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The Prince and the Pauper: Search and Brokerage in the Initiation of Status-Heterophilous Ties
Abstract
We combine structural hole theory with performance-feedback theory to identify determinants of partner selection in networks. Specifically, we examine how a brokerage position coupled with aspiration-performance gaps affect an organization’s propensity to initiate ties to partners of different status. We find that organizations in brokerage positions are more likely to systematically initiate such ties than non-brokers. However, when the performance of an organization in a brokerage position deviates from its aspirations, this organization changes its partner selection strategy and starts initiating ties to partners of similar status. Our results also suggest that organizations in brokerage positions set social and historical aspiration levels differently from non-brokers, which in turn affect their partner selection decisions.
... This exploration has been fueled by a social exchange perspective (Blau, 1986), which suggests that when the advantages that a high-status actor can obtain from collaborating with lower-status actors exceed the disadvantages resulting from status leakage, the highstatus actor may collaborate with lower-status ones D. Ma, et al. Social Networks 63 (2020) 162-173 Ertug, 2010;Shipilov et al., 2011). Along this line, collaboration across organizational status boundaries can benefit faculty in both low-status and high-status departments. ...
... Although recent research on organizational status heterophily has addressed the limitation of organizational status homophily (Castellucci and Ertug, 2010;Shipilov et al., 2011), it shares a social exchange view of relationship formation with research on organizational status homophily. In terms of social exchange, organizational boundary penetration is determined by cost-benefit calculation, a logic that may work well in rational contexts (e.g., investment banking, venture capital) of interorganizational relationship formation (Podolny, 1994;Stuart and Sorenson 2001). ...
... https://www.census.gov/geo/www/us_regdiv.pdf 9 Since brokerage may influence tie formation(Shipilov et al., 2011), we (footnote continued) measured brokerage with "structural holes" (i.e., aggregate network constraint;Burt, 1992) based on coauthorship networks. We did not find a significant main or moderating effect of "structural holes"; our hypothesis remained supported after the inclusion of this brokerage variable. ...
Our study examines the interactive effect of organizational status distance and geographical proximity on interpersonal professional tie formation. Whereas Blau (1977, 1994) proposes that geographical proximity will weaken the negative effect of organizational status distance on professional tie formation, our analysis of co-authorship in academic accounting over a 30-year period shows that geographical proximity between departments strengthens the negative effect of organizational status distance on the likelihood of coauthorship tie formation. These findings support our proposed “salience hypothesis”, which suggests that geographical proximity heightens the salience of organizational status boundary and consequently impedes people from status-distant organizations to form collaborative ties.
... Because status leaks across relationships (Podolny, 2005), however, it can also constrain the partnering behavior of high-status actors, as they do not want to jeopardize their own status-and all the benefits that come with it-by affiliating with lower-status alters. If few high-status actors are willing to accept lower-status ties, ultimately most ties should be between actors of similar status, a tendency known as status homophily (Ahuja, Polidoro, & Mitchell, 2009;Podolny, 1994;Powell, White, Koput, & Owen-Smith, 2005;Shipilov, Li, & Greve, 2011). However, status asymmetries do occur, which begs the question of what drives them. ...
... For example, low-status actors are more likely to form relationships with high-status partners when they have access to unique resources (Ahuja, 2000) or a track record of significant accomplishments (Hallen, 2008). Furthermore, actors in brokerage positions are more willing to overlook status differences when forming relationships because of their superior access to information about valuable exchange opportunities (Shipilov et al., 2011). Second, researchers have highlighted the role of the broader environmental context in the formation of statusasymmetric ties. ...
... In the present paper, we take steps to rectifying these lacunae by specifying how the internal collaboration context and the external market environment jointly shape the formation of directed status-asymmetric ties. We argue that projects with a strong performance trajectory increase the likelihood of upward-status asymmetries primarily because the low-status lead can use such projects to compensate a high-status partner for accepting the risk of negative status spillovers (Shipilov et al., 2011). Conversely, we articulate why the poorer performance of a project increases the likelihood of downward-status asymmetries, in part because the lead can use the implied social benefits of a high-status affiliation to induce a low-status follower to join a less compelling deal. ...
In this study, we investigate the emergence of status-asymmetric ties among venture capital firms. In particular, we highlight the venture’s performance trajectory as a powerful antecedent of upward-status asymmetries (in which a lower-status actor brings a higher-status alter into a venture) as well as downward-status asymmetries (in which a higher-status actor brings in a lower-status alter). We hypothesize that lower-status firms tend to bring higher-status alters into ventures on a better performance trajectory, whereas higher-status firms tend to bring lower-status alters into poorly performing ventures. Furthermore, we argue that these effects will be moderated by market heat, which affects whether investors would focus on the upside or downside of deals. We test our hypotheses in a longitudinal analysis of venture capital syndication patterns in the US between 1990 and 2017. We find support for most of our predictions and document that the ability of lower-status lead investors to bring higher-status followers into good ventures is particularly accentuated in hot markets, which can heighten market participants’ concerns about missing good deals. We thus highlight the interplay between the internal and the external context in shaping the formation of status-asymmetric relationships
... This point builds on prior work in several ways. Studies of organizational search for network partners have found that performance below aspirations leads managers to increase the network range of their search Shipilov, Li, and Greve, 2011). In the context of tie dissolution, an increase in network range suggests that managers pay more attention to the partner's other partners when their firm's own performance is below aspirations. ...
... Our theory also advances network dynamics research by incorporating firm performance as an antecedent factor in network change (see also Baum et al., 2005;Shipilov, Li, and Greve, 2011;Zhelyazkov, 2018). This perspective complements prior work that links network structure to performance outcomes (Gulati, Lavie, and Madhavan, 2011). ...
... This provides an initial test of performance feedback behavior with a tie-dissolution dependent variable, despite not being presented in terms of this theory. Other authors relating performance feedback to network dynamics areBaum et al. (2005) andShipilov, Li, and Greve (2011), who show that performance below aspirations can stimulate a more distant search for new exchange partners. ...
Managers need to periodically evaluate any exchange partner to decide whether to continue or dissolve the exchange tie, but doing so can be challenging because of causal ambiguity: it can be difficult to attribute organizational performance to any specific underlying factor. One way managers may evaluate their exchange partners is by observing the performance trajectories of competitors who rely on the same exchange partners. We propose a theory of vicarious performance feedback and test it in the context of Formula One motor racing. We find that a firm building a Formula One racing car is more likely to end an exchange relationship with an engine supplier after that supplier’s other customers experience an episode of poor performance relative to their historic track record. In line with an attention-based view of the firm, this behavior occurs when the firm’s own performance is below its aspiration level. This work extends our understanding of how managers use vicarious learning to supplement their direct experience when evaluating their exchange partners, expands our thinking about network dynamics by showing how network neighbors’ experiences can influence tie decisions made within a dyad, and contributes to the cognitive foundations of problemistic search by showing how external information is integrated into managers’ responses to their own firm’s underperformance.
... We first replicate Burt's (1988Burt's ( , 1992Burt's ( , 2008) studies of structural holes and industry performance using the 1992-2007 quinquennial U.S. input-output tables. We also replicate a study of structural holes and market performance (Shipilov and Li 2008) using U.S. public securities offerings (Shipilov et al. 2011). The U.S. industry networks are very dense, while the public securities offerings networks are quite sparse. ...
... To test the simulation findings in a relatively sparse network, we utilize data on public securities offerings on all U.S. stock exchanges between 1979 and 2001 (Shipilov et al. 2011). The actors are investments banks and the ties are underwriting syndicate co-memberships among lead and co-lead banks (Shipilov et al. 2011). ...
... To test the simulation findings in a relatively sparse network, we utilize data on public securities offerings on all U.S. stock exchanges between 1979 and 2001 (Shipilov et al. 2011). The actors are investments banks and the ties are underwriting syndicate co-memberships among lead and co-lead banks (Shipilov et al. 2011). Annual underwriting syndicate co-membership networks vary from 85 investment banks in 1979 to 394 in 1997. ...
Within the extensive literature examining brokers, Burt's intuitively appealing combination of structural holes theory and the network constraint measure plays a prominent role. This paper factors network constraint, revealing that the popular operationalization combines seven distinct network properties, none of which operationalizes structural holes. Computationally modeling scale-free/small-world networks, we observe that constraint is arithmetically and statistically dominated by its dyadic properties. Replicating two structural holes studies confirms the simulation findings: the replicated studies found strong dyadic effects consistent with resource dependence but no support for brokerage. This paper shows that the panoply of knowledge claims using Burt's structural holes measures, and subsequent research relying on those knowledge claims, supports resource dependence theory and not structural holes theory. The simulation and replication results support reinterpreting extant constraint-based research and refocusing future broker research.
... Scholars have investigated the motivations for forming cooperative relations as well as topics related to partner selection, alliance management and governance, and the performance implications of alliances (Wassmer, 2010). This stream of research has suggested that alliances and networks of cooperative relations directly contribute to firm performance rather than merely constrain rivalry (Gulati, 1998;Shipilov, Li, & Greve, 2011). ...
... In "Performance Feedback as a Cooperation 'Switch': A Behavioral Perspective on the Success of Venture Capital Syndicates Among Competitors," Makarevich (2018) examines the organizational antecedents as well as the performance implications of coopetition. His study draws on performance feedback theory (e.g., Shipilov et al., 2011) to advance a behavioral perspective on the implications of coopetition in the venture capital (VC) syndicates context. Such syndicates represent an example of cooperation among funders who are also rivals in deals through their investments in competing start-ups. ...
Research streams on competition and cooperation are central to the field of strategic management but have evolved independently. The emerging literature on coopetition has brought attention to the phenomenon of simultaneous competition and cooperation, yet the interplay between the two has remained under‐researched. We offer a roadmap for studying this interplay, which identifies some of its antecedents and consequences, highlights debates concerning the nature of competition and cooperation and the association between the two, and directs attention to the tension between competition and cooperation and the alternative approaches for managing this tension. We discuss the broader implications of the interplay, note some intriguing open questions, offer directions for future research, and present an organizing framework for the interplay of competition and cooperation.
... Prior research provides evidence that the use of such tactics is prevalent across a range of empirical settings (e.g. Hsu, 2004;Shipilov, Li & Greve, 2011). ...
... Besides lacking reputational visibility, poorly embedded firms also lack the informational benefits that accrue to more centrally embedded firms. Poorly embedded firms are less well able to collect information about potential collaborators and deals (Gulati, 1995b;Shipilov, Li & Greve, 2011) and are thus less likely than more central firms to form interorganisational ties (Ahuja et al., 2009). ...
