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

58 Pages Posted: 8 Feb 2021 Last revised: 10 Jul 2022

See all articles by DuckKi Cho

DuckKi Cho

Peking University HSBC Business School

Lyungmae Choi

City University of Hong Kong (CityU)

Michael G. Hertzel

Arizona State University (ASU) - Finance Department

Jessie Jiaxu Wang

Arizona State University (ASU) - W.P. Carey School of Business; Board of Governors of the Federal Reserve System

Date Written: March 15, 2020

Abstract

We show that the social capital embedded in employees’ networks contributes to firm performance. Using novel, individual-level network data, we measure a firm’s social capital derived from employees’ connections with external stakeholders. Our directed network data allow for differentiating those connections that know the employee and those that the employee knows. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees known by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors and provide evidence on the mechanisms.

Keywords: Social capital; Social networks; Labor economics; Business performance

JEL Classification: D22, G30, 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 (CityU) ( 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

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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