A Multilevel Model of Organization and Network Change

According to one vision organizations are more likely to establish network ties with partners having similar operational experiences (homophily). A second vision suggests that interdependent organizations connected by network ties are more likely to assimilate each other’s knowledge and develop progressively more similar portfolios of internal activities (assimilation). The internal structures of organizations can be represented as networks of interdependent portfolio items. These intra-organizational networks are nested in networks of organizations and influence the homophily and assimilation processes described.

In this paper we try to establish which of these two visions best describes the dynamics of collaboration (measured as patient transfers) and organizational change (measured as change in specializations) in a community of hospitals. We estimate newly developed stochastic actor-oriented models (SAOMs) for multilevel networks which specify how inter-organizational relations affect organizational decisions to change the portfolio network of internal organizational activities by adding or abandoning activities. At the same time, the model allows joint examination of how the common affiliation to internal activities affects decisions to change network ties defined in terms of patient sharing relations between partner hospitals. We innovate over existing studies of network dynamics in that we represent processes of change in internal organizational structure, and change in the structure of inter-organizational networks as coupled sub-components of a more general process of co-evolutionary development. The objective of this paper is to represent and examine this multilevel process of change empirically using data observed between 2003 and 2007 among all the hospitals in a regional community. In the discussion of the results we emphasize the connection between recent advances in the specification and estimation of SAOMs for multilevel networks, the current theoretical debates about the emergence of organizations and markets and the interpretation of our findings in the light of rational choice assumptions of the statistical framework.