The Positive Externalities of Social Capital: Benefitting from Senior Brokers

• Main Authors: GALUNIC, Charles, ERTUG, Gokhan, GARGIULO, Martin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: network analysis; social capital theory; theoretical perspectives; leadership theories; Finance and Financial Management; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3161; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4160/viewcontent/GalunicErtugGargiulo_2012_PositiveExternalSocCapital_AMJ_AFV.pdf
• Institution: Singapore Management University

The importance of an actor’s network to his/her private benefits is well explored. Less well understood are the positive externalities of social capital, that is whether an actor’s social capital “spills-over” and improves the outcomes of those to whom s/he is connected, creating broader, not just private, benefits. This paper examines how investment bankers add value to one another in the course of everyday work. Our concern is with a banker’s second-order social capital. The main question is whether being connected to a broker matters to the ability of the focal actor to add value to those around him/her. We argue and find that connecting to brokers matters contingent upon the broker being more senior than the focal actor. The networks of contacts who are of higher rank and/or the focal actor’s leader positively contribute to the ability of the focal actor to add value. Second-order social capital does matter, contingent on the contacts: senior brokers.