Social
Networks and Knowledge Transfer in Debt
Markets: An Embeddedness Approach
Brian Uzzi and Ryon
Lancaster
Abstract
As a complement to the learning literature that focuses
on the benefits of formal governance arrangements within and between
firms for knowledge transfer, we investigate how informal social
relationships and networks promote learning and knowledge transfer.
Drawing on social embeddedness theory, we argue that embeddedness
creates unique transfer and learning benefits between transactors
that facilitate the transfer of private information and motivate
exchange partners to ascertain mutual gains through Pareto improved
exchanges. We examined our argument in the context of lending transactions
among midmarket banks and firms — a lucrative yet understudied
financial market. To develop our framework, we conducted original
fieldwork at 11 Chicago banks and then examined its representativeness
using statistical analyses of two national random samples of small-
to medium-sized business. We find that firms tied to their lender
through embedded ties and with a network of bank ties that is composed
of a complementary mix of embedded and arm’s-length ties are
less likely to have collateral taken, pay large spreads, or both,
as conditions of their loans. These results indicate that informal
social relationships and networks can provide important conduits
for interfirm knowledge transfer and learning that are absent in
either formal governance mechanisms within or between firms.
Brian Uzzi, Kellogg
Graduate School of Management and Department of Sociology, Northwestern
University Ryon Lancaster, Kellogg Graduate School of Management
and Department of Sociology,
Northwestern University
To Order:
Hard copies of IPR working papers cost $5.00 each (international orders are $10 each). We only accept checks drawn on U.S. bank and payable in U.S. funds. Checks or
money orders should be made payable to Northwestern University and sent to
the following address:
Publications Department - WP Orders
Institute for Policy Research
2040 Sheridan Rd., Evanston, IL 60208-4100.
For information, call 847-491-8712 or email ipr@northwestern.edu.
Please note that we do not accept credit cards.
