This study explores the mechanisms through which relational embeddedness affects the
performance of banks in syndication networks formed in the Canadian investment
banking industry. I argue that banks have a choice between building embedded network
ties that are overlaid with social context and arm’s-length ties that
facilitate individual competition. Contrary to the arguments advanced in previous
studies, I propose that maintaining a mix of arm’s-length and embedded
relationships represents a disadvantageous network strategy. Such strategy not only
simultaneously exposes investment banks to competition from their peers, relying
primarily upon embedded or arm’s-length ties, but also sends confusing
signals about banks’ networking behavior. I also propose that the link
between relational embeddedness and performance is moderated by banks’
positional embeddedness, reflected in their status, and find that banks of higher
status extract greater benefits from maintaining embedded ties, as compared with
banks of lower status.
Ahuja, G.
(2000)
‘Collaboration Networks, Structural Holes, and Innovation: A
Longitudinal Study’
, Administrative Science Quarterly45(3):
425-455
.
2.
Baker, W.
(1990)
‘Market Networks and Corporate Behavior’
, American Journal of Sociology96:
589-625
.
3.
Baker, W.
and
Faulkner, R.
(2002) ‘Interorganizational
Networks’, in
Joel A. C. Baum
(ed.) Companion to Organizations, pp.
521-540.
Oxford: Blackwell
.
4.
Barron, D.
(2004)
‘Employing Identities in Organizational Ecology’
, Industrial and Corporate Change13(1):
3-32
.
5.
Baum, J. A. C.
,
Calabrese, T.
and
Silverman, B.
(2000)
‘Don’t Go It Alone: Alliance Network Composition and
Startups’ Performance in Canadian Biotechnology’
, Strategic Management Journal21:
267-294
.
6.
Baum, J. A. C.
and
Mezias, S.
(1992)
‘Localized Competition and Organizational Failure in the
Manhattan Hotel Industry’
, Administrative Science Quarterly37:
580-604
.
7.
Baum, J. A. C.
,
Rowley, T.
and
Shipilov, A.
(2004)
‘The Small World of Canadian Capital Markets: Statistical
Mechanics of Investment Bank Syndicate Networks, 1952-1989’
, Canadian Journal of Administrative Sciences21(4):
307-325
.
8.
Baum, J. A. C.
,
Rowley, T.
,
Shipilov, A. V.
and
Chuang, Y.
(2004)
‘Dancing with Strangers: Aspiration Performance and the Search
for Underwriting Syndicate Partners’
. Paper published in the Academy of Management Best Papers
Proceedings, New Orleans, LA.
9.
Baum, J. A. C.
,
Shipilov, A. V.
and
Rowley, T.
(2003)
‘Where do Small Worlds Come From?’
, Industrial and Corporate Change12(3):
697-203
.
10.
Beatty, R.
and
Ritter, J.
(1986)
‘Investment Banking, Reputation and the Underpricing of Initial
Public Offerings’
, Journal of Financial Economics15:
213-232
.
11.
Bonacich, P.
(1987)
‘Power and Centrality: The Family of Measures’
, American Journal of Sociology92:
1170-1183
.
12.
Burt, R.
(1992) Structural Holes: The Social Structure of
Competition.
Cambridge, MA: Harvard University Press
.
13.
Chen, H.
and
Ritter, J.
(2000)
‘The Seven Percent Solution’
, The Journal of Finance40(3):
1105-1131
.
14.
Chung, S. A.
,
Singh, H.
and
Lee, K.
(2000)
‘Complimentarity, Status Similarity and Social Capital as Drivers
of Alliance Formation’
, Strategic Management Journal21(1):
1-22
.
15.
Davis, G.
,
Yoo, M.
and
Baker, W. E.
(2003)
‘The Small World of the American Corporate Elite, 1991-2001’
, Strategic Organization1(3):
301-326
.
16.
Deephouse, D.
(1999)
‘To be Different, or to be the Same? It’s a Question
(and Theory) of Strategic Balance’
, Strategic Management Journal20:
147-166
.
17.
Dunbar, C.
(2000)
‘Factors Affecting Investment Bank Initial Public Offering Market Share’
, Journal of Financial Economics55:
3-41
.
18.
Eccles, R.
and
Crane, D.
(1988) Doing Deals: Investment Banks at Work.
