan 1989, Hill 1994). When sharing mechanisms are considered in this research, it is often assumed that the corporate center is able to identify and realize synergies arising from similarity in knowledge content among business units, but this assumption is typically not tested empirically and excludes a consideration of lateral interunit relations (Chandler 1994, Markides and Williamson 1994, Farjoun 1998). In other lines of research, in contrast, scholars have demonstrated the importance of having lateral linkages among organization subunits for effective knowledge sharing to occur. Research has shown that a subunit's information processing capacity is enhanced by lateral interunit integration mechanisms (e.g., Galbraith 1973, 1994; Egelhoff 1993; Gupta and Govindarajan 2000), product innovation knowledge flows more efficiently through established relationships spanning subunit boundaries (Tushman 1977, Ghoshal and Bartlett 1988, Nobel and Birkinshaw 1998, Hansen 1999), and best practices are transferred more easily when a positive existing relationship exists between the two parties to a transfer (Szulanski 1996). These lines of research on linkages have, however, not incorporated opportunities for knowledge sharing based on commonality in knowledge content among subunits, but has taken this aspect as given. Yet the existence of both related knowledge in the firm-i.e., expertise in the firm's business units that can be useful for tasks performed in a focal business unitand a set of established linkages among business units seems necessary for interunit knowledge sharing to occur

1047-7039/02/1303/0232/$05.00 1526-5455 electronic ISSN

MORTEN T . HANSEN Knowledge Networks

and be effective. In this paper, I consider both dimensions and develop the concept of task-specific knowledge networks, which comprise not only those business units that have related knowledge for a focal task unit, but also the established direct and indirect interunit relations connecting this subset of business units. I define established interunit relations as regularly occurring informal contacts between groups of people from different business units in a firm, and I assume that task units will be able to use these relations to search for and access knowledge residing in other business units. I make two main arguments. First, with respect to indirect relations (i.e., connections through intermediaries), I argue that task teams in focal business units with short path lengths in a knowledge network (i.e., few intermediaries are needed to connect with other units) are likely to obtain more knowledge from other business units and perform better than those with long path lengths because of search benefits accruing to business units with short path lengths. Long path lengths, in contrast, lead to information distortion in the knowledge network, making search for useful knowledge more difficult. Second, I argue that a focal unit's direct established relations in a knowledge network are a two-edged sword: While they provide immediate access to other business units that possess related knowledge, they are also costly to maintain. They are, therefore, most effective when they help teams solve difficult transfer problems, as when the knowledge to be transferred is noncodified (Szulanski 1996, Hansen 1999). When there is no transfer problem, they are likely to be harmful for task-unit effectiveness because of their maintenance costs. This knowledge network model seeks to advance our understanding of knowledge sharing in multiunit companies in several ways. First, by integrating the concepts of related knowledge and lateral network connections that enable knowledge sharing, the model seeks to extend extant research that has addressed only one of these aspects. Second, while extant research on knowledge transfers tends to focus on direct relations (i.e., the dyadic link between a recipient and a source unit of knowledge), I also consider the larger organization context of indirect relations, which are conduits for information about opportunities for knowledge sharing (cf. Ghoshal and Bartlett 1990). This approach enables a richer understanding of search processes for knowledge use in multiunit firms. Third, while scholars often consider the positive effects of network relations on knowledge sharing, I also consider maintenance costs of networks by incorporating this time commitment in analyzing the impact of interunit network relations on knowledge-sharing effectiveness in multiunit firms.

Knowledge Networks in Multiunit Firms

The joint consideration of related knowledge and lateral interunit relations of a knowledge network is illustrated in Figure 1 for a new product development team, which is the unit of analysis in this paper. Diagram l a illustrates a network of relations among all business units in a firm, but does not partition these units into those that have related knowledge for the focal new product development team, A (i.e., a pure network consideration). Diagram Ib, in contrast, partitions the business units in the firm into those that have related knowledge for the focal product development team (A) and those that have not, but there is no consideration of the network among the units (i.e.,

Figure 1

Illustration of a Project-Specific Knowledge Network for Project A

la. Network among business units (no related knowledge)

lb. Related knowledge between business units (no network)

0
0

Has related knowledge for A

0 Does not have related knowledge for A

lc. Project-specific knowledge network (network and related knowledge) Knowledge netwok

Has related knowledge for A

0 Does not have related knowledge for A

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a pure related knowledge consideration). Diagram 1c illustrates a project-specific knowledge network: Business units are partitioned into those that have related knowledge for the focal product development team (A), and the complete set of network of relations among them are included, including both direct and indirect relations (i.e., intermediary links connecting the focal unit with others in the knowledge network). Both the indirect and direct relations affect the extent to which a focal product development team is able to obtain knowledge from other business units and use it to perform better.

Effects of Indirect Relations in Knowledge Networks A product development team's direct and indirect interunit relations in its knowledge network affect the effectiveness of its search for useful knowledge by being important conduits for information about opportunitiesthe existence, whereabouts, and relevance of substantive knowledge residing in other business units. While business units in the network may not be able to pass on product-specific knowledge directly, as such knowledge often requires direct interaction with the source to be extracted, a focal team that hears about opportunities through the network can contact the source directly to obtain the knowledge. Such knowledge, as defined here, includes product-specific technical know-how, knowledge about technologies and markets, as well as knowledge embodied in existing solutions, such as already developed hardware and software. Although direct relations in the knowledge network provide immediate access and hence are especially useful for a focal team inquiring about opportunities, indirect relations are beneficial as well, because information about opportunities is likely to be passed on by intermediary units and eventually reach the focal team, provided that business units in the knowledge network are reachable.' The idea that intermediaries pass on messages and that they help forge connections has been well supported in communications and social network research. Studies investigating the "small-world phenomenon demonstrated that the path length (i.e., the minimum number of intermediaries) needed to connect two strangers from different states in the United States was remarkably short and consisted of about five to seven intermediaries (Milgram 1967, Kochen 1989, Watts 1999). Early work on innovation research showed that new product development teams benefited from having a gatekeeper or boundary spanner, that is, a person who scans and interprets the team's environment and then passes on information to the rest of the team (Allen 1977, Katz and Tushman 1979). In social network research, Granovetter (1973) showed that intermediary persons who are weakly tied to a focal
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person are uniquely placed to pass on information about new job opportunities because they are more likely than strongly tied connections to possess nonredundant information. The common thread in these lines of work is that indirect relations are pervasive conduits for information. Intermediaries help forge connections and pass on messages that bridge two otherwise disconnected actors. However, indirect interunit relations may not be perfect conduits of information about opportunities. As information gets passed on across people from different units, there is likely to be some degree of imperfect transmission of the message about opportunities for knowledge use. In particular, when information about opportunities has to be passed on through many intermediaries (i.e., through long paths, cf. Freeman 1979), it is likely to become distorted (Bartlett 1932, March and Simon 1958). People who exchange such information are prone to misunderstanding each other, forgetting details, failing to mention all that they know to others, filtering, or deliberately withholding aspects of what they know (Collins and Guetzkow 1964, Huber and Daft 1987, Gilovich 1991). The distortion may be unintentional or deliberate (07Reilly 1978). Huber (1982) relates a dramatic example, originally provided by Miller (1972), of a mistake made during the Vietnam War. The chain of messages was as follows: The order from headquarters to the brigade was "on no occasion must hamlets be burned down," the brigade radioed the battalion "do not burn down any hamlets unless you are absolutely convinced that the Viet Cong are in them;" the battalion radioed the infantry company at the scene "if you think there are any Viet Cong in the hamlet, bum it down;" the company commander ordered his troops "burn down that hamlet." Thus, the more intermediaries needed, the higher the chances of such distortion, and hence the less precise is the information that is passed on (Miller 1972, Huber 1982). The implication of receiving imprecise information in this context is that a project team cannot easily focus on a few opportunities that are especially relevant, but must instead check a number of imprecise leads to verify whether they are relevant for the team, resulting in a more elaborate interunit search process that takes time. For example, a project manager in my study told me that he had been told by a third party in the company about a group of engineers in another unit who were supposed to have some useful technical know-how, but when he was able to reach them after trying for a while, it turned out that the know-how was not relevant for the project. Such fruitless searches not only take time, but also cause delays in the project to the extent that the needed knowledge input holds up the completion of other parts of the project. Because of the problem of information distortion when

