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TitleCorporate Social Capital and Liability
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LanguageEnglish
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Page 1

Corporate Social
Capital and Liability

Page 2

Corporate Social
Capital and Liability

Edited by

Roger Th.A.J. Leenders
School of Management and OrganiZOlion
University ojGroningen, The Netherlands

Shaul M. Gabbay
Davidson Faculty of Industrial Engineering and Management
Technicn - Israellflsli/utl! o!Tedllw{ogy

.... . ,
Springer Science+Business Media, LLC

Page 279

CEO Demographics and Acquisitions - 277

Table 2. Logistic regression analysis of determinants of domain-expanding acquisitionsa

Variable (I) (2) (3) (4) (5) (6)

Output Background -.00 -.12 -.12 -.11 -.19

Throughput Background .20 .\3 .09 .18 .01

Peripheral Background -.01 -.10 -.12 -.05 -.11

Elite Grad. Degree (exc!. MBA) 1.49**

Elite MBA .35

MBA (nonelite) -.98* -1.00* -1.32* -1.32*

Elite Grad. Degree (inc!. MBA) .81** .84 1.29*

Uncertainty -.00

Uncertainty x Elite Grad. -.03

Uncertainty x MBA -.06

CEO Tenure .02

Tenure x Elite Grad. -.08*

TenurexMBA JJ7**

Control Variables"

CEO Age .02 .02 .01 .01 .00 .01

Year-1987 -1.31* -1.30* -1.25* -1.32* -1.58* -1.42*

Year-1988 -.63 -.62 -.57 -.67 -.58 -.79

Year-1989 -1.24* -1.23* -1.22* -1.35* -1.31* -1.47*

Year-1990 -1.37* -1.38* -1.22 -1.33* -1.25 -1.30*

Year-I991 -1.46* -1.45* -1.23 -1.36* -1.57* -1.44*

Year-1992 -2.45** -2.46** -2.32** -2.49** -2.41** -2.56*

Year-I993 -1.01 -.99 -.64 -.75 -.65 -.84

Sales (thousands) .13* .13* .12* .11* .12* .11*

Profits (thousands) -1.70* -1.70* -1.60* -1.50* -1.40* -1.50*

Intercept .06 -2.36** .38 .50 .91 .27

N 273 273 273 273 262 273

Chi-squared 97.94** 97.87** 107.31** 105.52** 99.65** 118.29**

-2 Log Ukelihood 248.4 248.3 238.8 240.6 229.1 227.8

% Cases Correcdy Classified .83 .83 .85 .85 .84 .86

*p<.05;**p<.OI, I-tailed tests for independent variables, 2-tailed tests for control variables.

aDependent variable is whether the focal firm engaged in a related acquisition (l=yes, O=no)

bResults for industry control variables are not reported, but are available from the author

in the same model (Model 3), separate analyses show that the statistical significance
of the results does not change when these variables are run separately. MBA is
negatively related, elite degree is positively related, and elite MBA has no
statistically significant effect on the likelihood of engaging in a domain-expanding
acquisition. Thus, we find evidence supporting a network perspective on education
(our elite graduate degree results). The elite MBA case, where cognitive and
network predictions oppose each other (elite education dictates more domain-
expanding acquisitions and MBA dictates more related acquisitions) produces no
statistically significant effect. This may be due to the opposing effects cancelling

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278 - Corporate Social Capital and Liability

each other in this situation. For our purposes, it is important to note that the network
effects are independent of the cognitive effects, supporting the validity of our
network perspective.

Model 5 of Table 2 examines whether uncertainty moderates the effects of an
MBA and an elite graduate degree on acquisitions (H3). Model 5 shows, contrary to
Hypothesis 3, that the main effects of education on acquisitions are hardly
moderated by uncertainty. In support of Hypothesis 4, however, Model 6 shows that
while firms whose CEOs have an elite graduate degree are more likely to engage in
domain-expanding acquisitions, this effect is weaker for long-tenured CEOs. Tenure
also weakens the negative relationship between a nonelite MBA and domain-
expanding acquisitions found in Model 3. Thus, it appears that tenure, but not
uncertainty, moderates the relationship between education and domain-expanding
acquisitions.

