The Strategic Impetus for Social Network Ties: How Strategic Dependencies Affect the Likelihood of Reconstituting Broken CEO Friendship Ties to Executives of Other Firms

Strategic Management Journal, Vol. 27, pp. 425-445, January 2006

Ross School of Business Paper No. B003

Posted: 11 Oct 2006

See all articles by James D. Westphal

James D. Westphal

University of Michigan - Stephen M. Ross School of Business

Steven Boivie

Texas A&M University - Department of Management

Han Ming Chng

University of Texas at Austin - Red McCombs School of Business

Abstract

Research on organization-environment relations has focused primarily on formal linkages between organizations such as board interlock ties as a strategy for managing resource dependence. This study examines whether top corporate executives may maintain more informal ties to executives of other firms in order to manage uncertainty arising from resource dependence. Our point of departure is prior research on boards of directors that has examined whether so-called 'broken board ties' (i.e., ties that are disrupted due to executive turnover) tend to be reconstituted, and whether resource dependence explains the likelihood of reconstitution. These studies have generally provided little evidence that corporate board ties are used to manage resource dependence. We draw from theory and research on social embeddedness and friendship to suggest that, as a strategy for managing dependence, the maintenance of friendship ties between top executives provides benefits that are comparable to the supposed benefits of board cooptation, while imposing fewer constraints on the organization. Our theory leads to the contention that, despite limited prior evidence that resource dependence determines the formation of formal board ties, corporate leaders may nevertheless reconstitute informal (i.e., friendship) ties to leaders of other firms that have the power to constrain their firms' access to needed resources when those ties have been disrupted (e.g., due to turnover of the CEO's friend). We test our hypotheses with a unique dataset that includes survey data from U.S. corporate leaders collected at two points in time, thus permitting an assessment of whether top executives reconstitute broken social ties to leaders of other firms, and whether various sources of resource dependence predict the likelihood of reconstitution. We discuss implications for strategic perspectives on inter-organizational relations and the sociological literature on embeddedness.

Keywords: social networks, top management, strategic management

JEL Classification: A12, A14, G34

Suggested Citation

Westphal, James D. and Boivie, Steven and Chng, Han Ming, The Strategic Impetus for Social Network Ties: How Strategic Dependencies Affect the Likelihood of Reconstituting Broken CEO Friendship Ties to Executives of Other Firms. Strategic Management Journal, Vol. 27, pp. 425-445, January 2006, Ross School of Business Paper No. B003, Available at SSRN: https://ssrn.com/abstract=936717

James D. Westphal (Contact Author)

University of Michigan - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Steven Boivie

Texas A&M University - Department of Management ( email )

430 Wehner
College Station, TX 77843-4218
United States

Han Ming Chng

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

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