INFORMS is the largest professional society in the world for professionals in the fields of operations research, management For more information on INFORMS, its publications, membership, or meetings visitOrganization ScienceV ol.23,No.2,March–April 2012,pp.529–546ISSN 1047-7039(print) ISSN 1526-5455(online)/10.1287/orsc.1100.0566©2012INFORMSBetter with Age?Tie Longevity and the PerformanceImplications of Bridging and ClosureJoel A.C.Baum,Bill McEvily,Tim J.RowleyRotman School of Management,University of Toronto,Toronto,Ontario M5S 3E6,Canada {baum@rotman.utoronto.ca,bill.mcevily@rotman.utoronto.ca,rowley@rotman.utoronto.ca}We examine the extent to which performance effects of firms’network positions vary with the ages of the ties comprising those positions.Our analysis of Canadian investment banks’underwriting syndicate ties indicates that the performance benefits of closure ties increase with age,whereas benefits of bridging ties decrease with age.We also find that benefits yielded by hybrid network positions,combining elements of both closure and bridging,are greatest when old closure ties are combined with either very young or very old bridging ties.Our findings support the idea that the advantages firms gain (or do not)from their network positions depend on the relational character of the ties comprising them,highlighting the risk of theorizing structural network effects without also considering the relational and temporal dynamics associated with network positions.Key words :strategy and firm performance;strategy and policy;strategic alliance networks;interorganizational relationships;organization and management theoryHistory :Published online in Articles in Advance August 20,2010.IntroductionAt the intersection of network and strategy litera-tures,researchers are concerned with how patterns of interfirm connections—structural embeddedness—create network-based advantages for well-positioned firms.Ini-tially,researchers debated whether firms should occupy positions in highly interconnected structures (closure positions),which create coordination and integration advantages (Coleman 1988,1990),or in sparse struc-tures (bridging positions),which provide timely infor-mation,resource access,and brokerage opportunities (Burt 1992).In the face of equivocal empirical evidence,however,this debate gave way to contingency argu-ments specifying conditions (e.g.,firm life-cycle stage,environmental uncertainty,tie function)under which closure and bridging were advantageous (Ahuja 2000,Walker et al.1997,Rowley et al.2000).More recently,researchers have examined the benefits of hybrid net-work positions that contain elements of both bridging and closure (Baldassarri and Diani 2007;Baum et al.2007;Reagans and McEvily 2003,2008;Schilling and Phelps 2007).Although the performance effects of closure,bridg-ing,and hybrid network positions have been observed in a variety of contexts,we still know little about the relational and temporal dynamics associated with each effect.Implicit in many theories of structural advan-tage are assertions about the character of the conduits through which structural benefits flow,but the specific relational qualities that matter,and how,have yet to be systematically work structures do notsimply appear;they are dynamic systems that emerge,take shape,and dissolve over time.These dynamics are essential to understanding when,and the extent to which,structural network positions produce valued outcomes.Indeed,we contend that the structural features of net-work positions will yield the predicted benefits only when the appropriate relational building blocks are in place.Research on structural network advantages has yet to consider how features of the ties comprising network positions affect the realization of those advantages.As a result,research on structural embeddedness and relational embeddedness remain disconnected.Whereas structural embeddedness emphasizes the topology or configuration of ties surrounding actors’network posi-tions,relational embeddedness emphasizes tie strength,stressing features such as depth of information exchange and trust (Uzzi 1996).Ties can be more or less preferen-tial and stable,more or less trustworthy,and entail richer or more limited information exchange.Relationally embedded ties are characterized by partners’willingness to make themselves vulnerable to one another and to commit to each other (Ring and Van de Ven 1994).The distinction between structural and relational embeddedness provides conceptual clarity,but also overlooks a basic connection.Underlying any structural network position is the relational character of the ties comprising the position,and any advantages firms gain (or do not)from these positions are likely to depend on the character of those ties.Indeed,it is difficult to theorize structural