Revisiting the Small-World Phenomenon

Abstract

Research has explored how embeddedness in small-world networks influences individual and firm outcomes. We show that there remains significant heterogeneity among networks classified as small-world networks. We develop measures of the efficiency of a network, which allow us to refine predictions associated with small-world networks. A network is classified as a small-world network if it exhibits a distance between nodes that is comparable to the distance found in random networks of similar sizes—with ties randomly allocated among nodes—in addition to containing dense clusters. To assess how efficient a network is, there are two questions worth asking: (a) What is a compelling random network for baseline levels of distance and clustering? and (b) How proximal should an observed value be to the baseline to be deemed comparable? Our framework tests properties of networks, using simulation, to further classify small-world networks according to their efficiency. Our results suggest that small-world networks exhibit significant variation in efficiency. We explore implications for the field of management and organization.