Cambridge, MA: Harvard Business School Press
.
19.
Fligstein, N.
(1996)
‘Markets as Politics: A Political-cultural Approach to Market Institutions’
, American Sociological Review61:
656-673
.
20.
Frank, R. H.
(1985) Choosing the Right Pond: Human Behavior and the Quest
for Status.
New York: Oxford University Press
.
21.
Gargiulo, M.
and
Benassi, M.
(2000)
‘Trapped in Your Own Net? Network Cohesion, Structural Holes, and
the Adaptation of Social Capital’
, Organization Science11(2):
183-196
.
22.
Gulati, R.
(1995)
‘Does Familiarity Breed Trust? The Implications of Repeated Ties
for Contractual Choice in Alliances’
, Academy of Management Journal38(1):
85-112
.
23.
Gulati, R.
(1999)
‘Network Location and Learning: The Influence of Network
Resources and Firm Capabilities on Alliance Formation’
, Strategic Management Journal20(5):
397-420
.
24.
Gulati, R.
and
Gargiulo, M.
(1999)
‘Where do Inter-organizational Networks Come From?’
, American Journal of Sociology104(5):
1439-1493
.
25.
Gulati, R.
,
Dialdin, D.
and
Wang, L.
(2002) ‘Organizational
Networks’, in
J. A. C. Baum
(ed.) Companion to Organizations, pp.
281-304.
Oxford: Blackwell
.
26.
Hannan, M.
and
Freeman, J.
(1989) Organizational Ecology.
Cambridge, MA: Harvard Business School Press
.
27.
Hirchman, A.
(1970) Exit, Voice and Loyalty: Responses of Decline in
Firms, Organizations and States.
Cambridge, MA: Harvard University Press
.
28.
Hite, J.
and
Hesterly, D.
(2001)
‘The Evolution of Firm Networks: From Emergence to Early Growth
of the Firm’
, Strategic Management Journal22:
275-286
.
29.
Jacobson, R.
(1990)
‘Unobservable Effects and Business Performance’
, Marketing Science9:
74-85
.
30.
Jensen, M.
(2003)
‘The Role of Network Resources in Market Entry: Commercial
Banks’ Entry into Investment Banking 1991-1997’
, Administrative Science Quarterly48:
466-497
.
31.
Judge, G.
,
Griffiths, W.
,
Hill, C.
and
Lee, T.C.
(1985) Theory and Practice in Econometrics.
New York: Wiley
.
32.
Kennedy, P.
(1992) A Guide to Econometrics, 4th edn.Cambridge, MA: MIT Press
.
33.
Khanna, T.
, and
Palepu, K.
(2000)
‘The Future of Business Groups in Emerging Markets: Longrun
Evidence from Chile’
, Academy of Management Journal43:
268-285
.
34.
Li, S. X.
and
Berta, W.
(2002)
‘The Ties That Bind: Strategic Actions and Status Structure in
the U.S. Investment Banking Industry’
, Organization Studies23:
339-368
.
35.
Lincoln, J. R.
,
Gerlach, M.
and
Takahashi, P.
(1992)
‘Keiretsu Networks in the Japanese Economy: A Dyad of
Intercorporate Ties’
, American Sociological Review57:
561-585
.
36.
McKendrick, D.
,
Jaffee, J.
,
Carroll, G.
,
Khessina, O.
(2003)
‘In the Bud? Disk Array Producers as a (Possibly) Emergent
Organizational Form’
, Administrative Science Quarterly48:
60-93
.
37.
Maginson, W.
and
Weiss, K.
(1991)
‘Venture Capitalist Certification in Initial Public Offerings’
, Journal of Finance46:
879-904
.
38.
Owen-Smith, J.
and
Powell, W.
(2004)
‘Knowledge Networks as Channels and Conduits: The Effects of
Spillovers in the Boston Biotechnology Community’
, Organization Science15(1):
5-21
.
39.
Padgett, J.
and
Ansell, C.
(1993)
‘Robust Action and the Rise of the Medici, 1400-1434’
, American Journal of Sociology98(6):
1259-1319
.
40.
Podolny, J.
(1993)
‘A Status-based Model of Market Competition’
, American Journal of Sociology98:
829-872
.
41.
Podolny, J.
(1994)
‘Market Uncertainty and the Social Character of Economic Exchange’
, Administrative Science Quarterly39(3):
458-470
.