network effects without referring to529D o w n l o a d e d f r o m i n f o r m s .o r g b y [132.194.32.30] o n 14 O c t o b e r 2014, a t 23:07 . F o r p e r s o n a l u s e o n l y , a l l r i g h t s r e s e r v e d .Baum,McEvily,and Rowley:Tie Longevity and the Performance Implications of Bridging and Closure530Organization Science 23(2),pp.529–546,©2012INFORMSthe qualities of the ties through which structural bene-fits accrue.We maintain that the benefits associated with structural positions are conditioned by the qualities of the ties constituting network positions.Longevity is a particularly germane feature of the ties comprising network positions given the time they take to form,mature,and ultimately decay.As a first step toward connecting research on structural and rela-tional embeddedness,we therefore develop predictions about how the benefits of closure,bridging,and hybrid network positions vary with the ages of ties constitut-ing them.We argue that the benefits typically associ-ated with closure positions are rooted in strong ties,which may take years to develop (Larson 1992,Uzzi 1996),whereas those associated with bridging are typi-cally conceived as short term and short lived (Burt 2000,Soda et al.2004).For hybrid positions,which combine elements of bridging and closure,we suggest that a mix of established and new ties will be most advantageous.We investigate the dependence of network position benefits on the ages of the relationships constituting them using comprehensive data covering all underwrit-ing syndicates formed by investment banks in Canada from 1952to 1990.In contrast to earlier analyses,which typically assess the value of firms’network positions without considering the longevity of the relationships underlying them,we disaggregate closure and bridging positions into their basic triadic substructures to incor-porate the age of the ties constituting the triads.Rep-resenting network structures in this way enables us to evaluate the performance of firms’network positions as a function of the ages of ties comprising them.Temporal Dynamics of Network PositionsSeveral properties of network structure have been the focus of research;however,primary attention has been on bridging and closure.Although differing in their causal mechanisms,theories of bridging (Burt 1992,Granovetter 1973)and closure (Coleman 1988)share a common emphasis on triadic structures as the basic building block of network positions.Bridging is fun-damentally a triad-level concept.Three actors,A,B,and C,constitute a “bridging triad”for actor A if A is tied to B and C,but B and C are not tied.Granovetter (1973)refers to bridging triads lacking the BC tie as “forbidden”triads.We refer to the ties AB and AC as “bridging ties”for actor A.Coleman’s (1988)clo-sure arguments,too,emphasize structures in which two actors share a common third party.Here,B and C are tied to each other,as well as to A.We refer to these as “closure ties”for actor A.Triads are influential in relationship formation,with the probability of actors B and C forming a tie increased by indirect communica-tion about their capabilities and interests through their mutual partner,actor A (Granovetter 1973).Also,whena BC link is formed,actor A facilitates deepening of that link by playing the role of independent monitor and arbiter (Krackhardt 1998).Benefits of closure and bridging,and the causal mech-anisms underlying them,are distinctive.Dense,persis-tent interaction within closure triads lowers the value of (short-term)noncooperative behavior (Axelrod 1984),facilitating development of reciprocity norms,amplifi-cation of trust,and emergence of a shared identity,all of which foster high levels of cooperation and greater volume and depth of information sharing (e.g.,Coleman 1988,Van de Ven 1976).Closure also gives rise to self-enforcing governance mechanisms that afford an incentive for conformity to agreed upon norms,lessen-ing the tendency of partners to behave opportunistically toward one another (Hansen 1999,Obstfeld 2005).The presence of a common third party,or “Simmelian”tie (Krackhardt 1999),introduces reputational concerns and possible sanctioning for noncooperative behavior within the closed triad.These advantages constitute semipub-lic goods available to all members of the same dense subnetwork (Coleman 1988,Rowley 1997).Whereas closure is about trust,collaboration,and integration within close-knit groups,bridging is about the importance of privileged access to varied informa-tion and autonomy from others in the network.Firms occupying bridging positions are located at the inter-section of a set of bridging triads and thus span multi-ple structural holes—positions between other firms that are not linked directly.Bridging emphasizes advantages derived from timely access to diverse information