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

71 Pages Posted: 8 Feb 2021 Last revised: 29 Jun 2021

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 enhances firm performance and provide evidence on the mechanism. Using novel 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 is more valued. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being valued by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors.

Keywords: Social finance; Social capital; Social networks; Directed networks; Information sharing

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 (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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