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relying on intermediary units, a focal team is likely to benefit from short path lengths in the knowledge network (i.e., few intermediaries required to connect a team in a focal unit with other units). Short path lengths enable the team to know about precisely described opportunities involving related knowledge and allow it to discard information about irrelevant opportunities. The team can then focus on opportunities with a high degree of realization potential and can quickly contact people in these units and begin working with them to extract and incorporate their knowledge into the focal project. Thus, less time is spent evaluating and pursuing opportunities, reducing efforts devoted to problemistic search, including search efforts that establish that no useful opportunities exist (Cyert and March 1992). Teams with short path lengths are thus more likely than teams with long path lengths to hear about more opportunities that overall yield more useful knowledge, to the extent that opportunities are not redundant to one another. All else equal, this benefit should reduce a focal team's time to complete the project. The arguments can be summarized in two hypotheses. HYPOTHESIS 1. The shorter a team's path lengths in the knowledge network, the more knowledge obtained from other business units by the team. HYPOTHESIS 2. The shorter a team's path lengths in the knowledge network, the shorter the project completion time.

Effects of Direct Relations in Knowledge Networks The shortest possible path length is to have an established direct relation to all other business units in a knowledge network. Such a network position does not require any intermediary units and should remove the information distortion caused by using intermediaries. However, unlike indirect relations, which are maintained by intermediary business units, direct interunit relations need to be maintained by people in the focal business unit, possibly including focal team members, and require their own set of activities that take time. In the company I studied, for example, product developers spent time outside of their projects traveling to other business units on a regular basis to discuss technology developments, market opportunities, and their respective product development programs. Such interunit network maintenance can be a distraction from completing specific project tasks: Time spent on maintaining direct contacts is time not spent on completing project-related tasks. Although direct interunit relations involve maintenance costs, they also provide a benefit in certain situations: Established direct relations between a focal team and another business unit may be helpful when the team identifies knowledge that requires effort to be moved from the
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source unit and incorporated into the project. For example, in a number of projects in my sample, team members were frequently able to obtain software code from engineers in other business units, but sometimes the engineers who wrote the code needed to explain it and help the team to incorporate the code into the new project. Receiving such help was often much easier when the team and the engineers providing the code knew each other beforehand. This likely positive aspect of direct relations needs to be compared with their maintenance costs. Direct relations are especially helpful when a team is experiencing transfer difficulties-i.e., spending significant time extracting, moving, and incorporating knowledge from other subunits-because the knowledge is noncodified, which is defined as knowledge that is difficult to adequately articulate in writing (Zander and Kogut 1995, Hansen 1999). Relying on established direct relations may ease the difficulties of transferring noncodified knowledge, because the team and people in the directly tied unit have most likely worked with each other before and have thus established some heuristics for working together, reducing the time it takes to explain the knowledge and understand one another (Uzzi 1997, Hansen 1999). When a focal team experiences significant transfer difficulties because of noncodified knowledge, having established direct relations to related business units is likely to reduce the amount of time spent transferring knowledge, which may offset the costs of maintaining such relations and shortening project completion time. In particular, having a number of direct relations in a knowledge network increases the likelihood that a team will be able to use one of them in transferring noncodified knowledge. Thus, while indirect relations are beneficial to the extent that they serve as intermediaries that provide a focal unit with nonredundant information, direct relations are beneficial to transferring noncodified knowledge, implying that the benefit of having intermediaries supplying nonredundant information is relative (cf. Burt 1992). In contrast, this transfer benefit of direct relations is less important when a focal team can easily extract and incorporate the knowledge that was identified in another subunit, as when that knowledge is highly codified. In these situations, direct interunit relations are not useful for transfer, but they still carry maintenance costs, which take time away from the completion of the project to the extent that team members do not have slack resources that can be devoted to maintaining these relationships. The more such relations that are maintained by a focal unit, the higher the maintenance costs, and the more time is taken away from completing a project. The arguments can be summarized as follows: HYPOTHESIS 3 ~The . higher a team's number of direct
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relations in the knowledge network, the shorter the project completion time when the knowledge to be transferred is noncodijied.
HYPOTHESIS3 ~The . higher a team's number of direct relations in the knowledge network, the longer the project completion time when the knowledge to be transferred is codijied.

