Structural Hole and Risk Taking

• In Event: 195 - Regular Session. Economic Sociology. Analytical Approaches to the Economy

Abstract

In explaining risk taking, current research have concentrated on identifying the determinants of “motivation” for risk taking, focusing on covariates of organizations such as slack and ownership. This line of research is based on an assumption that organizations make risky decisions mainly depending on the motivation. However, there is another important factor, information. One hardly can observe an organization making risky decisions without gathering and using information. Network analysts have shown that information is unevenly distributed among organizations depending on the positions in the social network. Building upon these logic, this paper explores how inter-organizational networks influence the patterns of the risk taking behaviors. It is hypothesized that organizations with more structural holes take more risks and that motivation and structural hole have positive interaction effects on risk taking. The results from analyzing the Korean venture capital market data 1999-2006 supported these hypotheses. Also, this paper is an attempt to contribute to the exploration of the black box between the network positions and the market performance, with a notion that the advantageous position in the social network does not automatically produce successful outcomes.

Author

• Gru Han, Harvard University