Are small world networks always best for innovation?

It is becoming increasingly apparent that a firm's communication network structure has a significant impact on its innovative capability. We know that in many cases, small world network structures in particular lead to improved innovation output. This paper is the first to test whether or not this finding is also true inside of large project-based firms We study a project team with 130 members using complex network analysis. The team's project includes several innovations, and the knowledge sharing networks do have small world structures. However, these networks have much more hierarchical structures than those measured in other innovation networks. We conclude that identifying a small world structure is only the first necessary step in analysing such networks. We identify a hierarchical generative mechanism for these structures, which demonstrates that gaining a better understanding of the history and evolution of particular networks is a critical step in analysing them.