I therefore included both canceled projects and projects still in progress. After having removed too-small, premature, and idiosyncratic projects, I ended up with a list of 147 projects. The project managers of 120 of these returned their survey, yielding a response rate of 85%. Of the 120 projects, 22 were still in progress at the time of data collection, four had been canceled, and 54 reported a significant transfer event involving another division. Specifying Project-Specific Knowledge Networks
Identifying Related Subunits. Together with the three corporate R&D managers, I developed a list of 22 technical competencies that constituted related knowledge areas (see Appendix 1 for the list of technical competenc i e ~ ) I. ~ asked the R&D managers in the divisions to indicate up to four specific competencies of their divisions on this list and to add any if they thought the list was incomplete. The three corporate R&D managers reviewed the responses to verify whether it made sense to group those divisions that had reported the same competence. The project managers of the 120 projects were then asked to indicate what technical competencies the specific project required and were presented with the same list that was presented to the divisional R&D managers. Thus, for a given project, a number of divisions had a competence that matched the requirements listed by the project manager (see Appendix 1 for the distribution of projects per competence). For example, a project manager indicated that his project required technical competencies in three areas: distributed measurement, communication system monitoring, and optics. Twelve diferent divisions had at least one of these technical competencies and thus constituted the knowledge network for this particular project. Specifying Interunit Relations. A group of engineers in a division typically maintained an informal regular contact with a group of engineers in another division, and a project team would use such contacts to access other divisions. These relationships were common knowledge in that most product developers seemed to know about their existence and how to use them, and I was told in preliminary interviews that a main responsibility of a division's managers was to provide these contacts for his or her project teams, should the need arise. I therefore assumed that at least one member of a project team would know about the divisional-level contacts and that the team members could access these contacts if they wanted to. Because of the importance of these interdivisional contacts in the company, I chose to focus on these types of contacts. Following previous research, I used a key informant to

Data and Methods

Setting I tested the knowledge network model in a large, multidivisional and multinational electronics company (hereafter called "the Company"). I negotiated access to the company through three senior corporate R&D managers and initially visited 14 divisions where I conducted openended interviews with 50 project engineers and managers to better understand the context, and to develop survey instruments. The company, which has annual sales of more than $5 billion, is involved in developing, manufacturing, and selling a range of industrial and consumer electronics products and systems, and is structured into 41 fairly autonomous operating divisions that are responsible for product development, manufacturing, and sales. By focusing on these divisions, I was able to compare units that occupy the same formal position in the Company, thereby controlling for a potential source of variation in formal structure. They all had the same formal status as a business unit with profit-and-loss responsibility, all had a general manager, and none of the divisions reported to another division. In addition to interunit relations, there were a few other integrative mechanisms across divisions, notably divisionwide conferences and electronic knowledge management systems, but initial interviews revealed that these did not vary much among the divisions. Selecting Product Development Projects I used two surveys: a network survey administered to the R&D managers in the 41 divisions and a survey for the project managers of the product development projects included in this study. In selecting projects, I first created a list of all projects that the divisions had undertaken during the three-year period prior to the time of data collection. I then excluded very small projects (i.e., those with less than two project engineers) and projects that had not yet moved from the investigation to the development phase and were therefore hard to track. I also excluded idiosyncratic projects that had no meaningful start and end (e.g., special ongoing customer projects). Including only successfully completed projects may lead to an overrepresentation of successful projects, biasing the results.
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obtain information on interdivisional relations (Knoke and Kuklinski 1982, Marsden 1990). I considered the divisional R&D managers to be the most appropriate informants because they were "in the thick of things" in the R&D department in their division. The R&D manager in each of the 41 divisions received a questionnaire asking, "Over the past two years, are there any divisions from whom your division regularly sought technical andlor market-related input?" The question was followed by a list of the 41 divisions included in the study, allowing respondents to indicate whether they had a tie to any on the list, leading to a complete network where everybody was asked whether a tie existed with everybody else (Marsden 1990). Because I asked everybody to indicate whether a tie existed with each of the other 40 divisions, I avoided a potential bias resulting from having to ask someone to ascertain whether ties exist among others (Krackhardt and klduff 1999). To validate the responses, I employed the crossvalidation method used by Krackhardt (1990) by asking the R&D managers who comes to them for input. An actual tie exists when both divisions agree that one comes to the other for input. I then sent an e-mail to all of the R&D managers, asking them about the ones about which there was no joint agreement. On the basis of their responses, I included some of these suspect ties and excluded others.
Merging Network and Project Data. I constructed project-specific knowledge networks by including all relations among divisions possessing related knowledge for a given project. For example, for the aforementioned project for which there were 12 related divisions, I included all relations among these 12 divisions, and this network constituted the project-specific knowledge network. To construct these project-specific networks, I merged the project data with the divisional network data by assigning a division's network relations to its projects. Thus, interdivisional ties became the equivalent of interdivisional project ties. It is important to record the values on the network variables prior to the start of a project because my theoretical arguments assume that a project team uses established preexisting interunit ties to search for and transfer knowledge. Following the approach of Burt (1992) and Podolny and Baron (1997), I handled this issue by measuring the interdivisional network relations over several years by only assigning network ties that existed prior to the start of the project. This procedure generated time-varying network data from information that the respondents could recall. The potential bias in this approach is that it may exclude some relations that existed prior to a project's start

but that ceased to exist by the time the R&D managers completed the survey. This problem can be partially controlled for. This potential bias should be more of a problem for projects in divisions in which relations come and go than in divisions with long-lasting relations. If a division's relations are long lasting, then it is less likely that there were some relations that ceased to exist between the time just prior to the project's start and the time of surveying. To control for this potential bias, I entered a control variable for the average age of direct relations to related subunits (Age relations).

Dependent Variables
Project Completion Time. To assess project task performance, I measured project completion time as the number of months from the start of concept development to the time of market introduction for a given project (or time to the end of the study period or cancellation for ongoing and canceled projects, respectively). I defined starting time as the month when a dedicated person started working part or full time on the project, which typically coincided with the time an account was opened for the project. I defined the end date as the date on which the product was released to shipment, which is a formal milestone date in this company because it signifies that the product is ready to be manufactured and shipped on a regular basis. These definitions turned out to be very clear and provided few problems in specifying the start and completion times, which were 14.8 months on average for completed projects. Scholars have proposed two alternative measures of completion time. First, completion time can be measured as the extent to which the project is finished on schedule (e.g., Ancona and Caldwell 1992). The assumption in this schedule measure is that inherent project differences are accounted for in the original schedule, but also that everybody sets equally ambitious schedules, which was most likely not true in this company, where individual project managers set their own targets. A second approach is to group projects according to some similarity measure and then take a project's deviation from the mean completion time of the group (Eisenhardt and Tabrizi 1995). The problem with this approach is that the mean deviation relies on a clear similarity measure that was not easy to attain in this setting. Given that these two alternative methods seemed problematic, I chose to use the number of months as the dependent variable and then add projectspecific variables to control for inherent differences between the projects. Amount Acquired Knowledge. During field interviews I was told that the most common knowledge that project