Institutions, in the sense of durable systems of behavioural rules, norms and beliefs, are generally limited in their scope. Collective rules and norms are developed for specific behaviours and enforced within delimited social domains. This dissertation examines how, in shaping the behaviour of firms, the effects of these institutions diffuse from their original contexts to outside domains. It explores how firms’ market relations can serve as a conduit for this diffusion.
Chapter One provides a context to, and overview of, the entire dissertation. Chapter Two presents the first of two empirical studies, entitled ‘Rules That Bound: How External Governance and Partner Dependence Combine to Drive Practice Adoption.’ The study features a quantitative analysis of how regulation—explicit rules, administrative guidelines and laws (Scott, 1995)—affects the adoption of practices by the suppliers to a regulated industry. A novel dataset is utilised which tracks the adoption of green building practices by a panel of 226 architecture studios in Australia from 2008-2015. In line with my theoretical predictions I find that firms are impacted by regulations in jurisdictions where they do not operate but where their prospective clients do. In their responses to extra-jurisdictional regulation, firms are found to vary to an extent that depends on a firm’s power relative to that of its clients. Chapter Three, entitled ‘Rules That Bind: The Observance of Norms in Early- Stage Interorganisational Relations,’ explores how social norms—implicit behavioural rules which specify what is valued and what ought to be done (Scott, 1995)—function to draw firms into productive relations. This study utilises a qualitative analysis of 22 early stage relationships between Australian design service firms and their clients. Using inductive multiple-case analysis, I identify a system of norms that influence cooperative choices by the client firms. Clients’ cooperative choices are found to have a positive effect on relationship development. I propose that this effect is mediated by a firm’s judgment of its client’s ‘character’ (i.e. the client’s underlying behavioural tendencies and values). In addition, this study suggests a previously unidentified contingency in the judgment process by which firm reputation forms: as a firm’s power increases relative to that of its client, the firm is more likely to impute positive character to the client for conduct that conforms to prevailing norms.
Taken together, the findings from this research suggest that firms are receptive to how their prospective clients are operated upon by institutional forces, including forces emanating from outside domains. The behavioural effects of institutions are shown to diffuse, within and across contexts, through the market relations between firms. Consistent across the two studies presented, firms’ responses to institutional effects on their clients are shown to vary to an extent that depends on a firm’s power relative to that of its clients. Following resource dependence theory, power is defined in terms of a firm’s control over vital resources and as a property of exchange relations (Emerson, 1962). This leads to the conclusion that as institutional effects diffuse through the market relations between firms they are moderated by properties of those market relations.
... Such benefits-besides the passive benefits stemming from access to heterogeneous information, also argued to accrue due to active intermediation between brokered parties or even by playing them off each other (Borgatti 2005)-are thereby implicitly assuming that the focal organization is aware of the fact that its partners are unconnected. Other examples come from the partner selection literature in which it is assumed that specific network characteristics of potential partners, such as their network status (Shipilov et al. 2011), are known to the focal organization. Regardless of whether organizations attempt to form status-homophilous (Ahuja et al. 2009, Collet and Philippe 2014) or status-heterophilous (Shipilov et al. 2011) ties, the assumption is that the network positions of the focal organization itself and of potential partners can be identified accurately. ...
... Other examples come from the partner selection literature in which it is assumed that specific network characteristics of potential partners, such as their network status (Shipilov et al. 2011), are known to the focal organization. Regardless of whether organizations attempt to form status-homophilous (Ahuja et al. 2009, Collet and Philippe 2014) or status-heterophilous (Shipilov et al. 2011) ties, the assumption is that the network positions of the focal organization itself and of potential partners can be identified accurately. ...
A growing body of network studies argues that firms purposefully act based on the network structure and their relative position in it. In this paper, we assess the validity of one of the core assumptions underpinning these arguments: that managers have accurate information about the structure of the network in which their organizations are embedded. We extend theory on interorganizational networks by developing novel hypotheses regarding the antecedents of differences in this network information accuracy between organizations. We test these hypotheses by drawing on a unique data set of two whole networks in the healthcare industry in the Netherlands in which both the “objective” network structure and the organizational perceptions of that structure are assessed. The empirical analyses revealed considerable differences among organizations in terms of the accuracy of their network information, especially with regard to accuracy about different parts of the network. A key finding is that the network position of the focal and the assessed organizations is essential for explaining information accuracy differentials. From these findings, we discuss which network strategies are viable strategic options for which organizations and derive implications for future network theory and research.
The e-companion is available at https://doi.org/10.1287/orsc.2017.1180 .
... R&D has a strong routine component, and seems like a weaker test of top management decisions. Other actions that were similarly affected by performance in the form of profitability despite their unclear relation to top management include firms' network strategy, and actions to improve safety and quality (Baum and Dahlin 2007;Baum et al. 2005;Madsen 2013;Schwab 2007;Shipilov et al. 2011). ...
... Among the new outcomes, a central task is to identify the incorporation of external goals and demonstrate that organizations actually respond to performance feedback relative to aspiration levels on such goals. Clearly, the status literature has a lead in such investigations, but it is very rare to see status as a goal analyzed based on performance feedback theory (but see Baum et al. 2005;Shipilov et al. 2011). Obviously there are many other goals with institutional sources, and these need further exploration. ...
This paper examines a paradox in the behavioral theory of the firm, and highlights how a complementary paradox from institutional theory suggests a theoretical integration with potential for significant progress. Current behavioral theory of the firm research has a strong record of showing a broad range of organizational changes in response to profitability. This is far from the original conception of internal organizational goals that trigger search in the vicinity of the problem. Profitability is a non-specific goal that results from a multitude of factors, and is in part an externally imposed goal. Its central role in many organizational changes prompts the question of whether other external goals affect the organization as well. In contrast, institutional theory is focused on externally imposed practices, but usually examines specific actions rather than goals, leading to a theory of action without goals. These paradoxes and corresponding gaps in knowledge suggest a need for a behavioral theory of organizational responses to external goals.
... However, recent research has found conditions where status homophily does not hold. For example, firms with high status have been suggested to form ties willingly with lower status firms to gain access to new technologies (Gulati and Gargiulo, 1999), to obtain mutual benefits under more tolerable risks (Yang et al., 2010), to take advantage of efforts made by lower status partners (Castellucci and Ertug, 2010) and to make use of the brokerage position (Shipilov et al., 2011). The contribution of these studies is that they considered conditions in which firms do not show high levels of homophily when partnering with each other. ...
... They argued that high status firms form ties with lower status partners in spite of the risk of decreasing status because lower status partners make more efforts for the ties and the efforts reduce the negative influences of lower status. Shipilov et al. (2011) suggested a relationship between brokerage and status distance. A position with more brokerage brings more experiences to handle the difference, more accesses to beneficial opportunities to form heterophilous ties, and easier termination of unsuccessful ties. ...
The objective of this study is to examine the relationship between company environmental disclosures and CEO characteristics in term of tenure and education background such as MBA (Master in Business Administration) and legal background. Sample data collected from annual reports of companies listed in Bursa Malaysia in financial year end as 31st December consist 74 companies listed in Malaysia with various sector and in years from 2011 till 2013. The result shows that CEO’s tenure and CEO with legal education have negative relationship with the environmental disclosure. Only one of controlling variables which is size has positive relationship with environmental disclosure. The study concludes that CEO who has work long in the company tents and CEO with legal background may have less willingness to take risk to disclosure environmental information. © 2016, International Academy of Business and Economics. All rights reserved.
... However, recent research has found conditions where status homophily does not hold. For example, firms with high status have been suggested to form ties willingly with lower status firms to gain access to new technologies (Gulati and Gargiulo, 1999), to obtain mutual benefits under more tolerable risks (Yang et al., 2010), to take advantage of efforts made by lower status partners (Castellucci and Ertug, 2010) and to make use of the brokerage position (Shipilov et al., 2011). The contribution of these studies is that they considered conditions in which firms do not show high levels of homophily when partnering with each other. ...
... They argued that high status firms form ties with lower status partners in spite of the risk of decreasing status because lower status partners make more efforts for the ties and the efforts reduce the negative influences of lower status. Shipilov et al. (2011) suggested a relationship between brokerage and status distance. A position with more brokerage brings more experiences to handle the difference, more accesses to beneficial opportunities to form heterophilous ties, and easier termination of unsuccessful ties. ...
Recent collapses, corporate frauds and the crisis of investors’ confidence have moved things toward the development of ethical codes and the companies’ orientation in the direction of a more sustainable behavior, which is now building up all over the world. In 2011, United Nations (UN) claims that companies have to “seek to prevent or to mitigate adverse human rights impacts that are linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts” (Guiding Principles, No. 13, p. 14). In this perspective, Human rights (HRs) principles are becoming a crucial theme in embedding sustainability issues in key company functions. Indeed, companies should be prepared to disclose actions to address their HRs impacts through a formal communication especially to affected stakeholders. The form and the frequency of this communication may provide suitable and accessible information giving an adequate measure of transparency and accountability to firms’ audiences that may be impacted or to other relevant stakeholders (i.e. investors and so on). Building on these reflections, the research question of the present study pertains the influence of firm approach about the Corporate Social Responsibility (CSR) reporting on firm commitment towards the safeguard of HRs. The foregoing research question is explored through six hypotheses into which the other determinants investigated are: firm profitability, corporate governance model and firm size. From an empirical standpoint, a longitudinal analysis, covering the time frame 2010-2014, is carried out on a sample of 42 European listed large-size companies operating in the oil & gas industry. Supportive empirical evidence ensues from the adoption of random effects (RE) regression models for panel data. © 2016, International Academy of Business and Economics. All rights reserved.
