Abstract
This study provides support for the argument that the underlying properties of the customer set of firms affiliated with financial intermediaries impact the performance of the affiliated firms as well as of the financial intermediaries. I provide empirical evidence that shows that structural properties of the customer set give rise to information-mediated networks effects which in turn impact firm performance. Those properties are shown to determine the availability of pertinent information affecting participation value of affiliated organizations and the organizing value of collectives. I study the impact of the properties of customer sets, conceptualized as affiliation networks, on three essential performance indicators: the cost of debt capital, the availability of debt capital and the survival probability of small and medium size enterprises. In the absence of financial slack resources, the amount of capital available for the disposition of entrepreneurs, its cost and its provider’s willingness and ability to assist in crisis periods are crucial factors determining success and growth of entrepreneurial projects (Petersen & Rajan, 1994). Similarly, in the absence of full customer related information, the properties of the affiliation network impact information availability and in turn bank performance. Hence, I also examine the performance of collectives by evaluating the impact of the network of affiliated firms on bank solvency and survival.
There is a growing interest in studying mediating organizations, like financial intermediaries, insurance companies, employment agencies, telecommunication corporations and postal services. Mediating organizations link clients or customers who are or wish to be interdependent (Thompson, 1967). Mediating organizations create value by organizing collectives. Notwithstanding that the modern economy would be very much diminished without the transportation, communication, information, and railroad networks (Economides, 1996), business research has been primarily focused on developing our understanding of organizations that employ two other value creating technologies, (namely, organizations that employ the long-linked technology, i.e. manufacturing firms (e.g. Porter, 1980, 1985) and organizations that employ the intensive technology i.e. knowledge intensive firms (e.g. Hansen, 1999; Nonaka & Takeuchi, 1995)).
Addressing this imbalance in academic attention and building upon Thompson’s (1967) typology of technologies and Stabell and Fjeldstad’s (1998) challenge of the universal applicability of Porter’s value chain and the their advancement of the value network, I advance hypotheses that link between the properties of affiliation networks and the performance of the affiliated firms as well as the performance of actors which organize collectives. The hypotheses are tested using about 1000 small and medium size Norwegian firms, about 1500 inter-organizational relationships and about 100 Italian small and medium size firms. The representative, cross-national and large-scale samples enhance the generalizibility potential of the findings to other economies as well as other mediating organizations.
Entrepreneurs face affiliation decisions with mediators and managers of mediating organizations face the challenges of customer selection and of organizational alignment in building their virtual networks of affiliated customers. The established relationship between the properties of affiliation networks and affiliated firms and mediator performance has direct implications for those managerial challenges. |