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teams received from other divisions took the form of technical solutions embodied in already developed software code and hardware components. There were two types of "ware" being used in the projects-standard input to the products being made (e.g., components that were used in nearly all oscilloscopes being manufactured), and ware that helped solve a d hoc problems that were unique to a given project (i.e., technical know-how that had been embodied in software code or hardware). While the former was typically handled within divisions, the latter was typically obtained through interdivisional network contacts. Because my theoretical analysis focuses on knowledge that was obtained to solve ad hoc problems for a project, I chose to focus on software and hardware that the focal team obtained from other divisions to solve emerging problems. With a few exceptions, most of the ware obtained from other divisions was of this kind.4 During pretests, project managers thought they could indicate the amount of ware obtained from other divisions fairly accurately. The project manager was asked to indicate the percentage of all the project's software and hardware that came from other divisions in the company (see Appendix 1 for the specific question). To construct the dependent variable, I computed the fraction of ware (ranging from zero to one) that came from other divisions (Amount acquired knowledge). While engineers also obtained other types of knowledge from other divisions, such as informal technical advice not embodied in either software or hardware, these were more difficult to quantify, and I therefore did not develop a separate dependent variable for these types. However, I did ask the project manager to indicate the extent to which the team had obtained such knowledge, and this measure correlated 0.7 with the chosen dependent variable. It is thus likely that my measure of amount acquired knowledge is a proxy for more informal types of knowledge obtained through the network in this setting.

value of zero if no divisions were reachable (i.e., there were no paths connecting the divisions) and a value of one if all divisions in the project-specific knowledge network were reachable (the mean value for this variable is 0.85). I used the measure of closeness centrality to measure path lengths in the network (Freeman 1979). Closeness was measured as (Wasserman and Faust 1994)

where d(ni, nj) is the geodesics linking divisions ni and nj. Summing over all reachable related divisions excluding the focal one (g - l), this gives division n,'s total closeness score. This measure is standardized, so that a division has the shortest path length (i.e., is closest) to related divisions when the index is one and the longest path length when the index is near zero (Close related). These measures were computed in UCINET IV (Borgatti et al. 1992). Direct Relations with Divisions in a Knowledge Network. Because direct relations were asymmetric in the network in the Company, I distinguished between direct relations in which the focal team went to other divisions for advice (i.e., advice-seeking relations) and direct relations in which other divisions went to the focal one for advice (i.e., advice-giving relations). Each type of relations implies different costs. Advice-seeking relations need to be maintained, while advice-giving relations require time helping others. I coded the number of direct advice-seeking relations to related divisions by counting the number of preexisting divisional ties to divisions that had related knowledge for a project and then assigned that value to the focal project (Outdegree related). I then coded the number of direct advice-giving relations to related divisions by counting the number of preexisting divisional ties in which a related division reportedly went to the focal division for advice on a regular basis (Indegree related). To control for the possibility that these variables are simply an indication of the division's overall number of direct relations, I also included similar measures for direct relations outside a project's knowledge network. I subtracted the number of related advice-seeking ties from the total number of direct advice-seeking relations for the focal division to arrive at the unrelated advice-seeking ties (Outdegree unrelated). I subtracted the number of related advice-giving ties from the total number of advice-giving ties to compute the number of unrelated advice-giving ties (Indegree unrelated). Finally, I included a measure of the strength of related

Independent Variables
Path Lengths in a Knowledge Network. I relied on geodesics to compute the distances in the network. A geodesic is the shortest path length (i.e., the one with fewest intermediaries) between a focal division and another division in a knowledge network (Wasserman and Faust 1994). However, the measure is complicated because several of the project-specific knowledge networks were disconnected in that some divisions did not have a tie with other divisions in the knowledge network. I handled this problem by creating a control variable that indicates the fraction of related divisions that were reachable in a knowledge network (Reach). This variable takes on a

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advice-seeking ties. Previous research has shown that weak ties may facilitate search but impede the transfer of complex knowledge (Hansen 1999). Although the theory in this paper does not pertain to the effects of tie weakness on interunit knowledge transfers, I wanted to control for the possible effect of tie weakness. Tie weakness was computed by asking the R&D divisional managers to indicate on a seven-point scale how frequently people in their division talked to people in the other division and how close their working relationship was (see Appendix 1 for the specific questions). I took the average frequency and closeness for related advice-seeking ties to compute the measure (Strength related). Noncodijed Knowledge. I constructed a three-item scale of noncodification (see Appendix 1 for the specific items) and asked the project manager to indicate the level of codification of the knowledge that the project team received from other divisions (Noncodijed). This variable was then interacted with the number of related advice-seeking relations to test the hypothesis (Noncodijed X outdegree related). Alternative Explanations. I included variables to test for the possibility that either short path lengths or related knowledge (but not both) explains the amount of acquired knowledge and product development time. First, I included an overall closeness centrality measure by using the above equations for the closeness centrality measure, using the entire set of 41 divisions as the relevant network (Close all). To make this analysis comparable to the rest of the analysis, I also included a variable indicating the total number of direct advice-seeking relations (Outdegree all). If the estimate for the general closeness measure is positive and significant, then the network argument about the importance of close positions (irrespective of knowledge relatedness) is plausible. To capture the extent of related knowledge available to a project team, I included a variable measuring the number of related divisions (No. related units). If this measure of the extent of related knowledge in the Company is positive and significant, then the argument about the importance of related knowledge (irrespective of network relations) is plausible.

be in a powerful position where they can control the flow of information between two other units, thus using this benefit to obtain favors from others, such as help in transferring knowledge. To control for this power-oriented benefit of central positions, I included a measure of betweenness centrality (Wasserman and Faust 1994)

where g,, is the number of geodisics linking division j and k, and gj, (n,) is the number of geodisics linking division j and k that involve the focal division i. The measure is a sum of the probabilities that the focal division will fall on the geodesics linking all pairs of related divisions. The measure is standardized as follows:

where the denominator is the number of pairs of divisions not including the focal division i. This measure ranges from zero to one, where one is the maximum related betweenness among related divisions (Between related). Project Attribute Controls. To make the projects comparable, I controlled for several project-specific factors. I controlled for the extent to which the project used software and hardware existing within its division. This measure controls to some extent for a project team's motivation to conduct searches through the interunit network. The team should be less motivated to the extent that it can use existing ware inside its own division. Project managers were asked to indicate the percentage of all software and hardware in the project that they reused or leveraged from their own division (Own existing ware). I used the log of estimated dollar costs at the start of the project to control for size and scope differences beIn tween the projects ( B ~ d ~ e t ) .my ~ field interviews with project managers, I was also told that estimated costs capture inherent differences in technical complexity among the projects (the more complex the technology, the more engineering hours billed to the project). I used the budget figure to avoid an interaction between final costs and the dependent variable. High final costs may reflect long completion time because of more engineering hours billed to the project. I also coded whether a project-specific patent was applied for, to measure degree of innovation (Patent), and whether the project team developed a product or a system (Product). More innovative projects presumably take
239

