A couple of weeks back I wrote in regards to the theory of Social Capital, and that may be applied to on-line social networks (see end of post for link). Today I'd like to share an associated theory called Structural Hole Theory, and explain what implications this theory can have for online social networks like Facebook and MySpace. First, a little background... - Kangen Water Review
Ronald Burt's theory of 'structural holes' is a key extension of social network theory. This theory intends to explain "how competition works when players have established relations with others" (Burt, 1992), and argues that networks provide two types of advantages: information benefits and control benefits.
Information advantages refer to the way quickly they find out about it and who knows about information that is relevant. Actors with strong networks will normally know more about important issues, and they will also know about it faster. According to Burt (1992), "players using a network optimally structured to supply these benefits enjoy higher rates of return to their investments, because such players know about, and have a hand in, more rewarding opportunities".
Control benefits consult with the advantages of being an important player in a well-connected network. In a large network, essential players have more bargaining power than other players, which also means that they can, to a large extent, command a lot of the information flows within the network.
Burt's theory of structural holes aims to enhance these advantages for their full potential. A structural hole is "a separation between non-redundant contacts" (Burt, 1992). The holes between non-redundant contacts supply opportunities that could improve both the management benefits and the information benefits of networks.
Optimizing the benefits of networks
I am going to look at how the optimization of control advantages and information benefits can be facilitated by structural holes. There are lots of methods to optimize structural holes in a network to ensure maximum information benefits:
The dimensions of the network. The dimensions of a network establishes the amount of information that is shared within the network. A person has a much better chance to get timely, useful advice in a big network than in a little one. The dimensions of the network is, nonetheless, not dependent merely on the number of actors in the network, but the number of non- redundant actors. The utility of a network with reference to its size may be described by a function know as Metcalfe's Law. Robert Metcalfe found that new technologies are valuable only if lots of people use them. Specifically, the usefulness, or utility of the network equals the square of the number of users. The more people utilize a piece of software, a network, a particular standard, a game, or a book, the more valuable it becomes and the more new users it will attract, raising both the utility as well as the speed of its adoption by still more users.
Efficient networks. Efficiency in a network is concerned with optimizing the number of non-redundant contacts in a network in order to maximize the number of structural holes per actor in the network. It really is feasible to get rid of redundant contacts by linking merely with a primary actor in each cluster that is redundant. This saves time and effort that could normally have been spent on maintaining redundant contacts.
Effective networks. Effectiveness in a network is concerned with "distinguishing primary from secondary contacts so as to focus resources on preserving principal contacts" (Burt, 1992:21). Constructing an effective network means building relationships with performers that lead to the maximum amount of secondary performers that are other, while being non-redundant.
Weak ties. In his 1973 paper entitled "The strength of weak ties", Mark Granovetter (Granovetter, 1973) developed his theory of weak ties. The theory states that because an individual with strong ties in a cluster more or less knows what the other men and women in the cluster know (e.g. in close friendships or a board of directors), the successful spread of information relies on the weak ties between individuals in separate clusters. "Poor ties are crucial to the flow of data that integrates otherwise disconnected social clusters into a broader society" (Burt, 1992). Structural holes describe exactly the same phenomena as poor ties because both emphasize the demand for entrepreneurs to fill the gap between different bunches and non-redundant contacts. However, structural hole theory goes one step further and stresses that what makes the difference important is not the weakness of the tie but the structural hole over which it spans. Preserving and building poor ties over large structural holes enhances information benefits and creates even more efficient and productive networks. - Kangen Water Review
To reach networks rich in information benefits it is crucial to build large networks with non-redundant contacts and lots of poor ties over structural holes. A number of these advice benefits are:
More contacts are included in the network, which implies that you have access to a larger volume of advice.
Non-redundant contacts ensure that this vast amount of information is diverse and separate.
Linking using the principal actor in a cluster implies a connection with the central player in that bunch. This means that you will be one of the first folks to be notified when new information becomes available.
Now, once structural holes are identified as well as the network is optimized to supply maximum information benefits, a crucial question is how these benefits can be used to capitalize on the opportunities in the network. Control advantages answer this question. Structural holes not only provide information benefits, they also give actors a particular amount of control in negotiating their relationships with other actors. To understand the role of structural holes in this aspect, it's important to understand the concept of tertius gaudens. Taken in the work of George Simmel, the tertius gaudens is defined as "the third who benefits" (Simmel, 1923). It describes the person who benefits from the disunion of two others. For instance, when two people wish to buy the same merchandise, the seller and their bids can play against one another to get a greater cost for this product. Structural holes are the setting in which the tertius gaudens runs. An entrepreneur stepping right into a structural hole in the proper time is going to have the power as well as the control to negotiate the relationship between both actors broken up by the hole, usually by playing their demands against one another.
Where structural holes provide a stage for tertius strategies, information is the substance with which the strategy is performed (Burt, 1992). Precise, timely and important information delivered between two non-redundant contacts at the right time creates an immense opportunity to negotiate and control the association between these performers. This is the power of structural holes, and that is why the theory is indeed applicable for social networks on the Internet.