... Since the publication of Greve's seminal book ("Organizational Learning from Performance Feedback: a Behavioural Perspective on Innovation and Change"; Greve, 2003) and other subsequent studies authored or co-authored by Greve (e.g., Ben-Oz & Greve, 2015;Gaba & Greve, 2019;Greve, 2008Greve, , 2011Rowley et al., 2017;Vissa et al., 2010), a noticeable bulk of empirical research has resorted to Performance Feedback Theory to explain firms' organizational and strategic change. Examples of the selected strategic variables are as follows: the identification of partnerships and alliances (e.g., Baum et al., 2005;Han, 2022;Martínez-Noya & García-Canal, 2021;Shipilov et al., 2011), internationalization (e.g., Wennberg & Holmquist, 2008;Lin, 2014;McCormick & Fernhaber, 2018;Jiang & Holburn, 2018;Li et al., 2018;Kaleka & Morgan, 2019;Xie et al., 2019;Fletcher et al., 2021;Ref et al., 2021;García-García et al., 2022;Zhong et al., 2022), corporate venture capital (Wan et al., 2022) and technological innovation and R&D investments (e.g., Chen, 2008;Lu & Fang, 2013;Rhee et al., 2019;Lv et al., 2019;Jirásek, 2020;Wang et al., 2021;Chen & Li, 2021;He et al., 2021;Chung & Shin, 2021;Jirásek, 2021;Qi & Wu, 2022;Chen et al., 2022;Saemundsson et al., 2022). ...
Plain English Summary
In recent years, firms have been faced with unprecedented challenges, prompted, for instance, by increasing competition end globalization, but also by particularly adverse and unpredicted events, including the well-known COVID-19 pandemic. This strengthened the importance of understanding how companies react to unexpected changes. To tackle this issue, in this study, we assess whether firms reduce or increase the extent of innovation in their business models as a response to both positive and negative variations in their market power (proxied by their price–cost margin, or markup). Using a sample of Italian manufacturing companies and unique survey data, we show that markup variations foster business model innovation, but that this link significantly changes with the degree of family involvement. In particular, family firms stand out for their proactive response to both increases and decreases in their market power, and seem to view the improvement in their competitive position in the product market as an incentive to strengthen those areas of the business model that are often considered weak in this type of company. Hence, our study portraits a favourable account of (virtuous) family businesses which should prompt policymakers to provide adequate support to these companies.
... Because realized ties were relatively rare, we ran several rare events models. Because potential interdependence among dyads may result in autocorrelation (each developer and each publisher were included multiple times), making standard errors difficult to interpret, we re-ran the analyses with all realized dyad-years and a sample of 5, 7, and 10 unrealized randomly selected dyads, respectively, per each realized dyad (Shipilov, Li, & Greve, 2011). We then reran the analyses by selecting unrealized dyads to match each realized dyad as closely as possible in observable characteristics, using propensity score matching, to achieve a higher-quality match as suggested by Rathje and Katila (2021). ...
Entrepreneurial and established firms form collaborative relationships to commercialize products. Through such ties, entrepreneurs seek (a) development help to hone ideas into marketable products and (b) access to markets. In most cases, entrepreneurs face a trade-off: they can be a big fish in a small pond, getting more attention and development help from a smaller firm with less market access, or a small fish in a big pond, getting less attention and help from a larger firm with more market access. Our study investigateswhat goes into choosing between these options. Drawing fromresource dependence theory and an empirical study of tie formation between developers and publishers of PlayStation 2 video games, we develop and test a framework that identifies the key decision variables and focuses on two moderators-resource need evolution and resource uncertainty related to competition-that explain whether a big fish (more development help) or a big pond (more market access) drives tie formation. Our findings point to prospective peers as one of the significant decision criteria at tie formation and highlight the dynamic nature of resource dependence. Altogether, the results give resource dependence theory a dynamic element it has lacked in the past.
... positive effect on revenue generation269 . As follow-up research,Shipilov et al. (2011) further studied the influence of status in selecting organisational partners. The influence of the firm's brokerage position in combination with aspirationperformance gaps on an organisation's propensity to initiate relationships with partners of different statuses has been examined. ...
Previous decades revealed two fundamental changes occurring in SCM: first, the concentration on core competencies and the outsourcing of the remaining functions steadily reduced the OEMs’ depth of production. This trend increased the importance of purchasing. Second, and in parallel, in purchasing the trend prevailed to reduce the number of suppliers and concentrate on a few buyer-supplier relations. Thus, the number of available suppliers sunk, often causing oligopolistic situations, while their importance increased. Additionally, from sustainability perspective, scarcity of raw materials and the increase of CSR and CE practises forced organisations to integrate sustainability, with CSCs as result. Consequently, these (mega)trends challenge purchasing to react with novel approaches. Therefore, by achieving a PCS, a buying firm can benefit from preferential treatment of the supplier. In the process to become a preferred customer, supplier satisfaction plays a crucial role. Next to the replication of Vos et al. (2016), this research will provide new insights by examining the directly and indirectly influence of corporate prestige – dissected into corporate reputation and corporate status - as well as the buyer’s adoption of CE principles on supplier satisfaction in order to obtain the PCS. Quantitative data is collected from 51 OEMs, as key suppliers, of a metal recycling company within the CSC. By using the partial least square–structural equation modeling, with support from SmartPLS, buyer’s reputation positively influences PCS, where status shows an insignificant relationship on both constructs. The same applies for the relation between buyer’s adoption of CE principles on supplier satisfaction and PCS. In addition, results show the significant effect of buyer’s adoption of CE principles on corporate reputation and reputation as underlying factor for the classical antecedents of Vos et al. (2016). This implies that future studies on satisfaction must consider prestige and sustainability as central variables in the ‘cycle of preferred customership’. Keywords: preferred customer status; supplier satisfaction; corporate prestige; status; reputation; sustainability; circular economy principles; and CE.
... Above the aspiration, however, search is increasing in performance. This type of pattern has been found in the propensity to form interfirm ties (Shipilov, Li, & Greve, 2011), investments in R&D (Chen, 2008), and accident experience (Baum & Dahlin, 2007). Similarly, a recent review of the literature by Kotiloglu, Chen and Lechler (2019) reported no decrease in search intensity above aspirations for R&D and product innovation. ...
A central idea in the Behavioral Theory of the Firm is that when organizations’ performance falls below aspirations, search is triggered. While this aspiration-based model has dominated the empirical literature, it is only one of the two Carnegie School accounts of how firms use performance feedback to regulate behavior. We call the second account the belief-based model. This paper compares the aspirationand belief-based models, highlighting the core contingency that bounds the applicability of one model or the other. In particular, we argue that when the challenge imposed by the task environment is primarily one of discovering a satisfactory solution, then firm behavior is well characterized by the aspiration-based model. However, when the task environment exhibits only a few choice alternatives, but ones with substantial evaluation challenges due to uncertainty and ambiguity, then firm behavior is better characterized by the belief-based model. Using a computational approach, we consider the behavioral predictions of the belief-based model and demonstrate that the difference between these two accounts may explain many prior mixed empirical results in the aspiration-based literature. We also highlight the implications for empirical research on performance feedback and extensions to account for additional theoretical constructs such as affect and politics.
... In studies of networks, interorganizational relations are argued to serve as both 'pipes'channels for the flow of resources such as information -and 'prisms'-informational cues about the underlying quality of network actors (Podolny, 2001). Prior direct and indirect relationships between firms provide a channel for them to learn about and monitor one another, and to collect information about a wider set of potential collaborators and deals (Gulati, 1995;Shipilov, Li and Greve, 2011). An extensive relationship history also serves to influence perceptions of a firm's attractiveness as a partner (Gulati and Gargiulo, 1999;Podolny, 1993;Podolny and Stuart, 1995). ...
Prior empirical research on institutional change shows that the actions of institutional actors in one locale can impact organizational behavior in another. In this paper, we explore how extra-jurisdictional regulative and normative pressures faced by a set of organizations affect the strategic decision making of their suppliers. We utilize a novel dataset that tracks the adoption of a green building practice by a panel of 226 architecture studios in Australia from 2008–2015. In line with our theoretical predictions, firms respond to regulation, social norms and competitive pressures from cities where they do not operate but where their prospective clients do. We find that a focal studio’s position in the market for the new practice shapes its response to extra-jurisdictional regulation but not its response to extra-jurisdictional norms. The study advances our understanding of how network mechanisms shape firms’ conceptions of the institutional field that governs exchange. We discuss resultant effects on organizational behavior which may be
crucial to market formation.
... Relatively little attention is paid to status heterophily -specifically how and why high-status actors exchange with low-status ones. Among the explanations given are that high status actors may prefer to exchange with low status ones because the latter are more likely to exert greater effort (Castellucci and Ertug 2010) or because the former's poor performance against aspirations makes them more prone to making risky choices in partner selection (Shipilov et al. 2011). We add to these explanations by suggesting that high-status actors may agree on terms of exchange that are more favorable to low-status actors when the latter signal greater intrinsic quality. ...
We ask how social similarity between start-up founders and venture capitalists (VCs) influences VCs’ pricing decisions and returns on investments. We conceptualize how regional and caste similarity, two salient aspects of social similarity in India, affect two distinct aspects of deal pricing: premoney valuation and investors’ downside risk protection in the Indian venture capital market. We theorize that VCs reflect the benefits and costs of social similarity by setting higher premoney valuation when investing in companies led by socially similar founders while also minimizing their downside risks in these investments. We expect that social similarity’s impact on pricing is amplified when VCs face greater subjective uncertainty, such as for early-stage deals or if the VCs lack expertise in the start-up company’s product market. Finally, we claim that VCs achieve superior returns on investments when their deal pricing accurately reflects the impact of social similarity. We tested our conceptual model using both parametric and nonparametric methods on a hand-collected data set of all deals that occurred during 2005–2012, and we supplemented our analyses with in-depth, qualitative interviews that contextualize our findings. The pattern of findings on regional similarity are consistent with our model, but the effects of caste in our data are theoretically anomalous. Post hoc analyses to resolve the anomaly suggest an “intrinsic quality” mechanism, whereby higher-caste VCs set higher valuations when matching with lower-caste founders that signal high quality. Overall, our findings offer evidence that VCs incorporate social attributes into deal pricing in nuanced yet boundedly rational ways.
... Future models of the dynamics and implications of social structure that interlink corporate agents and principals could therefore benefit from a more systematic integration of and attention to how actors' reputational considerations as collaborators and rivals affect their interactions. With the proliferation of network research studying the dynamics and outcomes of social structures in which agents represent clients-such as investment banking syndicates (e.g., Baum et al., 2005;Shipilov, Li, and Greve, 2011), marketing efforts (e.g., Rogan and Sorenson, 2014), or lobbying (e.g., Bermiss and Greenbaum, 2016)-the interplay between evaluative and structural dynamics presents a valuable avenue for future research. Our work provides a step in that direction by highlighting instances when loyalty requirements hamper cooperative interactions between rival agents who have previously collaborated. ...