Control Variables
Betweenness Centrality. Because the closeness centrality measures may be correlated with other centrality measures that attempt to capture other causal mechanisms, I included a measure of betweenness centrality, which is often used to measure a focal actor's brokering position in the network (Freeman 1979, Brass and Burkhardt 1992, Burt 1992). Divisions with high betweenness may

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longer to complete. The product-systems distinction was entered as a variable to control for possible differences between these two categories with respect to crossdivisional knowledge use. Each variable was coded as a dummy variable, where a value of one indicates a patent and a product, respectively. Finally, because strictly personal relations spanning subunits may be used by team members to obtain knowledge, I entered a control measure that was obtained from a third survey that was sent to all engineers on the projects in the sample (see Hansen et al. 2001). Engineers were asked to indicate the number of advice-seeking relations that they personally had to people in other divisions. I then summed these relations for a team (excluding contact names mentioned more than once) to arrive at a teamlevel measure of direct interpersonal relations spanning subunits (Personal relation^).^

Statistical Approach Because 66 projects did not report any knowledge use from other divisions, the dependent variable "amount acquired knowledge" was set to zero for these projects. Because of this large number of observations with a value of zero, a least squares regression model was inappropriate, and I employed a tobit model, using maximum likelihood estimation (Maddala 1983, Greene 1993). In addition, the statistical analysis of completion time was complicated by the fact that 22 of the 120 projects were still ongoing at the time of data collection. The dataset, therefore, includes right-censored cases (Tuma and Hannan 1984). Furthermore, four projects were canceled. Because the dataset contains right-censored data, ordinary least squares regression analysis cannot be employed (Tuma and Hannan 1984), but the problem of right censoring can be dealt with by using a hazard rate model. In this approach, a project enters the risk set from the time it was started and leaves the risk set when it is completed or canceled. The instantaneous transition rate-the dependent variable-is a measure of the likelihood of a project either completing or terminating at time t, conditional on it not having completed or terminated before t. The higher the transition rate, the more likely the project will be completed faster. The hazard rate model takes the following form:

I used the piecewise exponential specification as implemented in the statistical program TDA, because I did not want to make any assumption about duration dependence that would require a specific parametric distribution. I controlled for duration dependence, however, because the survivor plot revealed a nonmonotonic curve (cf. Tuma and Hannan 1984). The plot revealed several transition phases occurring at 10, 12, 15, 18, and 21 months and I therefore entered six time-period variables that reflect the time distribution of events. The transition rate is assumed to be constant within these periods, and covariates are assumed not to vary across time periods (Blossfeld and Rohwer 1995). Because multiple projects belong to a division, it is possible that project-specific observations are nonindependent because they vary with divisional attributes. I therefore chose a fixed effect specification and entered 26 dummy variables, one for each division (except one) that had a project in the sample (Greene 1993). These take on a value of one for projects belonging to the division, and zero otherwise. Because the variables for the alternative explanations do not vary with divisional attributes, I could not use this fixed effect specification and omitted the dummy variables for those models.

Results
Descriptive statistics are reported in Table 1, and results pertaining to the amount of acquired knowledge and project completion rate are presented in Tables 2 and 3, respectively. Models 1 and 2 in Tables 2 and 3 present the results for the alternative explanations that general closeness centrality (i.e., path length) or knowledge relatedness (but not both combined) explains the extent of knowledge obtained and product development time. None of these variables are significant in these models. Project teams in divisions with short path lengths in the entire network did not acquire more knowledge (i.e., software and hardware) from other divisions and were not completed faster. In addition, project teams for which many other divisions had related knowledge available did not acquire more software and hardware from other divisions and were not completed faster. These results show that neither the extent of related knowledge that is available in the Company nor a beneficial network position consisting of short path lengths in the entire network is a sufficient factor explaining the amount of interunit knowledge sharing and product development time. The independent variables predicting the extent of knowledge acquired from other divisions are entered in Models 3 and 4 in Table 2. The main effect for the "close related" variable is positive and significant. Projects in

where r(t), is the completion rate of project j, t is project time in the risk set, and r(t)T is the completion rate including the effects of all of the control variables in the model. The effects of the independent variables are specified in the exponential bracket; a is a vector of estimated coefficients, and C is a vector of independent variables.

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Table 1
Item

Descriptive Statistics
Mean S.D Mln Max

Var~ables

1. Amount of

acqu~red
knowledge**

0.083 0.157 0.450 0.307 6.735 1.061 0.200 0.402 0.750 0.435 2.873 1.041 1.618 2 186 4.299 1.275 2 317 1.824 3.550 2.503 2.725 2.843

0.000 0 900
0.000 1.000 -0.418
4.500 10 719 0.012 - 0 257 0.000 0.000 1.000 -0.037 1 000 -0.095 0 137 0.282 0.037 0.272 0.159 0 402 0 048 0.046 0.142 0.110 -0.044 - 0.096

2. Own existing

ware

3. 4 5 6 7

Budget Patent Product Age relations Personal relations

1.000 5 000 0 000 1167 0 000

0.090 - 0 083 0 123

9.000 -0.1 16 7.000 8 000

8. Strength
related

0.103 -0166 0.062 0.069 0 184 0.080 0.132

-0085 -0197 0 115 0 230

9. Outdegree
unrelated

0.337 -0 058 0 065 0.097 0100

10, lndegree
related

0.000 11.000

11

lndegree unrelated

0.000 14.000 -0137 1.857

0.083 -0069

12 Number of
related un~ts* 0.000 1.000 -2.337

0 112 -0.094 0 205 -0.036 0015 0 033 -0.1 17

0.233 - 0 018 -0.050 0 368 0 245 -0.042 0.190 0.003 0.088 0 164 0 086

13. Outdegree
related'

0.000 1.000 - 1.376 2 386 00870.108 0.856 0.237 0 0 000 0650 2 271 1.000 2.73

14 Between
related

0.111-0.103 0.100 -0.078 0 121

15. Close related' 0.000 1.000 -2 754 16. Reach 18. NoncodifiedX
Outdegree related

0.061 -0017

0 118 -0.044

17. Noncod~f~ed 0.000 1.000 - 0 74

0 020 - 0 124 - 0 058

0 272 2.162 -7.803 0.400 0 097 0 227

8.758

0.160 0 015

0 035 0.222

0.283 0 154

0 181 - 0 026 0.212 0 105 0.1 10 0.054

19 Outdegree all 8.608 3.892 20. Close all

1 000 16 000

0.597 -0.040

0.170 -0.027

120

* Standardized variables (mean set to 0 ; S.D set to 1) ** Dependent var~able

MORTEN T. HANSEN Knowledge Networks

Table 2
Variables Control Variables Own existing ware Budget Patent Product Age relations Personal relations Alternative Explanations Number of related units Outdegree all Close all Knowledge Network Controls lndegree related lndegree unrelated Outdegree related Outdegree unrelated Strength related Between related Reach Hypothesized Effect Close related Fixed Effects? Log likelihood Chi square (d.f.) Number of Observations -33 1 120 No No Yes Yes

