Networks, Clusters, and Small Worlds: Are they related?

In recent years, many industries have seen the rise of new inter-organizational forms. Among those new forms, organizational networks, clusters, and small worlds are attracting increasing interest, both in academic research and management practice. While economic theory considers such forms to be market failures, organization theory highlights their potential positive effects on the participating organizations. The organizational literature often uses the terms “networks”, “clusters”, and “small worlds” as synonymous even though there are differences between them. Moreover, given the sometimes-spontaneous emergence of these organizational forms, the extent to which they can be designed is not always clear. This article discusses the characteristics of networks, clusters, and small worlds; their operational parameters; and how these organizational forms are related. Further, we identify the role of design in these types of organizations.