Social embeddedness research has suggested that a history of collaboration between rivals should facilitate cooperation and prevent conflict. In contrast, the present study explores how a history of collaboration between people who subsequently become rivals can exacerbate conflict rather than facilitate future collaboration when salient others may expect them to be antagonistic. We develop this argument for a general set of relationships in which agents who previously collaborated become rivals while representing contesting principals. These agents may be perceived by the principals they represent as having compromised loyalties. This is especially likely when the principals whom the agents represent compete intensely or have previously been in conflict. To mitigate principals’ loyalty concerns, agents engage in compensatory behaviors meant to demonstrate social and psychological distance from former collaborators and now-rivals. Paradoxically, these behaviors transform a history of collaboration into a catalyst for conflict. Our empirical analyses are based on the professional histories of more than 20,000 external legal counsel representing corporate clients in intellectual property lawsuits filed from 2000 to 2015. Results reveal that lawyers engage in uncooperative behaviors in court to distance themselves from opposing lawyers who are former collaborators. These dynamics are associated with longer, more contentious litigation and lost economic value for clients, as evidenced by an analysis of companies’ abnormal stock market returns upon the termination of a lawsuit. Our research thus sheds lights on a mechanism by which past collaboration can undermine future collaboration and carries potential implications for research on social structures and for work on the interplay of structure and evaluative dynamics.
... However, many recent advances in network theory stem from ideas concerning heterophily (Kilduff & Tsai, 2003). For instance, Shiliov, Li and Greve (2011) found that organizations seek ties with status-heterophilous partners to procure unique information and resources. Studies of network dynamics show that heterophily can provide access to complementary skills in collaboration networks ( Xie et al., 2016). ...
The ability to evaluate opportunities accurately is critical to an organization’s competitive advantage. Research shows that this ability depends on how organizations harness the knowledge of their members but the behavioral mechanisms of this process are not well understood. We develop a model of social cognitive influences on opportunity evaluation in organizations. We find that the ability to choose good opportunities and forgo bad ones depends on evaluators’ position within an organization’s cognitive network and on their social preferences when gathering assessment from others. Surprisingly, the results show that in dynamic environments using cognitively central members of the organization to coordinate the evaluation process is more effective than relying on experts and that homophily can be an effective way to harness individuals’ judgments. The results also show how social cognitive influences are moderated by learning resources and exploratory structure at the organizational level. Overall, our findings provide a more agentic, relational and dynamic view of information aggregation in opportunity evaluation decisions.
... To aid interpretation in the Tables and empirical models, we had originally reversed all values for below-aspiration performance so that both spline variables contained only positive values or zero. In Figure 1, however, to follow convention in the BTF literature (e.g., Greve, 2003;Parker, Krause, & Covin, 2017;Shipilov, Li, & Greve, 2011), we displayed the true (negative) values of below-aspiration performance to depict distance below aspirations, with the inflection point of the DV at "0" attainment discrepancy (the aspiration point). This allows us to examine the influence of aspiration-relative performance as performance diverges from those aspirations, both above and below zero. ...
We contribute to the organizational aspirations and corporate venturing literature by theorizing and testing (a) the influence of a firm’s idiosyncratic strategic posture on behavioral responses to performance attainment discrepancies, and (b) that performance feedback may influence multifaceted yet thematically related forms of search. Specifically, we examine the influence of performance feedback on equity-based external corporate venturing. We then propose that a firm’s entrepreneurial orientation (EO) is a critical contingency when theorizing about how firms respond to attainment discrepancies. Our findings indicate that a firm’s EO is an important contingency when considering behavioral responses to attainment discrepancies.
... At the micro level, scholars have highlighted how individual characteristics (such as age, education, gender, race, and nationality) provide those who possess them with recognized social distinction because of their association with widely-shared belief systems about value and worth (Berger & Fisek, 2006;Neeley, 2013). Research at the organizational level has focused instead on actors' status within their network of affiliation (Podolny, 2001;Shipilov, Li, & Greve, 2011;Stuart, Hoang, & Hybels, 1999). At a very general level, these lines of inquiry have shown how status positions advantage or disadvantage actors (Bianchi, Kang, & Stewart, 2012). ...
Our study investigated how multi-centenary family firms in the area of Kyoto – collectively known as shinise – maintain a high social status in the community. Our analysis unpacks the socio-cultural practices through which the ongoing interaction among these actors re-enacts and reproduces the social order that ascribes shinise a distinct social standing in exchange for their continued commitment to practices and structures that help the community preserve its cultural integrity and collective identity. By doing so, our findings trace a connection between status maintenance and the expressive function that a category of firms performs within a community. At the same time, our study reveals a dark side of high status, by showing how their commitments lock shinise in a position of ‘benign entrapment’ that may impose sacrifices on family members and severe limitations to their personal freedom.
... We generated a Mills ratio from the first-stage regression and included it in the second-stage models. 15 We employed fixed-effect panel regressions in the second-stage regressions (Shipilov et al., 2011) with clustered standard errors at the startup level. 16 Model 8 is the baseline model with only control variables predicting the embeddedness between new and existing VCs. ...
This paper highlights the venture capital investor (VC) portfolios of startups, and explores how the portfolios evolve. We emphasize the important trade-off between broadening and reinforcing VC portfolios (i.e., expanding to new VCs versus relying on existing VCs). This is because, to startups, new and existing VCs generate very different opportunities and constraints. Focusing on the social structure of existing VCs, we argue that startups are more likely to opt for new VCs when the internal networks of existing VCs are denser, when the external networks of existing VCs are smaller, and when the status of existing VCs is lower. Additionally, we not only focus on whether new VCs are on board, but also pay attention to which new VCs are introduced, by analyzing the ex-ante embeddedness between existing and newly-introduced VCs. We stress that when new VCs are highly embedded with existing VCs, their involvement makes only a limited contribution to broadening a startup's portfolio and network. We test the hypotheses using a sample of VC financing rounds in the U.S. and find broad support.
... We choose β to be strictly between 0 and 1 because (i) prior research has shown that both direct and indirect ties influence a person's belief about others' trustworthiness (McEvily et al. 2003, Ferrin et al. 2006; and (ii) direct experience has a stronger influence on a person's trust belief than indirect evidence does (Paruchuri 2010). Some researchers have found that results based on different β values are highly consistent with each other (Shipilov et al. 2011). 10 We utilize a commonly-used software for social network analysis, UCINET, to compute the executives' network trust. ...
... For example, a family firm that acquires a company controlled by a private equity fund may obtain access to a set of complementary relational resources (e.g. with banks) or reputational resources (e.g. recognition within the financial community) that are scarce in the acquiring firm (Castellucci and Ertug, 2010;Shen et al., 2014;Shipilov et al., 2011). Conversely, acquisitions between firms with the same type of owners might make it more likely that their resources will be less valuable due to redundancy, and allow less scope for complementary and synergy, thereby reducing acquisition likelihood. ...
We study how ownership similarity between two firms affects the likelihood of an acquisition between them. Assortative matching arguments suggest that similarity between acquiring and target firms can encourage acquisition behavior, since more similar partners can better understand one another and combine resources in a more efficient way. Previous research has confirmed this expectation focusing on traits related to industry, strategy, and technology. We contribute to this literature by examining similarity in the type of dominant owner. We hypothesize and find evidence in a sample of 14,000 Italian companies that acquisitions are more likely to occur among firms with similar owners.
... Prior research provides evidence that the use of such tactics is prevalent across a range of empirical settings (e.g. Hsu, 2004;Shipilov, Li & Greve, 2011). Castellucci and Ertug (2010) showed that Formula One racing teams utilise status advantage to induce greater effort from engine suppliers. ...
... Recent work has also pushed into outcomes that are not so directly attributable to top management actions, even while maintaining the usual organization-level measures of performance. Organizational alliances are sensitive to performance relative to aspiration levels even though they are not necessarily made at the top level of the organization (Baum, Rowley, Shipilov, & Chuang, 2005;Schwab & Miner, 2008;Shipilov, Li, & Greve, 2011). A reasonable interpretation of these findings is that problemistic search can happen through top management endorsing either specific subunit actions or creating a climate for change, thus creating opportunities for subunit managers who are seeking to solve problems of their own. ...
... The behavioral theory of the firm, on the other hand, specified that performance below an aspiration level on an organizational goal triggers problemistic search (Cyert & March, 1963), which is oriented toward solving the problem of low performance and continues until decision-makers are satisfied with a proposed solution. This theory of low performance leading to organizational change has been supported for a wide range of outcomes such as product introduction (Gaba & Joseph, 2013), innovations (Greve, 2003a), market expansion (Barreto, 2012), alliance partner choice (Shipilov, Li, & Greve, 2011), mergers and acquisitions (Iyer & Miller, 2008), divestiture (Desai, 2016), and risk taking (Kacperczyk, Beckman, & Moliterno, 2015). These outcomes have in common that a problem identified through low performance is followed by a choice of change action. ...
Coalitions are important in organizational decision making, but the question of how coalitions are built and make decisions in response to firm performance is still not sufficiently explored. In this study, we develop and test theory on how potential coalitions are built through shared experience and recruitment of allies. When organizations respond to performance relative to aspiration levels, either as problemistic search following low performance or opportunity exploration following high performance, members form coalitions to influence decisions. We develop theory of coalition formation that builds on upper echelons theory and the theory of dominant coalitions to predict how past experience of decision makers leads to preferred actions by each member and subsequent coalition formation. We use this theory to make new measures of potential coalitions and apply it to acquisitions made by firms in China. We find evidence that the experience of members of the key decision making group—the board of directors—affects the potential coalition building, and hence the type of acquisition target, as predicted.
... We differentiate between alliance portfolios and dyads. The fundamental distinction is that the focal firm in a dyad has only one partner, while a portfolio involves multiple partners (Hoffmann, 2007;Lavie, 2007;Shipilov, Li, & Greve, 2011;Wassmer, 2010;Wassmer, Li, & Madhok, 2017). With the presence of multiple allies, a portfolio creates the potential for discord among partners (Simmel, 1950) so that the termination of a given alliance in a portfolio may be contingent on the nature of the focal firm's other ties within the portfolio. ...
Research Summary: Firms with resources that make them attractive allies are also desirable partners for competitors so that competition among partners is embedded in alliance portfolios. We develop a framework in which competition within a portfolio creates benefits for a focal firm but threatens partners, increasing the hazard of alliance termination. We then propose four mechanisms for managing the threat of competition to partners reflecting aspects of portfolio configuration: alliance governance, social cohesion, social structure of competition, and partner similarity. We test our framework using a sample of 204 biopharmaceutical firms with alliance portfolios comprising 1,621 alliances between 1990 and 2000. The study addresses the interplay of competition and cooperation in alliance portfolios, and more generally, key aspects of value chain integration strategy.
