Advanced Search
MyIDEAS: Login

Social Embeddedness and Corporate Financing: The Benefits of Social Networks in the Acquisition and Cost of Capital

Contents:

Author Info

  • Brian Uzzi
  • James J. Gillespie
Registered author(s):

    Abstract

    Using a structural embeddedness approach, we present arguments and evidence on the ways social capital affects the operation of financial capital markets in the context of the small business loan market. We posit that the quality of a relationship between a bank and a corporate borrower, as well as the network structure of ties between the borrower and its bank(s), influences the cost of capital firms pay on their loans. Specifically, we examine two dimensions of structural embeddedness at the dyad level and two at the network level. At the dyad level of analysis, we find that the duration of the relationship and relationship multiplexity are associated with a lower cost of capital (i.e., paying lower interest rates). At the network level, we find that firms that have ego-networks composed of a mix of embedded and arm's-length ties obtain a lower cost of capital than firms with either an ego network composed of arm's-length ties or an ego network composed of only embedded ties. We find no effect for simple ego-network size on the cost of capital. The implications of our embeddedness perspective on corporate social capital are discussed. .

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Paper provided by Institute for Policy Resarch at Northwestern University in its series IPR working papers with number 98-10.

    as in new window
    Length:
    Date of creation:
    Date of revision:
    Handle: RePEc:wop:nwuipr:98-10

    Contact details of provider:
    Postal: 2040 Sheridan Road, Evanston, IL 60208-4100
    Phone: 847-491-8712
    Email:
    Web page: http://www.nwu.edu/IPR/publications/wpindex1.html
    More information through EDIRC

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wop:nwuipr:98-10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.