It’s Not Who You Know—It’s Who Knows You: Employee Social Capital and Firm Performance
Abstract
We show that the social capital embedded in employees’ networks contributes to firm performance. Using novel, individual-level network data, we measure a firm’s social capital derived from employees’ connections with external stakeholders. Our directed network data allow for differentiating those connections that know the employee and those that the employee knows. Results show that firms with more employee social capital perform better; the positive effect stems primarily from employees being known by others. We provide causal evidence exploiting the enactment of a government regulation that imparted a negative shock to networking with specific sectors and provide evidence on the mechanisms.
This paper was accepted by Camelia Kuhnen, finance.
Funding: D. Cho acknowledges the PHBS Dean’s Research Fund for financial support. L. Choi acknowledges the General Research Fund of the Research Grants Council of Hong Kong [Grant 21502018] for financial support.
Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.01179.
