The Value of Professional Ties in B2B Markets

56 Pages Posted: 23 Nov 2021

See all articles by Navid Mojir

Navid Mojir

Harvard Business School

Sriya Anbil

Board of Governors of the Federal Reserve System

Date Written: November 19, 2021

Abstract

We study how a particular form of social ties (i.e., professional ties proxied by past employment) affect price and profitability in business-to-business (B2B) markets. While most of the work on social ties focuses on information diffusion in business-to-consumer markets, we ask: Do B2B buyers receive higher or lower prices from sellers with whom they have a professional tie? Answering this question is challenging because it is difficult to observe B2B prices, the individual decision-makers (IDMs), and elements of differentiation that drive price variation. We resolve these challenges by leveraging confidential data from the Federal Reserve on the largest market for short-term loans with daily transactions of over $2 trillion, the repo market. In addition, we use financial disclosure laws to unmask IDMs at sellers and use LinkedIn to reveal their ties. We show that a seller IDM who is the buyer's former employee, charges the buyer, on average, 25 basis points more than other buyers with no ties. This extra expense translates into 1.6% of additional revenue for the average seller. The mechanism driving this price increase involves a reliability premium." Sellers with a professional tie to the buyer act more reliably towards the buyer in the face of supply-demand imbalances. Our work suggests professional ties can affect B2B prices beyond observable supply-demand dynamics and provide value for sellers and buyers.

Keywords: professional ties, social ties, business-to-business marketing, B2B marketing, repo, individual connections, B2B pricing, pricing, decision-making in financial markets

JEL Classification: M31,G23,G12,G21

Suggested Citation

Mojir, Navid and Anbil, Sriya, The Value of Professional Ties in B2B Markets (November 19, 2021). Available at SSRN: https://ssrn.com/abstract=3967275 or http://dx.doi.org/10.2139/ssrn.3967275

Navid Mojir (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

Sriya Anbil

Board of Governors of the Federal Reserve System ( email )

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

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