42.
Podolny, J.
(2001)
‘Networks as the Pipes and Prisms of the Market’
, American Journal of Sociology1:
33-60
.
43.
Podolny, J.
,
Stuart, T.
and
Hannan, M.
(1996)
‘Networks, Knowledge, and Niches: Competition in the Worldwide
Semiconductor Industry, 1984-1991’
, American Journal of Sociology102:
659-689
.
44.
Porter, M. E.
(1980) Competitive Strategy.
New York: The Free Press
.
45.
Provan, K. G.
and
Sebastian, J. G.
(1998)
‘Networks within Networks: Service Link Overlap, Organizational
Cliques, and Network Effectiveness’
, Academy of Management Journal41:
453-463
.
46.
Ritter, J.
(1991)
‘The Long-run Performance of Initial Public Offerings’
, The Journal of Finance46(1):
3-25
.
47.
Romo, F.
and
Schwartz, M.
(1995)
‘Structural Embeddedness of Business Decisions: A Sociological
Assessment of the Migration Behavior of Plants in New York State between
1960 and 1985’
, American Sociological Review60:
874-907
.
48.
Rowley, T.
and
Baum, J. A. C.
(2004)
‘Sophistication of Interfirm Network Strategies in the Canadian
Investment Banking Industry’
, Scandinavian Journal of Management20:
103-124
.
49.
Rowley, T.
,
Behrens, D.
and
Krackhardt, D.
(2000)
‘Redundant Governance Structures: An Analysis of Structural and
Relational Embeddedness in the Steel and Semiconductor Industry’
, Strategic Management Journal21:
369-386
.
50.
Rowley, T.
,
Greve, H.
,
Rao, H.
,
Baum, J. A. C.
and
Shipilov, A. V.
(forthcoming)
‘Time to Break up: Social and Instrumental Antecedents of Firm
Exits from Cliques’
, Academy of Management Journal.
51.
Shipilov, A. V.
,
Aharonson, B.
and
Rowley, T.
(2006) ‘From Cradle to Grave: Value Generation
and Partnering Uncertainty as Antecedents of Social Relationships’
Formation and Decay’, in
J. A. C. Baum
(ed.) Advances in Strategic Management.
52.
Studenmund, W.
(1992) Using Econometrics.
New York: Harper-Collins
.
53.
Thornton, P.
and
Ocasio, W.
(1999)
‘Institutional Logics and the Historical Contingency of Power in
Organizations: Executive Succession in the Higher Education Publishing
Industry, 1958-1990’
, American Journal of Sociology105(3):
801-843
.
54.
Uzzi, B.
(1996)
‘The Sources and Consequences of Embeddedness for the Economic
Performance of Organizations: The Network Effect’
, American Sociological Review61:
674-698
.
55.
Uzzi, B.
(1997)
‘Social Structure and Competition in Interfirm Networks: The
Paradox of Embeddedness’
, Administrative Science Quarterly42:
35-67
.
56.
Uzzi, B.
(1999)
‘Embeddedness in the Making of Financial Capital: How Social
Relations and Networks Benefit Firms Seeking Financing’
, American Sociological Review64:
481-505
.
57.
Walker, G.
,
Kogut, B.
and
Shan, W.
(1997)
‘Social Capital, Structural Holes and the Formation of an
Industry Network’
, Organization Science8(2):
109-125
.
58.
Wasserman, S.
and
Faust, K.
(1994) Social Network Analysis: Methods and
Applications.
Cambridge University Press
.
59.
Williamson, O.
(1991)
‘Comparative Economic Organization: The Analysis of Discrete
Structural Alternatives’
, Administrative Science Quarterly36:
269-296
.
60.
Wilson, R.
(1989) ‘Exchange’, in
John Eatwell
,
Murray Milgate
, and
Peter Newman
(eds) Allocation, Information and Markets, The New Palgrave: A
Dictionary of Economics, pp. 83-93.
New York: W.W. Norton
.
61.
Zuckerman, E.
(1999)
‘Categorical Imperative: Securities Analysts and the Legitimacy Discount’
, American Journal of Sociology104(5):
1398-1438
.
62.
Zukin, S.
and
DiMaggio, P.
(1990) Structures of Capital: The Social Organization of the
Economy.
Cambridge, MA: Cambridge University Press
.