Results from Tobit Model Estimating the Amount of Acquired Software and Hardware from Other Divisions
Model 1 Model 2 Model 3 Model 4

Note. Number of observations with dependent variable value of 0 is 66. Coefficients for dummy variables in Models 3 and 4 and other dummy controls in all models are not shown. *pi 0.1: * * p < 0.05: ***pi 0.01 Two-tailed tests for variables; standard errors in parantheses. +Compared with Model 1; + +compared with Model 3

divisions with a high degree of closeness centrality (i.e., short path lengths) in their respective knowledge network were able to acquire more knowledge from other divisions. This result supports Hypothesis 1. The results for the independent variables predicting project completion time are included in Models 4 and 5 in Table 3. The main effect of the "close-related" variable is positive and significant. That is, projects whose divisions have a high degree of closeness centrality (i.e., short path lengths) in their respective knowledge network were likely to be completed more quickly than those with a low degree of closeness centrality (a positive hazard rate above one indicates faster completion). This result supports Hypothesis 2. The interaction effect for the outdegree (i.e., direct re-

lations) and transfer difficulty variable (i.e., noncodified knowledge) is entered in Model 5 in Table 3. When this interaction effect is added to the model, the main effect for outdegree to related divisions becomes significant and negative, while the coefficient for the interaction variable including outdegree and noncodified knowledge is positive. These results can be interpreted as follows: completion rate = exp [ - 1.230*outdegree + outdegree*(0.237*Noncodified)]. The net effect remains negative (i.e., the completion rate is below one, which means slower project completion time) even for high degrees of noncodification (e.g., when the noncodified variable takes on a value of two, which

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MORTEN T. HANSEN
Table 3 Variables

Knowledge Networks

Results for Hazard Rate Analysis of Project Completion Time Model 1 Model 2 Model 3 Model 4 Model 5

Control Variables
Own existing ware
Budget
Patent
Product
Age relations
Personal relations
Amount of acquired knowledge
Noncodification
Alternative Explanations
Number of related units
Outdegree all
Close all
Knowledge Network Controls
lndegree related
lndegree unrelated
Outdegree unrelated
Strength related
Between related
Reach
Hypothesized Effects
Close related Outdegree related NoncodifiedXOutdegree related Fixed Effect Model? Log likelihood Chi square (d.f.) Number of observations No No
- 639.8 0.6 (1)+ 120

0.373**(1.79) - 0 683 (0.713)

Yes Yes

- 1.230*(0.720)

0.718**(0.346)

0.237**(0.107)

Yes

-640.1 120

-613.8 120

61 1.4 4.8* ( I ) + + 120

-607.2 13.2** (2)+ + 120

Note. Coefficients for divisional dummy variables in Models 3 through 6 and time periods and other dummy controls in all models are not shown Two-tailed tests for variables. Standard errors in parentheses. +Compared with model 1; + +compared with Model 3. * p < 0.1 ; * * p < 0.05; ***p< 0.01

is two standard deviation from its mean, the completion rate is still below one). Thus, having direct relations to other divisions in the project's knowledge network mitigated the difficulties in transferring noncodified knowledge, but the net effect of having these direct relations led to longer project completion time, likely because of the maintenance costs involved in keeping them. These results lend partial support to Hypothesis 3a and full support to Hypothesis 3b. In addition, the results in Model 5 in Table 3 reveal a few other interesting findings. First, there is a significant negative effect for the indegree-related variable. That is,

the higher the number of related divisions that come to the focal division for advice, the slower the completion time of the focal project. My interpretation for this effect is that focal team members spend time helping others who come to the focal division for advice, leading to prolonged completion time of the focal project. Second, project teams that obtained high levels of knowledge from other divisions (i.e., the first dependent variable) completed their projects faster than those that did not. Thus, controlling for network relations, the use of existing knowledge from other divisions led to higher degrees of effectiveness as measured by completion time.

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Discussion and Conclusion

The main finding in this study is that a joint consideration of related knowledge and lateral network relations is needed to explain the extent and benefits of interunit knowledge sharing in multiunit firms. Projects in divisions with short network path lengths to other divisions that possessed related knowledge obtained more knowledge from other divisions and were completed faster, likely because of the search benefits accruing to project teams with this network position. In contrast, neither the extent of available related knowledge in the Company nor the path length in the entire network explained the amount of knowledge obtained from other divisions and project completion time.

Limitations The study was limited to lateral relations between divisions and excluded other means of obtaining knowledge, potentially biasing the results. As mentioned in the methods section, however, the other existing interunit integrative mechanisms did not vary much across the divisions and were therefore held fairly constant in the empirical test. Another bias may exist because some divisions were located in the same geographical area, while others were isolated geographically. Thus, some project teams may have been located in divisions that were in close physical proximity with clusters of other divisions, perhaps making it easier to interact and obtain useful knowledge. However, this variation among divisions would have been captured by the divisional dummy variables, which controlled for divisional attributes. Another limitation is that the network model presented here treats the network variables as exogenous, but they may be an outcome of other variables, such as team demographic variables. This possibility raises the issue of whether any omitted variables create a spurious association between the main network variables (closeness centrality and outdegree) and project completion time. For example, team members with long tenure may have larger networks and be more skilled at completing projects quickly. To check for this possibility, I ran several other models where I included average team tenure and age (and standard deviation for team tenure), but these variables did not alter the results, so I excluded them. Finally, because this study focused on one company, the results may not generalize to a diverse group of companies. The company that I studied is most likely more networked than are many multiunit firms, especially when it is compared with holding-type companies in which business units tend to operate independently of one another. This bias may, however, be in a conservative direction. It is likely that network search for related knowledge will be more difficult in a network with fewer
244