Managerial Summary: Alliance portfolios comprise a focal firm's set of direct partners, some of which compete with each other because of overlapping resources, capabilities, and strategies. The threat of actual or perceived competition from other partners may cause some firms to terminate their alliance with the focal firm. We develop a framework comprising four mechanisms related to alliance portfolios—alliance governance, social cohesion, social structure of competition, and partner similarity—that allows focal firms to attenuate the hazard of termination of their alliances. We find support for our framework in a study of 204 biopharmaceutical firms with alliance portfolios comprising 1,621 alliances between 1990 and 2000. We improve understanding of how firms can manage competition and cooperation within their alliance portfolios.
... We differentiate between alliance portfolios and dyads. The fundamental distinction is that the focal firm in a dyad has only one partner, while a portfolio involves multiple partners (Hoffmann, 2007;Lavie, 2007;Shipilov, Li, & Greve, 2011;Wassmer, 2010;Wassmer, Li, & Madhok, 2017). With the presence of multiple allies, a portfolio creates the potential for discord among partners (Simmel, 1950) so that the termination of a given alliance in a portfolio may be contingent on the nature of the focal firm's other ties within the portfolio. ...
... Conventional brokerage measures-efficiency, effective size, constraint, or hierarchy (Burt, 1992)-do not discriminate between brokerage opportunities that occur within a community or across communities, so we needed a different measure. Gould and Fernandez (1989) developed a brokerage index (often referred to as the ''G&F Index'') that can separate these different opportunities and that has been used in recent research to identify the extent to which a focal actor is brokering within or across network communities (Shipilov, Li, and Greve, 2011). The intuition behind the G&F index is that a brokerage opportunity occurs whenever the focal actor A is in an open triad in which A is connected to B and to C, but B and C are unconnected. ...
Although much is known about how brokerage positions in social networks help individuals improve their own performance, we know little about the impact of brokers on those around them. Our study investigates brokerage as a public good. We focus on the positive and negative externalities of specific kinds of brokers: “hubs,” who act as the main interfaces between members of their own network community (“network neighbors”) and members of other communities. Because hubs access diverse knowledge and perspectives, they create positive externalities by providing novel ideas to their network neighbors. But hubs also generate negative externalities: extensive cross-community activity puts heavy demands on their attention and time, so that hubs may not provide strong commitment to their neighbors’ projects. Because of this, network neighbors experience different externalities from hubs depending on their own formal role in projects. We use insights from our fieldwork in the French television game show industry to illustrate the mechanisms at play, and we test our theory with archival data on this industry from 1995 to 2012. Results suggest that the positive externalities of hubs help their neighbors contribute to the success of projects when these neighbors hold creativity-focused roles; yet the negative externalities of hubs hinder their neighbors’ contributions when they hold efficiency-focused roles.
... Customers attach considerable importance to seller reputation in emarketplaces [14] and seller reputation positively affects revenue and total sales [31,32]. Online sellers should consider the reputation of prospective partners when forming alliances [33]. A good reputation improves the benefits of forming alliances [34]. ...
... Cultural influences are absent from most organizational studies of status because these studies are predominantly executed at the level of the inter-firm networks, where the effect of national culture is either held constant or is so ambiguous that it is not clear which organization would benefit from the cultural norms (e.g. Podolny, 1993;Shipilov et al., 2011). Instead, scholars of status assume that deference is solely derived from the pattern of affiliations: the more relationships to high status individuals the focal individual has, the higher is the status of the focal individual (Podolny, 1993) to whom the lower status others have to defer (Castellucci & Ertug, 2010). ...
Deference within a dyad occurs when one partner acknowledges that the other is entitled to some privileges. Although deference is a well-known consequence of relationships between partners of unequal status, little is known on whether deference in one domain can affect interactions between the same actors in the other domains. This can happen within multiplex relationships, especially when they involve firms that have both business and personal interactions between their key decision makers. We combine insights from the literatures on status, multiplex relationships and competitive positioning to examine how actors' behaviors in a business domain of a multiplex relationship are shaped by the deference norms in a personal domain of the same relationship. We argue that marriages between owner-families of Korean business groups cause deferential behaviors between these families as a function of gender-based status differences within kinship ties. We show empirically that the inter-personal deference resulting from marriage affects business group market entries or exits, and in turn the group's performance. Thus, we shed light on how deference spillovers represent a novel mechanism through which one partner can extract advantage over another within a multiplex relationship.
Research Summary
We investigate the implications of the degree assortativity of intra-firm networks for firms’ innovation performance. We argue that prevalent patterns of collaborative relationships between organizational members can lead to variations in the levels of degree assortativity in intra-firm networks, ranging from disassortative structures (highly central members connect with peripheral members) to assortative ones (highly central members connect with other highly central members and vice versa). These patterns influence knowledge access and resource mobilization pathways and are thus associated with various firm-level invention outcomes. Using coarsened exact matching methodology and controlling for other characteristics of the intra-firm network structures, we find that assortative structures in the pharmaceutical industry are associated with larger invention output, but inventions originating from assortative structures have lower average novelty and impact.
Managerial Summary
A central challenge in knowledge-based industries is the design of collaborative teams to increase innovative output. In this paper, we show that firms in the pharmaceutical industry vary in the extent to which central inventors within a firm collaborate with peripheral inventors. Further, the ideal composition varies based on the desired innovative output: Firms with frequent collaborations between central inventors have higher inventive productivity, while firms with higher mixing between central and peripheral inventors generate inventions that are on average more novel and have higher impact. Results have implications for organizational design toward desired innovative outcomes, as well as management of strategic human capital.
Recent research suggests pre‐existing network structural dynamics can hamper inter‐organizational alliance formation, particularly for poorly embedded firms. However, this research fails to fully explain how poorly embedded firms can overcome these structural barriers when forming alliances. This study adds to the existing knowledge on network dynamics by proposing how interpersonal relational embeddedness alleviates such constraints and facilitates alliance formation of firms poorly embedded in existing alliance networks. We highlight the informational and sociological benefits of inter‐firm managerial social ties (IFMSTs) formed through interpersonal social experiences beyond those originated from prior business exchange activities between potential partnering firms. Our empirical investigation employs an extensive sample of US public firms and shows strong evidence that IFMSTs help poorly embedded firms overcome the obstacles imposed by their inferior network structure embeddedness when forming alliances. The negative effect of inferior network structural embeddedness is more muted by IFMSTs when both firms in a dyad are at the periphery of the alliance network than when they occupy asymmetric structural positions. This mitigation effect of IFMSTs is more salient when the ties originate from activity‐based social experiences than from shared educational affiliations.
Many firms simultaneously develop multiple alliances with different partners and face the challenges of managing a complex alliance portfolio that contains both strong and weak ties. How does this dispersion of tie strength affect alliance portfolio performance? This study examines the effect of tie strength dispersion on alliance portfolio performance, as well as the contingent effects of CEOs’ experience. The empirical analyses, using a dataset consisting of 748 funds initiated by 62 fund management firms over a 10‐year period (2002–2011), reveal an inverted U‐shaped relationship between tie strength dispersion and alliance portfolio performance. The analyses also reveal that CEOs’ political experience weakens, while their international experience strengthens, this inverted U‐shaped relationship.
Network brokerage research has grown rapidly in recent decades, spanning the boundaries of multiple social science disciplines as well as diverse research areas within management. Accordingly, we take stock of the literature on network brokerage and provide guidance on ways to move this burgeoning research area forward. We provide a comprehensive review of this literature, including crucial dimensions of the concept itself, in terms of brokerage structure and behavior, a set of key categories of factors surrounding the brokerage concept (antecedents, outcomes, and moderators), and an overview of brokerage dynamics over time. We use these dimensions and categories to depict network brokerage's theoretical and empirical underpinnings, as well as evaluate prior research efforts. In so doing, we offer a means to summarize and synthesize this large, interdisciplinary literature, identify important research gaps, and offer promising directions for future research.
R&D investments are an important precursor to innovation and ultimately affect a firm’s long-term performance. Prior research has treated R&D expenses as static over time, but over the last few years, scholars have switched to a more dynamic perspective of R&D investment. Using data from Chinese listed manufacturing firms, this study investigates the influence of performance feedback on R&D investment frequency, and further explores how that influence differs in SOEs and POEs. These results provide insight into the dynamics of firms’ R&D investment, which can help decision-makers properly stimulate firms’ R&D investments in China’s emerging economy.
This study integrates research on managerial discretion within the behavioral theory of the firm to examine how four CEO psychological traits serving as antecedents of managerial discretion—ambiguity tolerance, cognitive complexity, locus of control, and commitment to the status quo—moderate firm responses to poor performance. Using CEOs’ responses to questionnaires, CEO ambiguity tolerance is found to positively moderate the relationship between negative attainment discrepancy and strategic change when performance is slightly below aspirations, defined as average market return for the firm’s industry. Further, CEOs with greater cognitive complexity are found to engage in more strategic change when performance is farther below aspirations. Thus, this study begins to unpack the role of CEOs’ cognitive makeup on firm responses to performance shortfalls.
The mobilization of resources is a central and defining feature of entrepreneurship. As the body of empirical research on entrepreneurial resource mobilization has grown, the literature has become increasingly fragmented. We review the literature on entrepreneurs’ mobilization of resources, spanning human, social, financial, and other forms of capital. We identify five critical issues that hold back progress in resource mobilization research. We then propose a path ahead for future research guided by two overarching goals. First, we advocate for a process perspective, focusing attention on how an individual actor’s disposition and situation shape her responses, how these responses interact with those of other actors, and how these individual and collective responses unfold over time to generate outcomes. Second, we call for stronger unification of theory within the entrepreneurial resource mobilization literature and across contiguous conversations in strategy and organization theory. Theoretical consilience will enable the accumulation of empirical research into a cohesive body of knowledge on entrepreneurial resource mobilization.
Problemistic search is a central part of behavioral strategy because it is a fundamental step in the decision process leading to strategic change. Despite the significant research efforts so far, there is a gap in our understanding of search. Unlike the theory of myopic search, most research so far has emphasized search initiated by performance relative to aspiration levels on goals that are too broad to justify directing search toward the form of strategic change selected for investigation. In the following, I outline the foundation of an extended theory of problemistic search in response to broad goals through either broad search, use of multiple goals, use of power, reliance on cognitive biases, or responses to environmental stimuli. Each of these processes, alone or in combination, can give more specific predictions of where firms search when encountering performance below aspiration levels on broad goals. Substantial progress in empirical research is needed, however, to distinguish which of these processes occur.
