TESTING MULTITHEORETICAL, MULTILEVEL
HYPOTHESES ABOUT ORGANIZATIONAL
NETWORKS: AN ANALYTIC FRAMEWORK AND
EMPIRICAL EXAMPLE
NOSHIR S. CONTRACTOR
University of Illinois at Urbana-Champaign
STANLEY WASSERMAN
Indiana University and
Visible Path Corporation
KATHERINE FAUST
University of California, Irvine
Network forms of organization, unlike hierarchies or marketplaces, are agile and are
constantly adapting as new links are added and dysfunctional ones dropped. We
review some of the theoretical and methodological accomplishments and challenges
of contemporary research on organizational networks. We then offer an analytic
framework that can be used to specify and statistically test simultaneously multilevel,
multitheoretical hypotheses about the structural tendencies of organizational net-
works. We conclude with an empirical study illustrating some of the capabilities of
this framework.
The past decade has witnessed considerable
scholarly interest in conceptualizing twenty-
first-century organizational forms as “network
organizations” (Miles & Snow, 1995; Monge &
Fulk, 1999; Nohria, 1992; Poole, 1999; Powell,
1990). The network organization, these advo-
cates argue, will supplant bureaucracies (and
their descendants, the multidivisional form and
the matrix form) as the twenty-first-century or-
ganizational coin of the realm. Network forms of
organization are neither vertically organized hi-
erarchies like their bureaucratic predecessors
nor unorganized marketplaces governed by sup-
ply and demand (Powell, 1990; Williamson,
1991). Rather, network organizational forms use
flexible, dynamic communication linkages to
connect multiple organizations and people into
new entities that can create products or ser-
vices. These new forms are agile and are con-
stantly adapting as new links are added and
dysfunctional ones dropped. Thus, the evolving,
emerging network form is the organization.
The changes looming in the organizational
landscape signal the need for a new generation
of organizational theory and research that re-
sponds to the assumptions, aspirations, and ad-
versities that will characterize these twenty-
first-century organizational forms. While there
has been a long-standing interest in the study of
organizations from a social network perspective
(for reviews, see Krackhardt & Brass, 1994; Mizru-
chi & Galaskiewicz, 1994; Monge & Eisenberg,
1987), the fundamental changes outlined above
suggest that the research agenda needs to
evolve from studying networks in (or between)
organizations to grappling with the notion that
the network is the organization. This nuanced
yet significant change in perspective has sub-
stantial—and substantive—implications for the
deployment of a comprehensive network ana-
lytic framework to specify and statistically
model the structural tendencies of network
forms on the basis of multiple theories and at
National Science Foundation Grant Nos. IIS-9980109, ECS-
9427730, and SBR-9630754 and Office of Naval Research
Grant No. N00014-02-1-0877 supported preparation of this
manuscript. We express our appreciation to Peter Monge for
helping develop many of the ideas presented here and later
published in Monge and Contractor (2003), Jon Templin for
computational assistance, and two anonymous reviewers
for helpful comments. We presented an earlier version of
this paper in a Top Paper session at the 2000 annual con-
vention of the International Communication Association in
Acapulco, Mexico.

Academy of Management Review
2006, Vol. 31, No. 3, 681–703.
681

multiple levels of analysis. Toward that goal,
we begin by reviewing some of the theoretical
and methodological accomplishments and chal-
lenges of contemporary research on organiza-
tional networks. We then offer an analytic
framework that can be used to specify and sta-
tistically test simultaneously multilevel, multi-
theoretical hypotheses about the structural ten-
dencies of organizational networks. We
conclude with an empirical study that illus-
trates some of the capabilities of this frame-
work.
RECONCEPTUALIZING ORGANIZATIONS AS
NETWORKS
A social network consists of a set of actors and
one or more relations between the actors. The
network perspective is flexible in its applicabil-
ity to different kinds of actors and to different
kinds of relations. Actors may be any kind of
meaningful social unit, including individuals,
collective entities, firms, organizations, and di-
visions within organizations, as well as nonhu-
man agents, such as knowledge repositories
(Carley, 2002; Contractor, 2002; Contractor &
Monge, 2002). The relations may be any kind of
linkage between actors, including formal role
relations, affective expressions (friendship, re-
spect), social interactions, workflows, transfers
of material resources (money, goods), publish-
ing and retrieval of knowledge, flows of nonma-
terial resources (information, advice), and busi-
ness alliances, to name but a few.
The social network approach to organizations
is entirely fitting, since, as O’Reilly observes,
“Organizations are fundamentally relational
entities” (1991: 446). The focus on relations natu-
rally leads to representation and analysis of
organizations as social networks. Indeed, Noh-
ria asserts, “All organizations are in important
respects social networks and need to be ad-
dressed and analyzed as such” (1992: 4). More-
over, this claim holds whether the focus is on
interacting individuals within a single organi-
zation, divisions within a firm, or networks of
interacting firms. Again, Nohria notes these dif-
ferent levels of foci: “The premise that organiza-
tions are networks of recurring relationships ap-
plies to organizations at any level of analysis—
small and large groups, subunits of organiza-
tions, entire organizations, regions, industries,
national economies, and even the organization
of the world system” (1992: 4).
As we enter the new millennium, the new net-
work forms of organizing, precipitated by tech-
nological developments, are eroding the distinc-
tion between formal and emergent structural
categories that traditionally have been used to
characterize organizations. Contrary to tradi-
tional views, contemporary organizations are in-
creasingly constructed out of ephemeral com-
munication linkages, where the
networks of relations span across the entire orga-
nization, unimpeded by preordained formal
structures and fluid enough to adapt to immedi-
ate technological demands. These relations can
be multiple and complex. But one characteristic
they share is that they emerge in the organiza-
tion, they are not preplanned (Krackhardt, 1994:
218).
These developments offer new challenges for
future research on organizational networks both
from a theoretical and a methodological stand-
point.
THEORETICAL AND METHODOLOGICAL
CHALLENGES
Theoretically, the increasing irrelevance of re-
search contrasting formal and emergent struc-
tures has prompted researchers to advocate a
shift in focus from examining “emergent” (i.e.,
informal) networks to understanding the “emer-
gence” of organizational networks. In other
words, the focus has shifted toward modeling
the dynamics through which flexible organiza-
tional forms emerge. Based on a review of the
empirical literature, Monge and Contractor
(2001) identify nine families of theoretical mech-
anisms that have been used to explain the cre-
ation, maintenance, dissolution, and reconstitu-
tion of organizational networks. These are (1)
theories of self-interest, (2) theories of mutual
interest and collective action, (3) cognitive theo-
ries, (4) cognitive consistency theories, (5) conta-
gion theories, (6) exchange and dependency the-
ories, (7) homophily theories, (8) proximity
theories, and (9) theories of network evolution
and coevolution. The theoretical mechanisms
are summarized in Table 1.
Monge and Contractor’s review demonstrates
four theoretical implications for studying the
emergence of organizational networks. First, a
wide array of social theories are amenable to
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