The Network Effect: Employee Network can be an indicator of Company Value and Innovation!
Nicolas BEHBAHANI
Global People Analytics & HR Data Leader - People & Culture | Strategical People Analytics Design
?? The professional connections of an individual are an extension of their innate human capital, and could have important implications for the information and resources flowing into the firm who employs them, and in turn the outcome of innovative activities and firm value.
?? Researchers explored the relationship between human connections and firm performance and found that professional social networks may have potential benefits to companies, and not only to the individual !
?? Companies that are more central are having a bigger impact the innovation they produce is more successful in the marketplace
?? The firm-level network of U.S. public firms based on real-world employee connections is well-connected, although distinct communities emerge.
?? Importantly, these communities differ when considering the connections of employees at different-levels of employment at the firm.
?? Companies with higher R&D expenditure gain more value from their centrality in the network, according to a new interesting research published by a team of US researchers using data from 7,715 publicly traded U.S. firms from 2004 to 2018, using data on over 9 million people with 2 billion connections from the professional social network LinkedIn and Compustat
?Research Methodology
Researchers considered that two firms are connected if there is at least one individual-level connection on LinkedIn between these two firms.
The strength of the connection between two firms is measured by the natural logarithm of the number of connections between them. They use Tobin’s Q as the outcome variable in the following regression as a way to better measure the impact of social capital on firm value.
Researchers correlated the network data to measures of success in innovation, such as investments in research and development and the number of awarded patents and their impact.
For their main measure of centrality, researchers create a decile ranking based on the eigenvector centrality values.
?Company Centrality and firm Value
??Also researchers found an important relationship between firm centrality in the network and firm value that is driven primarily by the low and middle employees in the network.
??Companies in the Information, Finance and Insurance, and Manufacturing are highly connected overall and with each other. Manufacturing is the most central industry in this network (which is partially a result of it being the industry with the largest number of LinkedIn users), while Retail Trade and Information are the second and third most central industry, respectively.
?? Unsurprisingly, this study found that companies such as Microsoft, Alphabet, IBM, Oracle, Honeywell, General Motors, Target, Pfizer, AT&T, Texas Instruments, and Apple were among the most highly connected and at the center of their professional communities.
??Researchers conclude that companies that are more central are having a bigger impact the innovation they produce is more successful in the marketplace
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?Linked industries and large companies based on employee connections
Researchers found the 3 interesting conclusions below:
??There are a high number of connections within firms and amongst firms in the same industry.
??The Finance and Insurance industry, and the Information industry show the highest level of connectivity, which may be partially driven by the higher coverage in those industries
?? Based on this visual inspection, there appears to be a geographic element to the connections as well.
For example, companies that are headquartered in Minnesota (e.g., UnitedHealth Group, Target, 3M, and U.S. Bancorp) are well connected to each other, even though they are in different industries.
?Firm-level Network Centrality and Economic Performance
Researchers found that the firms that are in the top 100 on two economic measures of firm size: real sales and market capitalization. While many of these top firms are central to the overall network, this is not always the case as many economically large firms are not highly central to the network (e.g., colored but not labeled as a top central firm), and many highly central firms are not large
?? Researchers conclude that taking into account employee-level connections at all levels of the firm allows for both a broader and more granular analysis than existing measures of firm connectivity and will allow scholars to revisit earlier studies of firm networks to explore new avenues through which this connectivity may impact productivity and other social and economic outcomes.
?? ???? ???????????????? ????????: This wonderful research reinforces the value of human capital and knowledge sharing and highlights a surprising but very useful finding for recruiters that professional social networks can have potential benefits for businesses, not just individuals. Companies that recruit influencer employees have more commercial and research success than others.
Thank you ?? 美国南加州大学 美国南加州大学 - 马歇尔商学院 美国哈佛商学院 San Diego State University researchers team for these insightful findings: Shelley Xin Li Frank Nagle Aner Zhou
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11 个月? Understanding the link between human connections & organizational success is crucial Nicolas BEHBAHANI, thanks for sharing. ??♂? Your Networth is = Your Network. ?? How Org Can: Foster internal collaborative events & people to participate in external connect events in a structured manner - Sector, Industry, etc. ?? Benefits - Build Company Brands, Brings Referrals, Business leads, Partnerships, Sales, Learning's, etc. ?? - It cuts both sides.
Unleashing talent potential with real-time people analytics: Empowering HR & leaders to enhance employee experience, save time, and cultivate a culture of high performance and well-being through personal leadership
11 个月Nicolas BEHBAHANI, This outcome from this study underscores the potential inherent in human connection and knowledge sharing. In an era of numerous challenges, delivering value for the "greater good" is essential. This outcome is an invitation to all professionals worldwide to (continue to) share their experiences, knowledge, insights, and visions. Don't let your "ego" hold you back, no matter how brief your contribution may be. As writer and psychotherapist Wayne Dyer beautifully put it, "don't die with the music still in you."
Lead consultant in HR Strategy & Value Management. Enhancing Value through Human Performance. Delivery of Equality, Diversity & Inclusion Training. Lecturer and International Speaker on HRM and Value Management.
11 个月Great research Nicolas BEHBAHANI. It is often the implicit knowledge, picked up from colleagues across the organisation and our connections outside of the organisation, that leads to the innovation and creativity required for both the employee and organisation to grow. I have shared this previously (some time ago): Employee Development = Organisational Development (through innovation & creativity) = Growth (for both the Employee & the Organisation) = Value (to the Customer) = Brand (how the organisation is viewed by society). Thank you so much for sharing this article with us Nicolas.
Executive Leadership and Business Coach helping leaders enjoy sustainable success on their terms | Speaker | Author
11 个月This took me back to David Nadler’s Congruence Model where he noted that control comes from the formal organization but power comes from the informal organization. Connectedness in the informal organization is often the undervalued element of success. One of my goals as an executive was to both recognize the informal organization and then not to interfere with it and try to formalize those organic connections and relationships.
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11 个月The presence of distinct networking connections says about more ties between employees than just being paid by the same company, or working along job description. Most likely on top of individual performance, those companies focus on collaboration and teamwork, which stimulates people establish stronger connections.