and resources from nonredundant contacts,and opportuni-ties to broker novel information and resources between unconnected partners (Burt 1992).Because there is a limit to the ideas and opportunities that can be created using a given knowledge base,bridging positions also increase a firm’s potential for finding new combinations by exposing it to novel variations (Burt 1992,Flem-ing and Sorenson 2001).This advantage enables firms to select among or synthesize alternatives,anticipate problems and opportunities,and secure more favorable partnership terms (Ahuja 2000,Hargadon 2002,Koka and Prescott 2002,McEvily and Zaheer 1999,Soda et al.2004).Both closure and bridging have been shown to be advantageous under a range of conditions,but each dis-plays a distinct temporal dynamic.Closure advantages develop through repeated exchanges and tend to accrue over time.Bridging advantages,in contrast,are more immediate,as firms attempt to realize benefits from access to novel information and resources before oth-ers do.Consequently,we expect the benefits of bridging and closure positions to vary distinctively with the ages of ties comprising them.Building on this insight,below we develop the idea that the effect of a firm’s network position on its performance depends on the age of theD o w n l o a d e d f r o m i n f o r m s .o r g b y [132.194.32.30] o n 14 O c t o b e r 2014, a t 23:07 . F o r p e r s o n a l u s e o n l y , a l l r i g h t s r e s e r v e d .Baum,McEvily,and Rowley:Tie Longevity and the Performance Implications of Bridging and ClosureOrganization Science 23(2),pp.529–546,©2012INFORMS531bridging and closure ties constituting its position,and that the influence of closure tie age and bridging tie age differ.Tie Longevity and Realization of Closure and Bridging BenefitsThe mere presence of a closure or bridging tie does not necessarily mean that the tie is an effective conduit for accessing structural network advantages.The qual-ity of the ties also matters and can affect the degree to which available structural benefits of closure or bridg-ing are realized.Tie quality is dynamic,however,deep-ening or decaying over time,influenced in part by the type of triadic structure within which it resides.Clo-sure ties tend to deepen and increase their efficacy over time as repeated interactions and third-party connec-tions promote cooperative behavior and facilitate com-mitment,increasing partners’willingness to rely on and fully engage one another.Also,as these ties strengthen over time the partners are more likely to realize the structural benefits of closure ties.Bridging ties,in con-trast,are more likely to decay over time as the com-petitive nature of brokerage and absence of third-party connections inhibits development of embedded exchange relationships.Closure Ties.Interfirm relationships typically begin as weak ties,becoming relationally embedded only as partners learn to cooperate and trust one another over time (Gulati 1995,Levinthal and Fichman 1988,Van de Ven and Walker 1984).In the early stages,firms face uncertainty about each other’s capabilities and likelihood of cooperating or engaging in an opportunistic learning race (Khanna et al.1998,Li and Rowley 2002).Together or separately,misalignment of partner capabilities,inter-ests,or intentions can undermine and potentially over-whelm any gains derived from a partnership.Initially,firms thus tend to be reluctant to commit fully to a part-nership.Exchange relations develop in a slow process,starting with minor exchanges of limited risk and com-mitment,becoming more deeply engaged over time as a result of experience within the partnership (Ring and Van de Ven 1994).Larson’s (1992)study of interfirm relationships suggests,for instance,that partners fully commit to a relationship only after a period of incre-mental back-and-forth small exchanges.Realization of closure benefits depends on the willingness of partners to commit to one another.Persistent interaction over time is thus a condition for the development of relationally embedded ties capable of affording the trust,information sharing,and integration benefits associated with closure positions.Time permits development of routines for joint planning,informa-tion exchange,and conflict resolution that help part-ners coordinate their efforts for mutual gain (Zollo et al.2002).Time also allows partners to establish a historyof exchange from which to learn about (and reduce the uncertainty associated with)each other’s compe-tencies,conduct,and reliability (Gulati and Gargiulo 1999).Familiarity and mutual understanding in turn facilitate trust building and development of coopera-tive norms of exchange based on expectations of future interaction (Gulati 1995,Uzzi 1996).Finally,time per-mits reputation and third-party referrals to emerge as a source of