Getting Deals Done: The Use of Social Networks in Bank Decision-Making

By Mark S. Mizruchi, Linda Brewster Stearns. American Sociological Review, 2001

321 citations recorded by the source corpus.

Economic actors confront various forms of uncertainty making decisions, and how they deal with these obstacles may affect their success in accomplishing their goals. This study examines the means by which relationship managers in a major commercial bank attempt to close transactions with their corporate customers. It is hypothesized that under conditions of high uncertainty, bankers will rely on colleagues with whom they are strongly tied for advice on and support of their deals. Drawing on recent network theory, it is also hypothesized that transactions in which bankers use relatively sparse approval networks are more likely to successfully close than are transactions involving dense approval networks. Both hypotheses are supported. Bankers are faced with a strategic paradox: Their tendency to rely on those they trust in dealing with uncertainty creates conditions that render deals less likely to be closed successfully. This paradox represents an example of unanticipated consequences of purposive social action.

Subfields: Accounting, Finance, Organizational Behavior and Human Resource Management

View Paper: https://www.semanticscholar.org/paper/9a890fc961e7a2bc96927475d7100167a19b65b4

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Citations in the corpus

Dynamics of Networks if Everyone Strives for Structural Holes1 (2008, background): “The network becomes a “device to be manipulated consciously for an actor’s own ends” (Watts 1999, p. 495).”
Tie and Network Correlates of Individual Performance in Knowledge-Intensive Work (2004, background): “However, closed networks might also have " unintended consequences " on performance if they result in comfortable or validating interactions but not the most relevant knowledge for the task at hand (Erickson, 1988; Mizruchi & Stearns, 2001).”
Trust and Communication: Mechanisms for Increasing Farmers’ Participation in Water Quality Trading (2005, background): “Furthermore, where uncertainty persists, actors are likely to rely on networks of trust when making economic decisions (Mizruchi and Stearns 2001; Guseva and Rona-Tas 2001).”
Bigger and safer: the diffusion of competitive advantage (2009, background): “third parties, and thus are a structurally equivalent cluster (Burt, 1987; Galaskiewicz and Burt, 1991; Mizruchi and Stearns, 2001 ).”
The Organizational Life of an Idea: Integrating Social Network, Creativity and Decision-Making Perspectives (2007, background): “Large networks of ideas will, therefore, be mainly important during development to get additional input and criticism (Mizruchi and Stearns, 2001).”
Trust as a predictor of innovation network ties in project teams (2015, background): “, 2013; Coleman, 1990), enabling contingencies (Mizruchi and Stearns, 2001), and supporting collective action and synchronization (Burt, 2004; Obstfeld, 2005).”
The Two Faces of Control: Network Closure and Individual Performance among Knowledge Workers (2009, background): “…outcomes such as promotions (Burt, 1992, 1997; Podolny and Baron, 1997), bonuses (Burt, 1997), the ability to close deals in commercial banking (Mizruchi and Stearns, 2001), the number of billable hours by partners in a law fi rm (Lazega, 2001), and various performance ratings provided by…”
Why Do Firms Both Make and Buy? An Investigation of Concurrent Sourcing (2007, unknown): “However, incorporating robust standard errors adjusted for repeat observations by firm does address this problem, and this technique has been used by other scholars for similarly structured data (e.g., Mizruchi and Stearns, 2001).”
Relational Embeddedness and Learning: The Case of Bank Loan Managers and Their Clients (2003, background): “…a bank's ability to access a large and diverse amount of public information on firms through certified financial statements, analysts' reports, SEC filings, debt raters, etc., which greatly reduces the bank's uncertainty in evaluating a firm's credit eligibility (Mizruchi and Stearns 2001).”
Bringing the Context Back In: Settings and the Search for Syndicate Partners in Venture Capital Investment Networks (2008, background): “Likewise, Podolny (1994) found that market uncertainty increased the tendency for investment banks to engage in transactions with past partners and to favor similar status partners (see also Mizruchi and Stearns, 2001).”
The Dark Side of Structural Holes (2013, background): “The positive effects of structural holes were found for independent bankers closing deals with corporate clients (Mizruchi & Stearns, 2001) or investments bankers, financial analysts, and supply chain managers (Burt, 2007) who may be nested in temporary teams but often have individual objectives…”
Using Social Network Analysis to Improve Communities of Practice (2006, background): “Scholarly research has shown a cost to developing and maintaining ties in a network and also demonstrated that too many of the same kind of ties can undermine effectiveness.(16) Performance and career benefits accrue to those with more bridging ties as these people tend to hear about a wider range o”
Financing technology-based small firms in Europe: what do we know? (2012, background): “Most of the literature on financial networks deals with US firms, but does not focus on high-tech sectors (Uzzi 1999, Mizruchi and Stearns 2001, Godley and Ross 1996).”