Research summary
We ask if managerial opportunism is a significant problem in alliance partner choice and examine the role of corporate governance mechanisms in explaining this choice. Using a sample of 313 alliances of U.S. firms from the pharmaceutical and biotechnology industries from 1992 to 2010, we find that managerial incentives lead to managerial preference for relationally risky distant partners over existing and new close partners. Further, board monitoring encourages managers to pursue existing and distant partners over new close ones, choices aligned with shareholder interests. In addition, we find that board monitoring substitutes for managerial incentives in alliance partner choice. We contribute to the literature on alliance partner choice to identify an important and hitherto unexplored perspective.
Managerial summary
This article examines whether managers and shareholders view alliance‐related risks differently, and how the divergent interests between managers and shareholders affect alliance partner choice. We argue that managers’ concern about their loss of employment and compensation from alliance failure impedes the choice of relationally‐risky alliance partners that may increase shareholder value. We also argue that managerial stock ownership and board monitoring mitigate this managerial propensity. Our findings suggest that stock ownership owned by managers and strong board monitoring are effective governance mechanisms to align managers’ interests with those of shareholders. Our study offers a novel perspective to understand alliance partner choice by viewing the firm as an entity comprised of fragmented interests.
Whereas social network analysis has been associated with organizational aspirations, little is known on how firm’s structural positioning, and particularly network centrality, affects organizational aspirations to engage in international strategic alliances (ISA). This study examines the impact of network centrality on firm’s internationalization behavior within the ISA domain in response to the performance–aspiration gap. We build on social and behavioral perspectives to predict that network centrality and performance-based aspirations will be associated with the number of ISA the firm engages in. Using a sample of 7760 alliance collaborations from the top 81 global pharmaceutical firms for the period of 1991–2012, we find supporting evidence for most of our arguments.
March and Simon’s (1958: 50) assumption that search happens within a “benign environment” has become taken-for-granted in organizational studies. The implications of making this assumption are not widely theorized, investigated, or even discussed, and yet, it often appears to have been unwittingly imported into explanations of organizational learning. March and Simon acknowledged that this assumption was not realistic—our work builds on theirs by investigating the origins and consequences of a non-benign search environment. We draw on in-depth qualitative research at a Fortune 500 mining firm to show how perceptions of social risk problematize the assumption of a benign search environment. Causal links are drawn between role equivalence, performance comparisons, and rivalry for social status to explain how social risk is generated and why it can lead actors to view the intraorganizational search environment as non-benign. These perceptions help create what we describe as a “paradox of local equivalence” that leads actors to search for nonlocal solutions. Our causal logic provides a new way of understanding the phenomena of nonlocal search; complements explanations of nonlocal search founded on myopia in organizational learning; and shows how the micro-foundations of existing search models can be adapted to better explain organizational learning. In doing so, this study contributes to recent efforts to improve behavioral explanations of search and learning by bringing the notion of intraorganizational conflict back to center stage in this important area of organizational theory.
笔者研究了首席执行官（CEO）的自恋如何影响公司间的战略模仿。我们的理论提出，自恋的CEO受其自身在其他董事会任职时所经历的公司战略影响更大，而受其他董事所经历的公司战略影响更少。当CEO任董事的其他公司地位较高或者CEO在自己的董事会上较有权势时，以上的效应会更强。通过对财富500强公司增长策略中的并购倾向和国际多元化水平的长期（1997-2006年间）实证分析，我们发现自恋的CEO比起其他CEO而言的确更容易受到他们在其他公司所经历的公司战略的影响。此外，较为自恋的CEO不仅强烈抵制其他董事的经验的影响，还倾向于违背董事的经验而作决定，以此昭显自己的优势。笔者的理论和实证结果突显了CEO自恋如何限制董事对公司战略的影响以及如何影响CEO在制定战略决策时的学习和信息处理。
This chapter explains the importance of social capital for society, management and entrepreneurship. It emphasises the scholarly importance of social capital in the fields of social science, economics, health, arts and humanities. There is a large and robust body of research that addresses three main views pertaining to social capital: communitarian; networks; and institutions. The communitarian view reflects social cohesion amongst and between members in a group and moral behaviours. The networks view refers to different social ties available to individuals and associated norms that promote access to resources. The institutional view represents social capital as an outcome of institutions, democracy and rule of law. Furthermore, the chapter proceeds to explain the relevance of three social capital dimensions in management and entrepreneurial social capital research-namely, structural (bonding, bridging), relational (trust, reciprocity and norms) and cognitive (communication). It also illuminates the complex linkage between bonding and bridging network structures and dynamics of relational and cognitive features.
The main focus of this study is the role that organizational dominance in organizational identity change plays in shaping integration approaches in acquisitions. Using four in-depth case studies, this study categorizes the organizational identity change process into three stages: forms of resistance; conformation of new organizational identity; and integration approaches. The authors first identify two distinct roles of organizational dominance in organizational identity change after acquisition: multilevel resistance and power struggles, which are the prerequisites for developing integration approaches, according to the social identity theory. Second, they further investigate the conformation of new organizational identity with each of these two roles. They conclude that target firms completely lose their organizational identity when there is high organizational dominance after the acquisition. Conversely, target firms work with acquirers in developing integration approaches, and the power winner dominates the integration when there is low organizational dominance. Third, this study contributes to the understanding of integration approaches by connecting three specific integration approaches to the changed organizational identity. The study contributes to the literature on both organizational identity change and acquisition.
It is widely recognised that it is essential to the survival and growth of start-ups to initiate, develop and maintain business relationships (e.g. Aaboen, Dubois & Lind, 2011; La Rocca, Ford & Snehota, 2013). Only through establishing business relationships can start-ups embed themselves in the pre-existing developing, producing and using setting (Håkansson, Ford, Gadde, Snehota & Waluszewski, 2009). However, start-ups often experience difficulties in initiating the necessary business relationships (Prashantham & Birkinshaw, 2008). To cope with this challenge, Oukes and Raesfeld (2014) found that a start-up used the mediating function of its partners to initiate new relationships. They showed that after it was made aware of, introduced to or referred to a potential partner by one of its existing partners, the start-up could mobilise valuable resources from new partners.
Managers evaluate the organizational performance by comparing it with historical aspiration levels, and are more likely to make strategic changes when the performance falls below the aspiration level. Historical aspiration levels can be updated with different speed, because a focus on current performance will lead to quickly adjusting aspiration levels where historical performance has low weight, while a focus on past performance will lead to slowly adjusting performance levels where the current performance has low weight. A simulation model of aspiration-level learning and strategic change under uncertainty yields the following findings: (1) Slow adjustments of an aspiration level gives higher performance across different levels of environmental uncertainty, (2) slow adjustments of aspirations will dominate in populations with different adjustment levels if low-performing organizations are removed and replaced by organizations of the form currently performing best, and (3) stronger selection leads to faster domination by slow adjusters. Empirical analysis of format changes in radio stations finds slow adjustment of aspiration levels to be prevalent, and finds slower adjustment in competitive markets, as predicted.
In a sample of Canadian investment bank cliques from 1952 to 1990, we examined whether social similarity and cohesion reduced exits of members from these cliques; whether complementarity through differentiated roles reduced such exits; and whether inequality in structural holes increased exits. We found that complementarity and inequality were more powerful antecedents of clique exits than similarity and cohesion. Our results suggest that clique stability is a function of three social and instrumental processes: building social attraction to govern exchanges, developing complementarity to accomplish collaborative tasks, and distributing the value created by a clique among its members.
In this paper, we introduce performance feedback models to specify conditions under which organizations' decision makers are more (or less) likely to accept the risk and uncertainty of nonlocal interorganizational partnership ties rather than prefer embedded ties with partners with which they have either past direct or third-party ties. Learning theory suggests that organizations performing far from historical and social aspirations may be more willing to accept the uncertainty and risk of such nonlocal ties with relative strangers. An analysis of Canadian investment banks' underwriting syndicate ties from 1952 to 1990 supports predictions from learning theory and, in addition, indicates that inconsistent performance feedback (i.e., performance above either historical or social aspirations but below the other) triggers the greatest risk taking in selecting partners.
According to the behavioral theory of the firm, managers pay sequential attention to goals and apply aspiration levels to each goal. Although many goals have been proposed for organizations, research has so far concentrated on profitability. Here it is proposed that managers form an aspiration level for size through social comparison. This proposal leads to predictions on how performance and size goals jointly affect growth. Supporting this sequential attention hypothesis, evidence from the general insurance industry shows that firms grow more when they are below the aspiration level for size, especially when performance goals are satisfied.
This article explores the motivations that high-status firms have to enter exchange relationships with lower-status partners. We argue that high-status firms can secure greater effort from lower-status partners and that the amount of effort will be proportional to their status advantage over these partners. We further propose that such effort will translate to increased performance by mediating the negative consequences of affiliations with lower-status partners. This increase in performance constitutes the motivation for high-status firms to enter exchange relationships with lower-status partners. Findings using data on Formula One racing support our argument.
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We link two influential organizational learning models---performance feedback and experiential learning---to advance hypotheses that help explain how organizations' learning from their own and others' experience is conditioned by their aspiration-performance feedback. Our focus is on learning from failure; this kind of learning is essential to organizational learning and adaptation, and a necessary complement to studies of learning from success. Our analysis of U.S. Class 1 freight railroads' accident costs from 1975 to 2001 shows that when a railroad's accident rate deviates from aspiration levels, the railroad benefits less from its own operating and accident experience and more from other railroads' operating and accident experiences. These findings support the idea that performance near aspirations fosters local search and exploitive learning, while performance away from aspirations stimulates nonlocal search and exploration, providing a foundation for constructing more-integrated models of organizational learning and change.
Changes in corporate governance practices can be analyzed by linking the adaptations of individual firms to the structures of the networks in which firms' decision makers are embedded. Network structures determine the speed of adaptation and ultimate patterns of prevalence of governance practices by exposing a firm to particular role models and standards of appropriateness. The authors compare the spreads of two governance innovations adopted in response to the 1980s takeover wave: poison pills (which spread rapidly through a board-to-board diffusion process) and golden parachutes (which spread slowly through geographic proximity). The study closes with a discussion of networks as links between individual adaptation and collective structures.