information about potential partners’capabili-ties and motives that shape patterns of new relationships (Gulati and Gargiulo 1999).The more a firm resorts to third-party referrals as cues for new partners,the more closure triads it becomes situated among and the more stable and durable its closure ties tend to become (Krackhardt 1998,1999).Critical to the strengthening of closure ties from their initial incremental exchanges is the presence of com-mon alters,or “Simmelian”ties (Krackhardt 1999).As Simmel (1950)observed,there is a qualitative differ-ence between the private interactions that take place within dyads and the public interactions within closure triads.The publicness of interactions within closure tri-ads raises the potential cost of noncooperative behavior by jeopardizing relationships with common alters that witness and may reprove the misbehavior.Publicness also opens an avenue for third-party conflict resolution.The presence of common alters thus supports the deep-ening of the ties within mutually connected triads by introducing social governance mechanisms that foster reputational considerations,dampening self-interested behavior,and promoting conflict resolution (Krackhardt 1999,Tortoriello and Krackhardt 2010).Of course,the governance effects of third-party ties take time to mate-rialize,emerging only after cooperative norms,collec-tive sanctioning mechanisms,and conflict resolution approaches have developed (Rowley 1997,Walker et al.1997).Accordingly,the relationship between closure and tie age is self-reinforcing:closure facilitates the strength-ening of ties over time,which enhances the benefits of closure in turn.Time is thus essential for developing the relation-ally embedded ties through which closure advantages—coordination,trust,and sanctioning mechanisms that facilitate efficient exchanges and integration of informa-tion and resources—flow (Rowley 1997,Walker et al.1997).Consequently,we expect the benefits of closure ties to increase with their age.Therefore,we predict the following.Hypothesis 1(H1).The performance benefits of clo-sure ties increase with their age.Bridging Ties.Time,in contrast,appears to work against the advantages gained through ties constituting bridging positions.Bridging benefits are typically con-ceived in terms of concrete,short-term goals,and their advantages are relatively short lived (Burt 2005,p.93).D o w n l o a d e d f r o m i n f o r m s .o r g b y [132.194.32.30] o n 14 O c t o b e r 2014, a t 23:07 . F o r p e r s o n a l u s e o n l y , a l l r i g h t s r e s e r v e d .Baum,McEvily,and Rowley:Tie Longevity and the Performance Implications of Bridging and Closure532Organization Science 23(2),pp.529–546,©2012INFORMSThe value in bridging positions is that they provide timely access to novel information and resources that can be brokered.Brokerage opportunities can fade rapidly,however,if previously disconnected firms become linked to one another and information diffuses,rendering an initially unique connection increasingly redundant,and diminishing associated arbitrage and control opportuni-ties.The transience of bridging benefits appears great-est in environments characterized by rapid change and a short-term orientation,where novelty and uniqueness are of little value if outdated (Soda et al.2004).The transience of bridging benefits is exacerbated by the difficulty and cost of developing and maintaining bridging ties (Burt 2002).By definition,bridging ties connect firms operating in different spheres,making it more difficult to share,absorb,and integrate knowl-edge from each other because they lack sufficient over-lap in their knowledge bases,and because the language,heuristics,and standards that develop among exchange partners tend to be situation specific (Burt 2005,Uzzi 1997).Also by definition,brokering is a competitive activity,and bridging ties lack the self-enforcing gov-ernance mechanisms afforded by common alters that might lessen partners’tendency to behave opportunis-tically toward one another.As such,bridging ties are more prone to conflict and corruption by opportunism that undermines their functioning,and thus more likely to languish and decay than deepen over time.How-ever,because firms invest incrementally in partnerships,and because trust and cooperation take time to develop,it is unlikely that partners will abandon a potentially fruitful bridging tie at the first sign of noncooperation.Instead,they would be more reluctant to fully commit to and invest in the relationship in the face of nonco-operation,lowering the likelihood that potential struc-tural benefits will be realized.Dissolution becomes more likely,however,if conflict builds,cooperative norms fail to develop,and the tie’s failing effectiveness under-mines its potential benefits (Burt 2000,Krackhardt 1998,Rowley 