Between Closure and Holes: Hybrid Network Positions and the Performance of U.K. Investment Banks

33 Pages Posted: 21 Dec 2006

See all articles by Joel A. C. Baum

Joel A. C. Baum

University of Toronto - Joseph L. Rotman School of Management

Diederik W. van Liere

University of Toronto - Rotman School of Management; Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); RSM Erasmus University

Tim Rowley

University of Toronto - Rotman School of Management

Date Written: December 20, 2006

Abstract

This study examines the possibility that hybrid network positions that balance a firm's access to structural holes (Burt, 1992) and dense interconnections (Coleman, 1988) may outperform positions emphasizing one or the other alone. To do this, we estimate models of U.K. investment bank performance that consider a bank's own and its partners' balance of closure and bridging ties in the bond underwriting syndicate network. We find that banks occupying hybrid-firm positions outperform banks emphasizing only bridging, which in turn outperform banks emphasizing only closure. We also find that banks emphasizing closure can substitute their partners' bridges for their own; banks emphasizing bridging cannot, however, substitute their partners' closure the same way. These findings support the idea advanced by small-world network theorists that advantageous network positions both provide ready access to heterogeneous information sources through bridging and facilitate efficient exchange and integration of rich information through closure.

Keywords: Networks, Performance, Small World Networks, Investment Banking

JEL Classification: L20, G20, D20

Suggested Citation

Baum, Joel A.C. and van Liere, Diederik W. and Rowley, Tim, Between Closure and Holes: Hybrid Network Positions and the Performance of U.K. Investment Banks (December 20, 2006). Available at SSRN: https://ssrn.com/abstract=952717 or http://dx.doi.org/10.2139/ssrn.952717

Joel A.C. Baum (Contact Author)

University of Toronto - Joseph L. Rotman School of Management ( email )

University of Toronto
105 St. George Street
Toronto, ON, M5S 3E6
Canada
416-978-4914 (Phone)
416-978-4629 (Fax)

HOME PAGE: http://www.rotman.utoronto.ca/~baum

Diederik W. Van Liere

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

Burgemeester Oudlaan 50
P.O. Box 1738
Rotterdam
Netherlands

RSM Erasmus University ( email )

Burgemeester Oudlaan 50
P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
+31104081778 (Phone)

Tim Rowley

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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