Chapter 2: Familiarity and Novelty in Interpartner Knowledge: Homophily Cycles in Joint Venture Networks

This study uses the theoretical lens of homophily to analyze the dynamics of interpartner knowledge similarity and dissimilarity. While a number of crossdisciplinary studies have investigated the dimensions and associated outcomes of homophily, researchers tend to treat homophily as invariant across time. We reexamine this implicit assumption in the context of alliance knowledge. Adopting an inductive orientation, we investigate changes in homophily levels in the joint venture network of the telecommunications industry during the period 1991–2000. The exploratory analysis suggests that interfirm homophily follows a cyclical pattern over time. To explain such homophily cycles, we propose a model in which the tension between two opposing forces— the search for familiar knowledge as well as for novel knowledge—determines observed homophily levels. Given that homophily minimizes the diversity of firm knowledge stocks, an understanding of homophily cycles will enrich the study of knowledge management in strategic alliances.