Models 1-3 of Table 3 present the results of analyses of vertical acquisitions.
For these models, the dependent variable was coded 1 if the acquisition was vertical,
and 0 if it was related or conglomerate. Model 1 shows, as predicted by Hypothesis
2b, firms having CEOs with output function backgrounds are more likely to engage
in vertical acquisitions than firms having CEOs with other backgrounds. Model 1
also replicates the effect of elite educational background (HI) (elite graduate
degrees are positively related to vertical acquisitions).

Models 2 and 3 examine whether uncertainty and CEO tenure moderate the
effects of output background on vertical acquisitions (H3 and H4). Model 2 shows,
in support of Hypothesis 3, the main effect of an output background on vertical
acquisitions is strengthened by uncertainty. While CEOs whose social capital is
shaped by output backgrounds are more likely to do vertical acquisitions, they are
even more likely to do so under conditions of uncertainty. Model 3 shows, contrary
to Hypothesis 4, that tenure has no statistically significant effect on the relationship
between output function background and vertical acquisitions. Thus, functional
background effects on vertical acquisitions are affected by uncertainty, but hardly by
tenure.5

Models 4-6 of Table 3 present the results of analyses of conglomerate
acquisitions. For these models, the dependent variable was coded 1 if the acquisition
was conglomerate, and 0 if it was related or vertical. Model 4 tests whether firms
whose CEOs have social capital that is shaped by peripheral function backgrounds
engage in more conglomerate acquisitions than firms whose CEOs have other
functional backgrounds. Model 4 shows, contrary to Hypothesis 2a, firms with
CEOs that have peripheral function backgrounds are no more likely to engage in
conglomerate acquisitions than firms with CEOs that have other backgrounds.
Model 4 also replicates the effects of elite educational background (HI) (elite
graduate degrees are positively related to unrelated acquisitions). Thus, the positive
effects of an elite graduate degree apply to both vertical and conglomerate
acquisitions. Models 5 and 6 of Table 3 show that uncertainty and tenure have no
statistically significant effect on the relationship between peripheral background and
conglomerate acquisitions. Thus, Hypotheses 3 and 4 get no support when looking at
conglomerate acquisitions alone.

Overall, then, Hypothesis 3 gets mixed support from these results. Uncertainty
does not appear to weaken the effects of educational background. It does not weaken

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562 - Corporate Social Capital and Liability

Onno (S.W.F.) Omta
Associate Professor of Innovation and Business Development, School of
Management and Organization, University Groningen, The Netherlands.

Jason Owen-Smith
Ph.D. Candidate, Department of Sociology, University of Arizona.

Johannes M. Pennings
Professor of Management, The Wharton School, University of Pennsylvania.

Joel M. Podolny
Associate Professor of Strategic Management and Organizational Behavior,
Graduate School of Business, Stanford University.

Walter W. Powell
Professor of Sociology, Department of Sociology, University of Arizona.

Wouter van Rossum
Professor of Commercial Management, Marketing, and Innovation Management,
University of Twente, The Netherlands.

Rebecca L. Sandefur
Ph.D. Candidate, Department of Sociology, University of Chicago.

Laurel Smith-Doerr
Ph.D. Candidate, Department of Sociology, University of Arizona.

Toby E. Stuart
Assistant Professor of Organizations and Strategy, Graduate School of Business,
University of Chicago.

Dan Talmud
Lecturer, Graduate Program in Applied and Organizational Sociology, Department
of Sociology and Anthropology, University of Haifa, Israel.

Brian Uzzi
Associate Professor of Organization Behavior and Sociology, J.L. Kellogg Graduate
School of Management, Northwestern University.

Page 559

THE EDITORS

Shaul M. Gabbay
Lecturer. Davidson Faculty of Industrial Engineering and
Management. Technion. Israel Institute of Technology.
Israel.

Roger Th.A.J. Leenders
Assistant Professor of Business Development and Business
Research Methods. School of Management and
Organization. University Groningen. The Netherlands.

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