Socially advantaged? How social affiliations influence access to valuable service professional transactions

• Author: Ryan Cooper,Timothy Gubler
• Date: 01 December 2019
• Published date: 01 December 2019
• DOI: http://doi.org/10.1002/smj.3082

RESEARCH ARTICLE

Socially advantaged? How social affiliations

influence access to valuable service professional

transactions

Timothy Gubler

1,2

| Ryan Cooper

3

1

School of Business, University of

California, Riverside, California

2

Marriott School of Business, Brigham

Young University, Provo, Utah

3

Robert H. Smith School of Business,

University of Maryland, College Park,

Maryland

Correspondence

Timothy Gubler, Marriott School of

Business, Brigham Young University &

School of Business, University of

California, Riverside, 581 TNRB Marriott

School of Business, Brigham Young

University, Provo, UT 84602, USA.

Email: tim.gubler@byu.edu

Abstract

Research summary:This article theorizes that social capi-

tal produced by social affiliations allows service profes-

sionals to gain access to higher-value transactions through

increased reputation for trustworthiness, which then aids

them in further building reputation and engaging in entre-

preneurship. Using a unique approach that pairs Utah resi-

dential real estate data with church congregation

boundaries, we find that affiliations enable real estate

agents to list 14% more expensive homes, and to conse-

quently build reputation useful for future nonaffiliated

transactions. We observe large reputation-building benefits

for early-career agents, particularly for agents in low-

reputation firms. Strikingly, we find this lowers entrepre-

neurship entry by 6%. These results imply that social affili-

ations can substitute for reputation in selection, enabling

professionals to build reputation, which then has important

career implications.

Managerial summary:This article explores how social

relationships between real estate agents and home sellers

influence the value of transactions agents engage

in. Sellers increasingly trust agents with whom they share

a social affiliation, which allows agents to better secure

high-value listings and build reputation. This benefits

agent in securing future valuable transactions with non-

affiliated clients. Using residential real estate data and

Real estate listing data were provided courtesy of the Wasatch Front Regional Multiple Listing Service (WFRMLS).

WFRMLS has not reviewed or verified any of the numbers or statistics in this article.

Received: 28 February 2018 Revised: 16 July 2019 Accepted: 19 July 2019 Published on: 29 August 2019

DOI: 10.1002/smj.3082

Strat Mgmt J. 2019;40:2287–2314. wileyonlinelibrary.com/journal/smj © 2019 John Wiley & Sons, Ltd. 2287

geographically assigned church congregations, we find

that agents list 14% more expensive homes when listing

for affiliated clients, and that this builds agent reputation

significantly faster than listing for nonaffiliated clients.

Interestingly, we find listing for affiliated clients reduces

future entrepreneurship 6%. Our study suggests that ser-

vice professionals can leverage social affiliations to build

reputation that helps them establish clientele and improve

performance.

KEYWORDS

entrepreneurship, human capital, professional services, reputation,

social capital

1|INTRODUCTION

Transaction volume and value are both crucial to firm performance. In human capital-intensive

industries, such as professional services, providers face challenges increasing transaction volume and

value. Consumers ultimately desire to engage with trustworthy and high-ability providers, yet differ-

entials in expertise between consumers and providers as well as difficulties monitoring and evaluat-

ing provider quality create potential for agency problems. These information asymmetries may even

persist ex post (Darby & Karni, 1973; Dulleck & Kerschbamer, 2006; Dulleck, Kerschbamer, & Sut-

ter, 2011), making evaluation of trustworthiness and ability difficult. Reputation is the most common

way for providers to overcome these challenges, but usually requires several transactions to establish,

and ex post information asymmetries make signals from reputation (or other available proxies) noisy.

In such cases, scholars have found that consumers increasingly rely on social capital to choose trans-

acting partners (DiMaggio & Louch, 1998; Elfenbein & Zenger, 2013; Greif, 1993; Gubler, 2019;

Hoetker, 2005; Yenkey, 2018), as it reduces agency concerns (Adler & Kwon, 2002; Coleman,

1990; Portes, 1998). While strategic theory shows that social capital influences the selection process

in favor of socially connected partners (i.e., increases volume), it remains unclear how it affects the

characteristics of transactions providers engage in—foremost among them transaction value.

In this article, we explore the extent to which the social affiliations of service professionals (which

we define as common memberships between individuals in formal social institutions) impact transac-

tion value, reputation-building, and the decision to enter into entrepreneurship. Our work relates to

and extends previous work on the economic impact of social capital (e.g., Adler & Kwon, 2002;

Ody-Brasier, 2018; Uzzi & Lancaster, 2004; Yenkey, 2018), as well as investigations into the links

between social and human capital (e.g., Byun, Frake, and Agarwal, 2018; Byun, Raffiee, and Ganco

2018; Coleman, 1988; Gubler, 2019; Mawdsley & Somaya, 2016).

1

1

Readers familiar with Gubler (2019) will likely find similarities between this paper and that one. Both deal with the influence

of social affiliations in professional services, but there are key differences. This article focuses on how social affiliations

influence ex ante transaction value, allowing professionals to engage in high-value transactions, which then builds reputation

and influences entry into entrepreneurship. That paper focuses on how social affiliations influence ex post transaction

performance, taking transaction value and characteristics as given, without any implications for reputation or entrepreneurship.

2288 GUBLER AND COOPER