This article develops a benefit curve and a cost curve that relate the strength of a CEO’s social tie to its benefits and costs respectively, and thereby develops a cost-benefit framework for understanding the strengths of CEO social ties. In particular, this framework helps address the basic, yet largely unanswered questions of why one tie is stronger than another and why a CEO utilizes social ties to a greater extent in one context than in another.
As a conceptual paper, this article develops a cost-benefit framework for understanding the strengths of CEO social ties.
This article suggests an important shift of research focus and a different way of thinking regarding tie strength. Specifically, it suggests that the more fundamental question might not be whether a social tie is beneficial or one tie is more beneficial than another, but rather what its optimal strength is, given the underlying relational factors such as resource dependence and demographic similarity. Relatedly, the question might not be whether a CEO’s level of utilization of social ties has a more positive effect on firm performance in one context than in another, but rather what the optimal level of utilization is, given the contextual factors such as environmental uncertainty.
This article addresses a widely accepted, yet potentially misleading understanding of the relationship between a tie’s strength and its benefits (i.e. the strength of weak ties argument). By doing so, it develops a benefit curve that integrates into a coherent, parsimonious function three seemingly conflicting key ideas in the literature (i.e. the overall notion that social ties are beneficial, the strength of weak ties argument, and the liability of strong ties argument). Relatedly, it develops a coherent framework for understanding the strengths of CEO social ties.
