It’s Not Who You Know — It’s Who Knows You: Employee Social Capital and Firm Performance

74 Pages Posted: 8 Feb 2021

See all articles by DuckKi Cho

DuckKi Cho

Peking University HSBC Business School

Lyungmae Choi

City University of Hong Kong (CityUHK)

Michael G. Hertzel

Arizona State University (ASU) - Finance Department

Jessie Jiaxu Wang

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: March 15, 2020

Abstract

We show that the social capital embedded in employees’ networks contributes to superior firm performance and provide evidence on the mechanism. Using data from a professional networking app, we measure a firm’s social capital derived from employees’ connections with external stakeholders. The directed nature of connections allows for identifying whether one party in a connection values the other more. Results show that firms with more employee social capital perform better. The positive effect arises primarily from employees being valued by others. We provide causal evidence by exploiting the enactment of an anti-graft act, which imparts a negative shock to networks.

Keywords: labor and finance; social capital; social connections; directed networks

JEL Classification: G30, G32, L14

Suggested Citation

Cho, DuckKi and Choi, Lyungmae and Hertzel, Michael G. and Wang, Jessie Jiaxu, It’s Not Who You Know — It’s Who Knows You: Employee Social Capital and Firm Performance (March 15, 2020). Available at SSRN: https://ssrn.com/abstract=3752197 or http://dx.doi.org/10.2139/ssrn.3752197

DuckKi Cho

Peking University HSBC Business School ( email )

Room 751
Peking University HSBC Business School
Shenzhen, Guangdong 518055
China
8675526032795 (Phone)

HOME PAGE: http://sites.google.com/view/duckkicho/home

Lyungmae Choi

City University of Hong Kong (CityUHK) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Michael G. Hertzel

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-6869 (Phone)
602-965-8539 (Fax)

Jessie Jiaxu Wang (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

HOME PAGE: http://www.jiaxuwang.com

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