[产业集群与集聚] Social networks and loss of capital. [推广有奖]

Social networks and loss of capital.

Baker, Wayne E.; Faulkner, Robert R.

Social Networks, Vol 26(2), May 2004, 91-111.

http://dx.doi.org/10.1016/j.socnet.2004.01.004

• Economic sociologists and white-collar criminologists offer competing predictions about the outcomes of socially embedded transactions. The present study presents a case which serves as a critical test of the protective versus harmful effects of social ties: a business that operated as a legitimate enterprise and also engaged in ongoing financial fraud. This case is strategic because the role of social networks ex post is theoretically ambiguous for a legitimate-fraudulent business. Do social networks lower, raise, or have no effect on the probability of loss of capital, given that an investment has been made? The probability of loss of capital depends on due diligence and type of social tie. Investors who fail to conduct due diligence and do not use social ties have a 79% probability of loss of capital, controlling for other factors. Investors who conduct due diligence (and do not use social ties) have a 49% probability of loss. Investors with preexisting social ties to the principals, sales representatives, or employees of the company (and do not conduct due diligence) have a 39% probability of loss, while those with this type of social tie who also conduct due diligence have a 14% probability. Investors with preexisting social ties to prior investors are not significantly more or less likely to lose their capital. Even in a business that was partly fraudulent, preexisting social ties to the company played a protective and beneficial role. Ironically, fraudulent behavior lowered the probability of loss for investors with this type of social tie: Illegal practices allowed the company to favor friends and acquaintances in the ex post allocation of proceeds. (PsycINFO Database Record (c) 2012 APA, all rights reserved)