In this paper, I attempt to advance the concept of embeddedness beyond the level of a programmatic statement by developing a formulation that specifies how embeddedness and network structure affect economic action. On the basis of existing theory and original ethnographies of 23 apparel firms, I develop a systematic scheme that more fully demarcates the unique features, functions, and sources of embeddedness. From this scheme, I derive a set of refutable implications and test their plausibility, using another data set on the network ties of all better dress apparel firms in the New York apparel economy. Results reveal that embeddedness is an exchange system with unique opportunities relative to markets and that firms organized in networks have higher survival chances than do firms which maintain arm's-length market relationships. The positive effect of embeddedness reaches a threshold, however, after which point the positive effect reverses itself.
This study advances understanding of network dynamics by applying matching theory to the formation of interorganizational alliances. We introduce market complementary and resource compatibility as two critical matching criteria of alliance formation and argue that good matches increase firm performance. Using data from liner shipping, we found effects of matching on alliance formation. But contrary to our expectations, alliances by networked firms, rather than isolate firms, exhibited better match quality, suggesting that networks facilitate matching rather than sacrifice it. We also found evidence that alliances with matched partners improve firm performance and survival chances.
This paper explores the tension between two opposite views on how networks create social capital. Network closure (Coleman 1988) stresses the role of cohesive ties in fostering a normative environment that facilitate cooperation. Structural hole theory (Burt 1992) sees cohesive ties as a source of rigidity that hinders the coordination of complex organizational tasks. The two theories lead to opposite predictions on how the structure of an actor's network may affect his ability to adapt that network to a significant change in task environment. Using data from a newly created special unit within the Italian subsidiary of a multinational computer manufacturer, we show that managers with cohesive communication networks were less likely to adapt these networks to the change in coordination requirements prompted by their new assignments, which in turn jeopardized their role as facilitators of horizontal cooperation within a newly created business unit structure. We conclude with a discussion of the trade-off between the "safety" of cooperation within cohesive networks and the "flexibility" provided by networks rich in structural holes.
In this paper, we introduce performance feedback models to specify conditions under which organizations' decision makers are more (or less) likely to accept the risk and uncertainty of nonlocal interorganizational partnership ties rather than prefer embedded ties with partners with which they have either past direct or third-party ties. Learning theory suggests that organizations performing far from historical and social aspirations may be more willing to accept the uncertainty and risk of such nonlocal ties with relative strangers. An analysis of Canadian investment banks' underwriting syndicate ties from 1952 to 1990 supports predictions from learning theory and, in addition, indicates that inconsistent performance feedback (i.e., performance above either historical or social aspirations but below the other) triggers the greatest risk taking in selecting partners.
This paper explores the interplay between social structure and economic action by examining some of the evolutionary dynamics of an emergent network that coalesces into a small-world system. The study highlights the small-world system’s evolutionary dynamics at both the macro level of the network and the micro level of an individual actor. This dual analytical lens helps establish that, in competitive and information-intensive settings, a small-world system could be a highly dynamic structure that follows an inverted U-shaped evolutionary pattern, wherein an increase in the small-worldliness of the system is followed by its later decline due to three factors: (1) the recursive relationship between the evolving social structure and individual actors’ formation of bridging ties, which eventually homogenizes the information space and decreases actors’ propensity to form bridging ties, creating a globally separated network; (2) self-containment of the small-world network, or increasing homogenization of the social system, which makes the small world less accepting of and less attractive to new actors, thereby limiting formation of bridging ties to outside clusters; and (3) fragmentation of the small-world network, or the small-world system’s inability to retain current clusters. The study uses data on interorganizational tie formation in the global computer industry in the period from 1996 to 2005 to test the hypothesized relationships.
What implications does a firm's specialization have for firm performance achieved by spanning structural holes between its partners? By analyzing networks within the Canadian investment banking industry, I find that, in networks rich in structural holes, both specialists and generalists outperform banks of moderate specialization levels, and that generalist banks, in turn, perform better than specialists.
Using field data from an American financial services organization, we examined the effects of three important variables in Cyert and March's (1963) initial conceptualization of the aspiration-level adaptation process: The previous aspiration level, performance feedback, and social comparison. Past findings obtained in controlled contexts (Glynn et al. 1991; Lant 1992) have provided empirical support for the attainment discrepancy model (Lewin et al. 1944), which includes variables of the previous aspiration level and attainment discrepancy (i.e., performance feedback). We replicated these findings in the field: The effects of the previous aspiration level and attainment discrepancy on the current aspiration levels were significant and positive. In addition, we investigated the effect of social comparison using a variable based on the difference between the performance of the focal unit and the performance of comparable others (Greve 1998). Based on the assumption that decision makers in organizations will expect to observe similar performance levels among those in the same comparison group (Wood 1989), we posited that the effect of social comparison would be negative, refiecting managerial efforts to reduce performance discrepancies among similar units. The empirical results supported the prediction from this reasoning. We conclude by discussing implications of our findings for theory and research in organizational learning and the behavioral theory of the firm.
In this study, we examine how experience at the level of the organization, the population, and the related group affects the failure of Manhattan hotels. We find organizational experience has a U-shaped effect on failure; that organizations enjoy reduced failure as a function of population experience before their founding, but not after; and that related organizations provide experience that lowers failure, but it matters whether their experience is local or non-local, and if it was acquired before or after the relationship was established. These results indicate both the difficulty of applying different types of experience to reduce the risk of organizational failure, and the relevance of experience for the evolution of organizational populations.
Using data on all underwriting syndicates in Canada over nearly 40 years, we examine whether, and if so to what extent, managers are aware of and strategic about their network positions by comparing the effects of partner selection on network position at two levels of complexity. Our findings show that when investment banks' managers formed and joined underwriting syndicates, they improved their network positions by spanning more structural holes. They did not, however, distinguish between constrained and unconstrained structural holes, which would require a more complex understanding of the network. Our study suggests that models of network-based competitive advantages and network change need to consider more fully firms' network strategies and the cognitive limits of the managers enacting them.
We develop and test, using McFadden's discrete choice statistical modeling applied to network dynamics, four alternative logics of attachment - - accumulative advantage, homophily, follow-the-trend, and multiconnectivity - - to account for the development of interorganizational collaboration in the field of biotechnology. The commercial field of the life sciences is characterized by wide dispersion in the sources of basic knowledge and rapid development of the underlying science, fostering collaboration among a broad range of institutionally diverse actors. We map the network dynamics of the field over the period 1988-99. Using multiple novel methods, including analysis of network degree distributions, network visualizations, and multi-probability models to estimate dyadic attachments, we demonstrate how a preference for diversity shapes network evolution. Collaborative strategies pursued by early commercial entrants are supplanted by strategies influenced more by universities, research institutes, venture capital, and small firms. As organizations increase both the number of activities around which they collaborate and the diversity of organizations with which they are linked, cohesive subnetworks form that are characterized by multiple, independent pathways. These structural components, in turn, condition the choices and opportunities available to members of a field, thereby reinforcing an attachment logic based on connection to partners that are diversely and differently linked. The dual analysis of network and institutional evolution offers a compelling explanation for the decentralized structure of this science-based field.
This paper investigates the effects of organizational form on problemistic search. We contrast how Indian firms affiliated to business groups and unaffiliated firms evaluate performance and react by adjusting their internal technology search and external market search. We propose that, compared with unaffiliated firms, business group firms are more externally oriented in setting aspiration levels and more likely to respond to low performance in the market domain. We find support for an external orientation of business group affiliated firms and find that group affiliation determines the responsiveness to performance feedback in different search domains. The findings suggest a need to add considerations of organizational form and governance to the theory of organizational search.
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This paper examines how organizational changes of market position are motivated by comparison of organizational performance with historical and social aspiration levels and facilitated by change experience and observed changes by competitors. The analysis supports all effects and gives evidence on the form of aspiration-level effects on risk taking.
We draw upon theories of organizational learning to examine acquisition likelihood in a sample of banking industry acquisitions from 1988 through 2001. Although research on organizational learning suggests that routines arising both from experience and from performance feedback guide organizational learning, the combined effect of these two sources of learning has rarely been examined. Findings are consistent with our theoretical predictions: (1) prior acquisition experience, (2) recent acquisition performance, and (3) the interaction between acquisition experience and recent acquisition performance are all positively related to the likelihood of subsequent acquisition.
What implications does a firm's specialization have for the performance the firm achieves by spanning structural holes between its partners? By analyzing networks within the Canadian investment banking industry, I found that, in networks rich in structural holes, both specialists and generalists performed better than banks of moderate specialization levels, and that generalist banks, in turn, performed better than specialists.
Social Capital, the advantage created by location in social structure, is a critical element in business strategy. Who has it, how it works, and how to develop it have become key questions as markets, organizations, and careers become more and more dependent on informal, discretionary relationships. The formal organization deals with accountability; Everything else flows through the informal: advice, coordination, cooperation friendship, gossip, knowledge, trust. Informal relations have always been with us, they have always mattered. What is new is the range of activities in which they now matter, and the emerging clarity we have about how they create advantage for certain people at the expense of others. This is done by brokerage and closure. Ronald S. Burt builds upon his celebrated work in this area to explore the nature of brokerage and closure. Brokerage is the activity of people who live at the intersection of social worlds, who have a vision advantage of seeing and developing good ideas, an advantage which can be seen in their compensation, recognition, and the responsibility they're entrusted with in comparison to their peers. Closure is the tightening of coordination in a closed network of people, and people who do this do well as a complement to brokers because of the trust and alignment they create. Brokerage and Closure explores how these elements work together to define social capital, showing how in the business world reputation has come to replace authority, pursued opportunity assignment, and reward has come to be associated with achieving competitive advantage in a social order of continuous disequilibrium.
Past studies have consistently shown that firms favor past partners when forming new alliances. This behavior has been associated with a need to have knowledge of potential partners' capabilities and reliability. We consider inertia as an alternative rationale. Inertia and evaluation factors were tested in the context of underwriting syndicate formations in the U.S. investment banking industry. The results suggest both inertia and several evaluation criteria, including reciprocity, experience, and prior performance, influence partner selection.
How do business organizations make decisions? What process do they follow in deciding how much to produce? And at what price? A behavioral theory of the firm is here explored. Using a specific type of duopoly, a model is written explicity as a computer program to deal with the complex theory implicit in the process by which businesses make decisions. This model highlights our need for more empirical observations of organizational decision-making.