1997).Despite the endemic challenges of bridging ties,the longer a bridging tie endures,the smaller its disadvan-tage should become as,despite the inherent conflicts,partners learn to work together productively,for exam-ple,by learning to resolve conflicts and manage their joint activities for mutual gain.If this selection argument is correct,long-standing bridging ties should continue to afford brokering opportunities as the information and resources held by these disconnected alters is periodi-cally updated.Consistent with this idea,Burt’s (2002)study of tie decay showed that the survival rate increases for bridging ties past a threshold age.Of course,this finding is conditional on the structural hole a bridg-ing tie spans not being absorbed into the surrounding network.Importantly,the two foregoing arguments are not rivals,but rather complements.Advantages of some bridging ties may decline over time because the bro-kering opportunity they afford is short lived,because relationships decay (rather than deepen)and there-fore diminish their effectiveness as an information con-duit,or because previously disconnected firms become linked to each other,closing the structural hole.Advan-tages of other bridging ties may grow over time,as decay-resistant relationships deepen and avoid disinter-mediation,offering ongoing sources of timely access to unique information,resources,and associated opportu-nities.Therefore,we predict the following.Hypothesis 2(H2A).The performance benefits of young bridging ties decrease with their age.Hypothesis 2(H2B).The performance benefits of old bridging ties increase with their age.Hybrid Positions and Tie LongevityResearch indicates that few firms participate only in either closure or bridging ties,but instead are more typically situated in hybrid network position compris-ing both types of ties (Baum et al.2003,2007).Like small-world network structures (e.g.,Watts 1999),hybrid positions enhance performance because the coex-istence of clustered closure ties with distant bridging ties enables trust and close collaboration within groups to be combined with nonredundant information and ideas from other groups (Baldassarri and Diani 2007;Baum et al.2007;Burt 2005;Reagans and McEvily 2003,2008;Schilling and Phelps 2007).Hybrid positions are precisely those described by Burt’s (1980,1982)con-cept of structural autonomy.A structurally autonomous actor belongs to a densely interconnected group of part-ners,but also has bridges beyond them.Indeed,Burt (2005,p.139)defines structural autonomy explicitly as the interaction of closure and bridging.More than just compatible,closure and bridging can be complementary.For firms that emphasize closure,bridging ties create opportunities to realize access advan-tages to distinct information and resources available from beyond its local network.For firms that stress bridging,closure ties create a collaborative context within which to engage in the coordinated action neces-sary to transform new ideas into concrete and valuable applications (Obstfeld 2005).Thus,in mixing the two,firms combine the cooperative properties of closure with the access and brokering properties of bridging.As Burt (2005,p.7)explains it:“Facilitating the trust and col-laborative alignment needed to deliver the value of bro-kerage,closure is a complement to brokerage such that the two together define social capital in a general way.”Put more strongly,the benefits of bridging ties may be difficult to realize unless combined with well-established closure ties that provide ready access to a collaborativeD o w n l o a d e d f r o m i n f o r m s .o r g b y [132.194.32.30] o n 14 O c t o b e r 2014, a t 23:07 . F o r p e r s o n a l u s e o n l y , a l l r i g h t s r e s e r v e d .Baum,McEvily,and Rowley:Tie Longevity and the Performance Implications of Bridging and ClosureOrganization Science 23(2),pp.529–546,©2012INFORMS533context within which to rapidly deploy novel informa-tion and ensure the trust “needed to realize the value of bridging a structural hole”(Burt 2005,p.97).We expect the benefits of combining closure and bridging ties to depend on their ages.Taken together,hypotheses H1(benefits of closure ties increase with age)and H2A (benefits of bridging ties decline with age)suggest that firms can maximize hybrid position benefits by combining the trust and integration benefits afforded by old closure ties with the timely information access and brokering benefits of new bridging ties.In contrast,combining hypothesis H1with H2B (benefits of bridg-ing ties grow with age)suggests that hybrid position benefits are optimized by combining the benefits of old closure ties with the potential stream of information and resource advantages associated with old bridging ties.Accordingly,we predict the following.Hypothesis 3(H3A).Hybrid