An increasing body of research has emphasized that managerial social networks are crucial for innovation. However, empirical research has yielded inconclusive results which have stimulated an ongoing debate about which type of networks are most conducive to innovation: bonding (cohesive) or bridging (diverse) networks? To resolve this debate, a growing number of scholars have argued that whether cohesive or diverse networks are more beneficial for innovation depends on the context. To extend this stream of research, this study draws on social network and institutional theory to examine the moderating role of both formal and informal institutional environments. Using several meta‐analytic techniques to integrate findings from 88 studies, thereby spanning 26 different countries and 20 years of research, the results of this study reveal that institutional environments significantly moderate the impact bonding and bridging networks have on innovation. In particular, the findings indicate that cohesive networks are more effective to stimulate innovation in weak political, regulatory, and financial institutions as well as in collectivistic cultures, whereas diverse networks are more beneficial for innovation in strong political and regulatory institutions as well as in individualistic cultures. This study thus extends prior research on managerial networks and innovation by uncovering how formal and informal institutions influence whether bridging or bonding networks are more beneficial for innovation. For practitioners, the results provide important insights as they reveal how top managers can cope with different formal institutions and cultural settings through specific types of networks to best promote innovation.
Practitioner Points
Top managers can use different types of networks (cohesive vs. diverse) to foster innovation. However, whether cohesive or diverse networks are more beneficial for innovation depends on the institutional environment in which they are embedded.
As establishing and maintaining networks is costly and time‐consuming, top managers should focus on the fit between the type of network and the institutional setting they are in to best promote innovation.
Specifically, top managers should build cohesive networks to cope with weak political, regulatory, and financial institutions, whereas they should invest in diverse networks in strong political and regulatory institutions to foster innovation.
Moreover, top managers should establish cohesive networks to foster innovation in collectivistic cultures, whereas they should build diverse networks in individualistic cultures.