interunit relations because teams will, on average, have longer path lengths. If interunit network search for related knowledge is problematic in a relatively dense interunit network, then it is also likely to occur in a company with a less dense network. Implications While these limitations imply that some caution is needed to interpret the findings, the study provides new insights into the challenges of sharing knowledge across business units in a multiunit firm. Although a prior paper repo~ted results based on some of the same data (Hansen 1999), this study extends well beyond those findings and theoretical framework in two important ways. First, the earlier study did not consider the possibility that divisions may possess different competencies and hence provide different levels of utility to teams that seek their knowledge. As the results reported here demonstrate, network relations have different performance implications, depending on whether they tie a team to units that possess related knowledge. Second, the earlier study did not include a full analysis of indirect relations but was limited to a division's direct contacts and the ties between those contacts (i.e., maximum path lengths of one intermediary). The finding that long path lengths impede search because they lead to information distortion could not have been obtained in the first study. Because most prior research on knowledge transfers (including Hansen 1999) has focused on direct relations only, this paper makes a contribution to that line of research by empirically testing the implications of indirect relations on a task unit's ability to obtain and benefit from knowledge transfers. This study also builds on other studies that have attempted to empirically capture how noncodified or tacit knowledge is transferred across organization boundaries. The scale that I developed in a prior paper (Hansen 1999) and used here complements other scales, notably two (see Appendix 2 for a comparison of the questions in these three scales). It is similar to the one used by Szulanski (1996), who measured knowledge dimensions in the transfer of best practice, and to the one used by Zander and Kogut (1995), who measured knowledge aspects of manufacturing processes that were transferred across organization units. A few differences notwithstanding, the three scales are very similar. Their empirical validation suggests that subsequent research can usefully apply both the construct of noncodified knowledge and the existing measurements. The most important implication of this study for existing research is the suggestion that scholars adopt a new way of analyzing knowledge synergies in multiunit firms. In their extensive review of decades of empirical research on the value of firm diversification, Ramanujam and Varadarajan (1989) concluded that "we still do not know

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MORTEN T. HANSEN

Knowledge Networks

why synergy in diversification is so elusive to obtain." They suggested that research refocus on internal organization structures and processes that mediate the link between the firm's overall diversity status and its performance. This paper has attempted to uncover some of the internal organization network mechanisms that explain the extent and effectiveness of knowledge synergies. In particular, the results suggest that subsequent research on this topic needs to be altered in three ways. First, existing research needs to be more integrative by considering both relatedness in skill bases among business units and interunit integrative mechanisms. Research on relatedness in knowledge can benefit by incorporating lateral interunit sharing mechanisms in addition to the current focus on the relatedness construct, thus attaining a better understanding of how synergies are realized. This approach requires that researchers collect network data on companies; it is not sufficient to collect only archival data on the types and degrees of relatedness in multiunit firms. Likewise, research on lateral integrative mechanisms, including network research, can benefit by considering the knowledge content, such as technical competencies, that is obtainable through networks. The second implication for research on knowledge synergies in multiunit firms is the need to incorporate concepts that include indirect relations among business units. Extant research on interunit knowledge sharing has mainly focused on "nodal" (i.e., the attributes of the subunit only) or dyadic (i.e., the relations between two parties to a transfer) interunit relations but not on network positions characterized by both direct and indirect interunit relations (for an exception, see Nohria and Ghoshal 1997). As demonstrated by the empirical study in this paper, a unit's entire path length in a knowledge network affects its ability to access useful knowledge in the firm and improve task performance. While my study focused on path lengths, subsequent studies can address attributes of intermediary units that facilitate the routing of messages (cf. Huber and Daft 1987). A third implication is that research on knowledge synergies in multiunit firms also needs to consider the costs and drawbacks of having integrative interunit mechanisms. While direct interunit relations enable task units to access and transfer knowledge, they also carry costs in the form of time spent building and maintaining them and efforts required to help other units. Unless research does not distinguish between costs and benefits of having direct interunit relations, it is unlikely to find robust results for the net effects of lateral integrative mechanisms on performance. Future research thus needs to more carefully specify conditions under which lateral integrative

mechanisms will have negative or positive performance implications. In conclusion, by incorporating the dual dimension of relatedness in knowledge content and network relations and the issues of indirect ties and cost considerations, subsequent research on knowledge synergies and transfers in multiunit companies is likely to provide new insights into the question of why knowledge sharing in multiunit firms leads to performance improvement.

Appendix 1. List of Technical Competencies and Survey Questions

Technical Competencies:
Number of Number of Divisions per Projects per Competence Competence 12 6 5 1 4 4 5 3 15 3 9 4 2 10 10 7 10 3 7 1 4 2 4.9 37 19 27 4 12 9 8 17 48 16 20 15 1 27 27 17 19 5 13 1 1 4 2.9

Technical Competence (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (1 1) (1 2) (13) (14) (15) (16) (17) (18) (19) (20) (21) (22) Digital signal processing Analog signal processing < 10 MHz Analog signal processing > 10 MHz Quartz/cesium resonance Optics Mechanical measurement Distributed measurement Component test technology Real-time software IC design Measurement integration Analog to digital conversion Fault diagnostics High-speed digital design RF measurement Communication system monitoring Test system architecture High-power design Software engineering Device physics Special user interface Protocol test

Average

Survey Questions: Amount Acquired Knowledge (Dependent Variable). This variable includes software and hardware that were defined as follows in the survey: Software included firmware and flow and structure charts; hardware included electronic, electrical, and mechanical parts. Project managers were asked, "Of all the software (hardware) that was needed in the product, what were the following breakdowns?' They were given the following six categories and asked to allocate 100 points among them: (1) already developed ware from own division, (2) new ware developed in own division, (3) already developed ware from other divisions, (4) new ware developed in other divisions, (5) already developed ware from outside of the company, and (6) new ware developed outside the company. The project manager was also asked to indicate the project's percentage split between software and hardware, and I used this information to take a weighted sum of (3) and (4), which I divided by 100.

