Structural Holes

This work describes the social structural theory of competition that has developed from the 1970s to the 1990s. The contrast between perfect competition and monopoly is replaced with a network image of competition more closely keyed to the actual settings in which people live and work. The theory describes how the network structure of a situation offers competitive advantage to certain players. The basic element in this description is the structural hole: a gap between two individuals with complementary resources or information. When the two are connected through a third individual as entrepreneur, the gap is filled, creating important advantages for the entrepreneur. The distribution of structural holes in a competitive arena determines the flow of information and control benefits to certain players. Competitive advantage is a matter of access to structural holes. The author shows how the distribution of structural holes around market transactions in the American economy gives certain producers an advantage in negotiating price, which translates into higher producer profit margins.
He also examines how the distribution of structural holes in the contact networks of senior managers in one of America's leading high-technology firms determines the speed with which managers are promoted past one another. Burt also shows how the structural hole argument can add value to other theories, including the interface theory of markets, the strength of weak ties argument, resource dependence and transaction cost theories of the firm, population ecology theories of organization, and interpersonal theories of personality. The book should be of interest to sociologists, economists, and business strategists.