It is argued that P-values and the tests based upon them give unsatisfactory results, especially in large samples. It is shown that, in regression, when there are many candidate independent variables, standard variable selection procedures can give very misleading results. Also, by selecting a single model, they ignore model uncertainty and so underestimate the uncertainty about quantities of interest. The Bayesian approach to hypothesis testing, model selection, and accounting for model uncertainty is presented. Implementing this is straightforward through the use of the simple and accurate BIC approximation, and it can be done using the output from standard software. Specific results are presented for most of the types of model commonly used in sociology. It is shown that this approach overcomes the difficulties with P-values and standard model selection procedures based on them. It also allows easy comparison of nonnested models, and permits the quantification of the evidence for a null hypothesis of interest, such as a convergence theory or a hypothesis about societal norms.
Many networked systems, including physical, biological, social, and technological networks, appear to contain ``communities'' -- groups of nodes within which connections are dense, but between which they are sparser. The ability to find such communities in an automated fashion could be of considerable use. Communities in a web graph for instance might correspond to sets of web sites dealing with related topics, while communities in a biochemical network or an electronic circuit might correspond to functional units of some kind. We present a number of new methods for community discovery, including methods based on ``betweenness'' measures and methods based on modularity optimization. We also give examples of applications of these methods to both computer-generated and real-world network data, and show how our techniques can be used to shed light on the sometimes dauntingly complex structure of networked systems.
The authors develop a conception of an organization-specific niche in a technological network. This niche is defined by two properties: crowding and status. The authors hypothesize that crowding suppresses an organization's life chances and that status enhances life chances, especially for those organizations in uncrowded niches. They operationalize this conception of the niche using patents and patent citations, and they find support for these hypotheses in an examination of technological competition in the worldwide semiconductor industry. In the conclusion, they compare these findings to earlier research and highlight some of the particular advantages of this conception of the niche.
This article draws an analytical distinction between two types of market uncertainty: egocentric, which refers to a focal actor's uncertainty regarding the best way to convert a set of inputs to an output desired by a potential exchange partner, and altercentric, which denotes the uncertainty confronted by a focal actor's exchange partners regarding the quality of the output that the focal actor brings to the market. Given this distinction, the article considers how the value of "structural holes" and market status vary with these two types of uncertainty. The article proposes that the value of structural holes increases with egocentric uncertainty, but not with altercentric uncertainty. In contrast, the value of status increases with altercentric uncertainty, but declines with egocentric uncertainty. Thus actors with networks rich in structural holes should sort into markets or market segments that are high in egocentric uncertainty; high-status actors should sort into markets that are low in egocentric uncertainty. Support for this claim is found in an examination of the venture capital markets.
While strategy scholars primarily focus on internal firm capabilities and network scholars typically examine network structure, we posit that firms with superior network structures may be better able to exploit their internal capabilities and thus enhance their performance. We examine how innovative capabilities—both those of focal firms and those they access through their networks—influence the performance of Canadian mutual fund companies. We find that a firm's innovative capabilities and its network structure both enhance firm performance, while the innovativeness of its contacts does not do so directly. Innovative firms that also bridge structural holes get a further performance boost, suggesting that firms need to develop network-enabled capabilities—capabilities accruing to innovative firms that bridge structural holes. Copyright © 2005 John Wiley & Sons, Ltd.
This paper proposes that organizations overcome problems of market uncertainty by adopting a principle of exclusivity in selecting exchange partners. This general proposition in turn implies two specific hypotheses. First, the greater the market uncertainty, the more that organizations engage in exchange relations with those with whom they have transacted in the past. Second, the greater the uncertainty, the more that organizations engage in transactions with those of similar status. A study of investment banking relationships in the investment grade and non-investment-grade debt markets from 1981 to 1987 provides support for the hypotheses. The implications of this analysis for stratification and concentration in the market are discussed.
This article explores the motivations that high-status firms have to enter exchange relationships with lower-status partners. We argue that high-status firms can secure greater effort from lower-status partners and that the amount of effort will be proportional to their status advantage over these partners. We further propose that such effort will translate to increased performance by mediating the negative consequences of affiliations with lower-status partners. This increase in performance constitutes the motivation for high-status firms to enter exchange relationships with lower-status partners. Findings using data on Formula One racing support our argument. [ABSTRACT FROM AUTHOR]
The formation of a network is determined by the opposition of two forces. The first is the reproduction of network structure as a general social resource for network members. The second is the alteration of network structure by entrepreneurs for their own benefit. The idea of reproduction is a conventional one in organizational sociology but has taken on increased importance due to the work of Bourdieu and Coleman. In contrast, Burt stresses the entrepreneurship of individual agents in exploiting structural holes that lie between constrained positions. Though complementary, the theories of social capital and structural holes have fundamentally different implications for network formation.
This paper investigates these theories by examining empirically the formation of the interorganizational network among biotechnology firms. We propose that network structure determines the frequency with which a new biotechnology firm (or startup) establishes new relationships. Network structure indicates both where social capital is distributed in the industry and where opportunities for entrepreneurial action are located. The reproduction of network structure depends on how startups value social capital compared to these opportunities. The critical test is, consequently, whether new relationships reproduce or alter the inherited network structure. We find strong support for the power of social capital in reproducing the network over time.
Using data on U.S. investment banking firms’ syndication in underwriting corporate stock offerings during the 1980s, this study explores the factors that drive alliance formation between two specific firms. We compare resource complementarity, status similarity, and social capital as a basis of alliance formation. The findings indicate that the likelihood of investment banks’ alliance formation is positively related to the complementarity of their capabilities, as well as their status similarity. Social capital arising from banks’ direct and indirect collaborative experiences also plays a very important role in alliance formation. The number of deals given by a lead bank to a potential partner over the past three years has an inverted U-shaped relationship to the probability that the lead bank will invite the potential partner to form an alliance. Our findings indicate that status similarity and social capital have a stronger effect on alliance formation in initial public offering deals than in secondary offering deals, as the former are more uncertain than the latter. Using these findings, we discuss the role of complementarity, status similarity, and social capital in alliance formation. Copyright © 2000 John Wiley & Sons, Ltd.
Our theory extends the situational considerations explaining firm R&D search intensity beyond the behavioral theory of the firm by including shifts in the focus of attention among bankruptcy, aspirations, and slack. We also allow that search can reflect institutionalized investment patterns within firms and industries. We find stable firm-specific R&D investment patterns (i.e., institutionalized search) and variations in R&D intensity depending on firms' situations—including performance relative to aspirations, proximity to bankruptcy, and slack. Our empirical results evidence shifts in the focus of attention relevant to explaining R&D search intensity for subsamples of firms in different situations. Copyright © 2007 John Wiley & Sons, Ltd.
2In an influential paper, Freeman (1979) identified three aspects of centrality: betweenness, nearness, and degree. Perhaps because they are designed to apply to networks in which relations are binary valued (they exist or they do not), these types of centrality have not been used in interlocking directorate research, which has almost exclusively used formula (2) below to compute centrality. Conceptually, this measure, of which c(ot, 3) is a generalization, is closest to being a nearness measure when 3 is positive. In any case, there is no discrepancy between the measures for the four networks whose analysis forms the heart of this paper. The rank orderings by the
This study explores the mechanisms through which economic and social factors affect the performance of banks in syndication networks formed in the Canadian investment banking industry. It is argued that firms have a choice between building embedded network ties that are overlaid with social context and arms-length ties that are driven by the forces of atomistic competition. Furthermore, maintaining a mix of arms-length and embedded relationships prevents investment banks from relying on either the economic or the social drivers of competition. A mixed relational strategy also sends inconsistent signals about banks' strategies and capabilities to other market participants, which prevents the banks from accessing new deals in the future. It is also proposed that costs and benefits associated with either relational strategy are affected by the status of an investment bank. It is found that growth in firm's status decreases potential liabilities of embeddedness, thus making embedded ties more valuable to the firm.
In this paper, we examine the relationship between structural holes in a firm's ego network and firm performance. We argue that the firms need two types of information - about new business opportunities and partner cooperativeness - to pursue, respectively, two types of self-reinforcing performance goals: status accumulation and market performance. Firms' open ego networks facilitate access to information about new business opportunities, which helps them attain status accumulation. However, open ego networks limit access to information about partner cooperativeness, which dampens market performance. Analyses of investment banks acting as advisers for merger and acquisition transactions in the United Kingdom during 1992-2001 provide support for these arguments.
This study examines how incumbent firms use relational discrimination to manage threats from market entry. The use of relationships to manage market entry implies that incumbent firms decide to collaborate with entering firms instead of incumbent firms based on the extent to which entering firms threaten their own market positions. I argue that incumbent firms seeking collaborators switch between favoring and disfavoring entering firms compared to incumbent firms depending on their social status and brokerage opportunities. A comprehensive dataset on commercial banks' entry into investment banking in the period 1991 to 1997 provides empirical support for my arguments.
This study focuses on the roles of interfirm ties and network status in firms gaining access to customers in newly entered markets, examining whether these network resources are transferable and therefore can be deployed outside the market in which they originated. The role of market ties and network status is examined in a comprehensive longitudinal sample of commercial banks' entry into investment banking from 1991 to 1997. Results show that though market ties and network status facilitate market entry, the importance of network status decreases in the presence of market ties, and the value of network status, unlike market ties, decreases over time after market entry and is less important to customers with more market experience.
Revisiting Cyert and March’s classic 1963 ‘Behavioral Theory of the Firm’, Henrich Greve offers an intriguing analysis of how firms evolve in response to feedback about their own performance. Based on ideas from organizational theory, social psychology, and economics, he explains how managers set goals, evaluate performance, and determine strategic changes. Drawing on a range of studies, including the author’s own analysis of the Japanese shipbuilding industry, he reports on how theory fits evidence on organizational change of risk-taking, research and development expenses, innovativeness, investment in assets, and in market strategy. The findings suggest that high-performing organizations quickly reduce their rates of change, but low-performing organizations only slowly increase those rates. Analysis of performance feedback is an important direction for research and this book provides valuable insights in how organizational learning interacts with other influences on organizational behaviour such as competitive rivalry and institutional influences.
This article explores the significance of status processes for generating and reproducing hierarchy among producers in a market. It develops a conception of a market as a status order in which each producer's status position circumscribes the producer's actions by providing a unique cost and revenue profile for manufacturing a good of a given level of quality. An examination of pricing behavior among investment banks in the underwriting of corporate securities provides impirical support for this status-based model of market competition. Extension are discussed.