Getting Deals Done: The Use of Social Networks in Bank Decision-Making

Abstract

Economic actors confront various forms of uncertainty making decisions, and how they deal with these obstacles may affect their success in accomplishing their goals. This study examines the means by which relationship managers in a major commercial bank attempt to close transactions with their corporate customers. It is hypothesized that under conditions of high uncertainty, bankers will rely on colleagues with whom they are strongly tied for advice on and support of their deals. Drawing on recent network theory, it is also hypothesized that transactions in which bankers use relatively sparse approval networks are more likely to successfully close than are transactions involving dense approval networks. Both hypotheses are supported. Bankers are faced with a strategic paradox: Their tendency to rely on those they trust in dealing with uncertainty creates conditions that render deals less likely to be closed successfully. This paradox represents an example of unanticipated consequences of purposive social action.