Innovation in a global consulting firm: when the problem is too much diversity

Abstract

Abstract This paper explores how individual managers in multinational firms utilize their informal relations to create new knowledge. Specifically, how does the density of informal networks affect an actor's ability to access and integrate diverse information and consequently that actor's innovation performance? The arguments are developed using the setting of 79 senior partners in a global management consulting firm and tested on a dataset of 1,449 informal relationships. I distinguish between internal, external, local, and global relations and find that this separation permits a more nuanced understanding of the effect of network structure on innovation performance. Specifically, I argue that the most effective network strategy is contingent upon the context in which the partners operate. The findings show that partners operating in homogeneous contexts, where the primary challenge is to access diverse information, benefit from low‐density networks. In contrast, when crossing both firm and geographic boundaries, partners with dense networks have higher innovation performance. I argue that in such heterogeneous contexts, dense network interactions facilitate partners' ability to integrate the diverse information to which they are exposed. Copyright © 2010 John Wiley & Sons, Ltd.

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