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MORTEN T . HANSEN Knowledge Networks

Noncodijied Knowledge. Project managers answered three questions based on seven-point scales: (1) "How well documented was the knowledge that your team leveraged from this division? Consider all the knowledge." Categories were: 0 = It was very well documented, 3 = It was somewhat well documented, 6 = It was not well documented. (2) "Was all of this knowledge sufficiently explained to your team in writing (in code comments, written reports, manuals, e-mails, faxes. etc.)?' Categories were: 0 = All of it was, 3 = Half of it was, 6 = None of it was. (3) "What type of knowledge came from this division?" Categories were: 0 = Mainly reports, manuals, documents, self-explanatory software, etc., 3 = Half know-how and half reports/ documents, 6 = Mainly personal practical know-how, tricks of the trade. The average of the three scores represents noncodified knowledge (Cronbach's Alpha = 0.81). Interdivisional Tie Strength to Related Divisions. Divisional R&D managers answered two questions on a seven-point scale: (1) "How frequently do (did) people in your division interact with this division (on average over the past two years)?" Categories were: 0 = once a day, 1 = twice a week, 2 = once a week, 3 = twice a month, 4 = once a month, 5 = once every second month, 6 = once every 3 months. (2) "How close is (was) the working relationship between your division and this division?" Categories were: 0 = "Very close, practically like being in the same work group," 3 = "Somewhat close, like discussing and solving issues together," 6 = "Distant, like an arm'slength delivery of the input." The two scores were reversed, the scale set to one through seven (zero for no ties), and the average of the two represents tie strength.

Appendix 2. Comparison of Three Measures for Codified Knowledge

Measures Similar items to this study Hansen 1999 and This Study (Noncodification) *How well documented was the knowledge that your team leveraged from this division? (0 = It was very well documented, 6 = It was not well documented) *Was all of this knowledge sufficiently explained to your team in writing (in code comments written reports, manuals, e-mails, faxes, etc.)? (0 = All of it was, 6 = None of it was) *What type of knowledge came from this division? (0 = Mainly reports, manuals, documents, selfexplanatory software, etc., 6 = Mainly personal practical knowhow, tricks of the trade) Less similar items to this study Szulanski 1996 (No Causal Ambiguity) (scale with five answers possible: Yes!; yes, but; no opinion; no, not really; no!) *There is a precise list of the skills, resources, and prerequisites necessary for successfully performing the practice Useful manuals for the practice are available *Existing work manuals and operating procedures describe precisely what people working in the practice actually do Operating procedures for the practice are available Zander and Kogut 1995 (Codifiability) *Large parts of our manufacturing control are embodied in standard type software that we modified for our needs *Large parts of our manufacturing control are embodied in software developed within our company exclusively for our use *Extensive documentation describing critical parts of the manufacturing process exist in our company

*The limits of the practice are fully specified *With the practice we know why a given action results in a given outcome *When a problem surfaced for the practice, the precise reasons for failure could not be articulated even after the event (reversed) *It is well known how the components of that list interact to produce practice's output. 0.86

A useful manual describing our manufacturing process can be written

Cronbach's Alpha for scale

0.81

0.678

Source. Szulanski 1996, causal ambiguity scale in Appendix 2. Zander and Kogut 1995, codifiability scale in Appendix 1.

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Knowledge Networks Collins, B. E., H. A. Guetzkow. 1964. A Social Psychology of Group Processes for Decision Making. Wiley, New York. Cyert, R., J. G. March. 1992. A Behavioral Theory of the Firm, 2nd ed. Blackwell Business, Cambridge, MA. Egelhoff, W. 1993. Information processing theory and the multinational corporation. S. Ghoshal and D. E. Westney, eds. Organization Theory and The Multinational Corporation. St. Martin's Press, New York, 182-210. Eisenhardt, K., B. Tabrizi. 1995. Accelerating adaptive processes: Product innovation in the global computer industry. Admin. Sci. Quart. 40(1) 84-1 10. Farjoun, M. 1998. The independent and joint effects of the skills and physical bases of relatedness in diversification. Strategic Management J. 19(7) 61 1-630. Freeman, L. 1979. Centrality in social networks: Conceptual clarification. Social Networks l ( 3 ) 215-234. Galbraith, J. 1973. Designing Complex Organizations. AddisonWesley, Reading, MA. 1994. Competing with Flexible Lateral Organizations, 2nd ed. Addison-Wesley, Reading, MA. Ghoshal, S., C. Bartlett. 1988. Creation, adoption, and diffusion of innovations by subsidiaries of multinational corporations. Internat. Bus. Stud. 19(3) 365-388. -, 1990. The multinational corporation as an interorganizational network. Acad. Management Rev. 15 603-625. Gilovich, T. 1991. How We Know What Isn't So: The Fallibilin. of Human Reason in Everyday Life. Free Press, New York. Granovetter, M. 1973. The strength of weak ties. Amer. J. Soc. 6(6) 1360-1380. Greene, W. H. 1993. Econometric Analysis, 2nd ed. Macmillan Publishing, New York. Gupta, A. K., V. Govindarajan. 2000. Knowledge flows within multinational corporations. Strategic Management J. 21(4) 473-496. Hansen, M. T. 1999. The search-transfer problem: The role of weak ties in sharing knowledge across organization subunits. Admin. Sci. Quart. 44(1) 82-1 11. , J. M. Podolny, J. Pfeffer. 2001. So many ties, so little time: A task contingency perspective on corporate social capital. Res. in the Sociology of Organ. 1 8 21-57. Hill, C. 1994. Diversification and economic performance: Bringing structure and corporate management back into the picture. R. Rumelt, D. Schendel, and D. Teece, eds. Fundamental Issues in Strategy. Harvard Business School Press, Boston, MA, 2973LL.

Endnotes
onre reachable units do not have any relations in the knowledge network and are isolates, malung it more difficult for focal teams in other units to know about opportunities for knowledge sharing in those units. 2 ~ hlist e reveals that the technical competencies are at a fairly detailed level, because they are mainly in one industry, but interviews indicated that this was the most appropriate level of detail to study: A more abstract level would mask important differences in technical competencies among divisions, whereas a more detailed level would force differences among divisions even where commonalities existed. 'ln addition to these contacts, there were a few regularly occurring licensing agreements between divisions and some enduring crossdivisional groups that were focused around a specific technology area. I included these two types of fairly informal relations so as not to bias the network information. 41n a few instances, divisions did obtain standardized software and hardware components from other divisions and had entered into crossdivisional licensing agreements that specified transfer prices for these transactions. To remove this potential bias from my measure of interdivisional software and hardware for ad hoc problem solving, I created a dummy variable that took on a value of one if the focal division had an interdivisional licensing agreement, and zero otherwise. Because this variable did not alter any of the results, I excluded it from the main results. ' ~ e c a u s einformation on estimated costs was missing for 19 projects, I imputed the values for these projects through a regression analysis estimating the log of estimated project costs at the start of the project. The results of this imputation are not reported. 6 ~ h i information s was missing for 62 projects whose response rate for the individual network survey was below 50%. I therefore set the personal-relation variable to zero for these projects and entered a dummy variable that took a value of one if the information was missing, and a zero otherwise.

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