network positions that combine old closure ties with young bridging ties enhance performance.Hypothesis 3(H3B).Hybrid network positions that combine old closure ties with old bridging ties enhance performance.MethodsResearch Setting and Network DefinitionWe study the relationship between network position age and performance using data on all underwriting syn-dicates formed by Canadian investment banks between 1952and 1990.Data were compiled from the Record of New Issues ,published annually since 1952by the Financial Data Group.Additional data were collected from annual reports of the Toronto Stock Exchange as well as from the Canadian Sociometric Informa-tion and Management Database.In 1952,19invest-ment banks participated in 27underwriting syndicates in Canada.The number of syndicates grew rapidly,and by 1989,83banks participated in 422syndicates.Although life histories for a small number of banks are left-censored (i.e.,in operation prior to 1952),our data thus covers the period in which raising equity in capi-tal markets superseded bank debt as the dominant mode of corporate financing (Davis and Mizruchi 1999).Our comprehensive,longitudinal network data permit us to avoid the problem of network boundary setting (Doreian and Woodard 1992)and to model partner selection over a period of time sufficient to yield meaningful variation in network structure and composition.Underwriting SyndicatesInvestment banks act as financial intermediaries link-ing issuers (firms)wishing to raise funds on capital markets to investors.They add value to corporations raising capital in primary markets by effectively pricingand placing their issues.The industry is characterized as “relationship-oriented”because banks commonly col-laborate in underwriting deals.Relationships are not only common practice,but also the primary assets banks employ,acting as conduits to underwriting opportunities,investors,and fundamental to their reputation (Podolny 1993).The syndication process begins with an issuer choosing a lead bank to oversee underwriting respon-sibilities.In most cases,the lead bank invites addi-tional investment banks to participate as co-leads in an underwriting syndicate as a means of spreading risk and acquiring industry-specific skills,investor contacts,and distribution capabilities that help the syndicate to reach a wider range of investors (Pollock et al.2004).Co-lead banks have more limited discretion,either accepting or rejecting an invitation to participate in a syndicate.In aggregate,these two types of partnering decisions—lead banks forming and co-lead banks joining under-writing syndicates—generate the syndicate network.The network is thus composed of all dyadic lead–co-lead syndicate ties.1Over time,banks participate in numer-ous syndicates,typically with banks they have partnered with in the past (and their partners)and with which they have developed deeply embedded closure ties (Baum et al.2005).Interactions between such partners differ qualitatively from those in more arms-length arrange-ments,with each tending to select the other as a partner for future syndicates (Li and Rowley 2002).As such,the intensity of competition among investment banks declines when banks move from arms-length to relation-ally embedded interactions.Bridging and closure ties both create value for investment banks.Bridging ties are beneficial in information-intensive environments such as underwrit-ing because they provide access to and control of infor-mation vital to rmation regarding potential underwriting deals,others’relationships,and investor interests is essential to success;preferential access to diverse,high-quality information is a key source of com-petitive advantage.By spanning structural holes in the syndicate network,banks are able to maximize the num-ber of underwriting deals to which they have access and control,while minimizing their costs in terms of the number of relationships managed.Closure ties benefit investment banks by smoothing cooperation and enhancing trust,which facilitate the transfer of information required for complex financial transactions and syndicate effiernance bene-fits of closure,however,are rendered partly redundant by the nature of underwriting relationships.Banks establish short-term ties repeatedly among a relatively stable set of firms,which is instrumental in aligning banks’incen-tives and limiting opportunism (Ritter 1991).The long shadow of the future this pattern of interaction instills lowers the value of (short-term)noncooperative behav-ior,because the long-term advantage of future collabo-rations with the same partners (and their partners)wouldD o w n l o a d e d f r o m i n f o r m s .o r g b y [132.194.32.30] o n 14 O c t o b e r 2014, a t 23:07 . F o r p e r s o n a l u s e o n l y , a l l r i g h t s r e s e r v e d .。
