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Leveraging who you know by what you know: Specialization and returns to relational capital

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  • Heejung Byun
  • Justin Frake
  • Rajshree Agarwal

Abstract

Research Summary: This paper investigates the interaction effects of specialization and relational capital on performance. We distinguish between upstream and downstream relational capital and theorize that higher levels of specialization will buffer against decreases in upstream relational capital, because of deeper domain expertise and stronger downstream relational capital. Conversely, higher levels of generalization permit greater gains from increases in upstream relational capital, due to leverage across a more diversified downstream portfolio of activities. We test and find support for these hypotheses in the context of the US lobbying industry. Our study contributes to the strategic human capital literature by isolating the dimension of specialization and relational capital embodied within individuals and providing performance implications of the interactions. Managerial Summary: Both “what you know” and “whom you know” impacts performance. Generalists and specialists are different on the “what you know” dimension. On the “who you know” dimension, we distinguish between upstream (supplier) and downstream (client) relationships. We show that specialists are buffered by deeper downstream relations from performance declines when their powerful upstream connections lose power. Generalists benefit from broader networks when their upstream connections gain power. Thus, when the value of their relationships change, specialists and generalists should each assess when they can reap performance benefits, and when they need to bolster against adversities. For firms, our study suggests hiring the right mix of specialists and generalists is important to reduce risks from relational losses while enjoying the performance benefits from relational gains.

Suggested Citation

  • Heejung Byun & Justin Frake & Rajshree Agarwal, 2018. "Leveraging who you know by what you know: Specialization and returns to relational capital," Strategic Management Journal, Wiley Blackwell, vol. 39(7), pages 1803-1833, July.
    • Handle: RePEc:bla:stratm:v:39:y:2018:i:7:p:1803-1833
    DOI: 10.1002/smj.2790
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    Citations

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    Cited by:

    1. Miguel Espinosa, 2021. "Labor Boundaries and Skills: The Case of Lobbyists," Management Science, INFORMS, vol. 67(3), pages 1586-1607, March.
    2. George Chondrakis & Mari Sako, 2020. "When suppliers shift my boundaries: Supplier employee mobility and its impact on buyer firms' sourcing strategy," Strategic Management Journal, Wiley Blackwell, vol. 41(9), pages 1682-1711, September.
    3. John Kenneth Mawdsley & Lionel Paolella & Rodolphe Durand, 2023. "A rivalry‐based theory of gender diversity," Strategic Management Journal, Wiley Blackwell, vol. 44(5), pages 1254-1291, May.
    4. Wei Shi & Cheng Gao & Ruth V. Aguilera, 2021. "The liabilities of foreign institutional ownership: Managing political dependence through corporate political spending," Strategic Management Journal, Wiley Blackwell, vol. 42(1), pages 84-113, January.
    5. Amit Jain & Will Mitchell, 2022. "Specialization as a double‐edged sword: The relationship of scientist specialization with R&D productivity and impact following collaborator change," Strategic Management Journal, Wiley Blackwell, vol. 43(5), pages 986-1024, May.
    6. Nadia Zahoor & Ali Meftah Gerged, 2021. "Relational capital, environmental knowledge integration, and environmental performance of small and medium enterprises in emerging markets," Business Strategy and the Environment, Wiley Blackwell, vol. 30(8), pages 3789-3803, December.
    7. Lee, Jeoung Yul & Jiménez, Alfredo & Choi, Seong-jin & Choi, Yun Hyeong, 2022. "Ideological polarization and corporate lobbying activity: The contingent impact of corruption distance," Journal of Business Research, Elsevier, vol. 141(C), pages 448-461.
    8. Gianluigi Giustiziero, 2021. "Is the division of labor limited by the extent of the market? Opportunity cost theory with evidence from the real estate brokerage industry," Strategic Management Journal, Wiley Blackwell, vol. 42(7), pages 1344-1378, July.
    9. Timothy Gubler, 2019. "Connected, but Qualified? Social Affiliations, Human Capital, and Service Professional Performance," Organization Science, INFORMS, vol. 30(5), pages 912-936, September.

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