Assimilation and differentiation: A multilevel perspective on organizational and network change

This paper builds on recently derived stochastic actor-oriented models (SAOMs) for the coevolution of one-mode and two-mode networks, and extends them to the analysis of how concurrent multilevel processes of (internal) organizational and (external) network change affect one another over time. New effects are presented that afford specification and identification of two apparently conflicting micro-relational mechanisms that jointly affect decisions to modify the portfolio of internal organizational activities. The first mechanism, assimilation, makes network partners more similar by facilitating the replication and diffusion of experience. The second mechanism, functional differentiation, operates to maintain and amplify differences between network partners by preventing or limiting internal organizational change. We illustrate the empirical value of the model in the context of data that we have collected on a regional community of hospital organizations connected by collaborative patient transfer relations observed over a period of seven years. We find that processes of social influence conveyed by network ties may lead both to similarity and differences among connected organizations. We discuss the implications of the results in the context of current research on interorganizational networks.