Loyal to Whom? The Effect of Relational Embeddedness and Managers’ Mobility on Market Tie Dissolution *

Abstract

In this study we use a social embeddedness perspective to investigate the paradoxical role that individual-level embedded relationships have on the dissolution of interorganizational ties. Prior studies have found that managers who form close interpersonal relationships with clients can stabilize market ties, but these relationships can also be a source of increased market tie dissolution in the event of an exchange manager’s departure from the firm. Using data on all state-level lobbyists and clients in the Texas lobbying industry from 2001 to 2009, we confirm that a client is more likely to remain with a firm than to follow a departing manager to a new firm, but the depth, focus, and shared ownership of a manager’s client relationship moderate the impact of his or her mobility on market tie dissolution. We find that the tenure of the relationship with a manager, the number of clients on a manager’s roster, the level of attention received from a manager, and the presence of an additional manager relationship at the same firm all influence where a client places its business when a manager departs. Our results suggest that embeddedness explanations strongly predict interpersonal market tie dissolution when managers are stationary but lose their predictive power when managers move to new firms. We propose that an alternative logic of interorganizational market ties, based on power and resource dependence, may be at play in such situations.