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

Abstract

Economic actors confront various forms of uncertainty in their decision making, and the ways in which they deal with these obstacles may affect their success in accomplishing their goals. In this paper, we examine the means by which relationship managers in a major commercial bank attempt to close transactions with their corporate customers. We hypothesize 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, we also hypothesize that transactions in which bankers use relatively sparse approval networks are more likely to successfully close than are transactions involving dense approval networks. We find support for both hypotheses. We conclude that 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 successful. This represents an example of the unanticipated consequences of purposive social action.

Business groups, networks, and embeddedness: innovation and implementation alliances in Japanese electronics, 1985–1998

“…A similar result appears in Mizruchi and Stearns' (2001) study of U. S. commercial bank lending. Deals marked by high uncertainty motivated bankers to consult their strong tie webs of trusted friends and colleagues.…”

Findings from an Organizational Network Analysis to Support Local Public Health Management

“…This is effective when the central core uses its tight connections to manage resources and integrate tasks, but centralized structures can risk overburdening those at the center with too much information while underutilizing the abilities of peripheral members. 24,34,35 Programs with mobile field staff might perform best with a highly centralized structure, but too much centralization can prevent a unit from exercising discrete task resolution and forming interunit ties. 20,36 In this health department, lower overall measurements of complexity (links between the organization's components) were coupled with high social density (links between employees) in the programs.…”

Social Network Position and Its Relationship to Performance of IT Professionals

“…Senior managers who span structural holes are more likely to be promoted early (Podolny & Baron, 1997). Loan officers with networks that span structural holes were shown to be more likely to bring a deal to closure (Mizruchi & Sterns, 2001). In a French chemical firm, salary increases were more likely for individuals who span structural holes .…”