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Does Social Capital Matter in Corporate Decisions? Evidence from Corporate Tax Avoidance ...
Differences Make a Difference: Diversity in Social Learning and Value Creation
Journal of Corporate Finance,
Prior research has demonstrated that CEOs learn privileged information from their social connections. Going beyond the importance of the number of social ties in a CEO's social network, this paper studies the value generated from a diverse social environment. We construct an index of social-network heterogeneity (SNH) that captures the extent to which CEOs are connected to people of different demographic attributes and skill sets. We find that higher CEO SNH leads to greater firm value through the channels of better corporate innovation and diversified M&As. Overall, the evidence suggests that CEOs' exposure to human diversity enhances social learning and creates greater growth opportunities for firms.
Criminal Network Formation and Optimal Detection Policy: The Role of Cascade of Detection
Journal of Economic Behavior & Organization,
This paper investigates the effect of cascade of detection, how detection of a criminal triggers detection of his network neighbors, on criminal network formation. We develop a model in which criminals choose both links and actions. We show that the degree of cascade of detection plays an important role in shaping equilibrium criminal networks. Surprisingly, greater cascade of detection could reduce ex ante social welfare. In particular, we prove that full cascade of detection yields a weakly denser criminal network than that under partial cascade of detection. We further characterize the optimal allocation of the detection resource and demonstrate that it should be highly asymmetric among ex ante identical agents.
Does Social Capital Matter in Corporate Decisions? Evidence from Corporate Tax Avoidance
Journal of Accounting Research,
We investigate whether the levels of social capital in U.S. counties, as captured by strength of civic norms and density of social networks in the counties, are systematically related to tax avoidance activities of corporations with headquarters located in the counties. We find strong negative associations between social capital and corporate tax avoidance, as captured by effective tax rates and book-tax differences. These results are incremental to the effects of local religiosity and firm culture toward socially irresponsible activities. They are robust to using organ donation as an alternative social capital proxy and fixed effect regressions. They extend to aggressive tax avoidance practices. Additionally, we provide corroborating evidence using firms with headquarters relocation that changes the exposure to social capital. We conclude that social capital surrounding corporate headquarters provides environmental influences constraining corporate tax avoidance.
Transferability of Skills across Sectors and Heterogeneous Displacement Costs
American Economic Review: Papers and Proceedings,
We use rich German administrative data to estimate new measures of skill transferability between manufacturing and other sectors. These measures capture the value of workers' human capital when applied in different sectors and are directly related to workers' displacement costs. We estimate these transferability measures using a selection correction model, which addresses workers' endogenous mobility, and a novel selection instrument based on the social network of workers. Our results indicate substantial heterogeneity in how workers can transfer their skills when they move across sectors, which implies heterogeneous displacement costs that depend on the sector to which workers reallocate.
The Structure and Evolution of Inter-sectoral Technological Complementarity in R&D in Germany from 1990 to 2011
Journal of Evolutionary Economics,
Technological complementarity is argued to be a crucial element for effective R&D collaboration. The real structure is, however, still largely unknown. Based on the argument that organizations’ knowledge resources must fit for enabling collective learning and innovation, we use the co-occurrence of firms in collaborative R&D projects in Germany to assess inter-sectoral technological complementarity between 129 sectors. The results are mapped as complementarity space for the Germany economy. The space and its dynamics from 1990 to 2011 are analyzed by means of social network analysis. The results illustrate sectors being complements both from a dyadic and portfolio/network perspective. This latter is important, as complementarities may only become fully effective when integrated in a complete set of different knowledge resources from multiple sectors. The dynamic perspective moreover reveals the shifting demand for knowledge resources among sectors at different time periods.
Social Capital and Migration Preferences - An Empirical Analysis for the Case of the Reunified Germany
Grincoh Working Papers July 2013,
We focus on the relevance of different types of social capital on migration intentions in the context of shrinking regions. On the one hand, formal social capital characterised by weak ties without local roots is supposed to drive selectivity and outmigration. On the other hand, informal social capital stressing strong ties to friends, relatives or neighbours might hinder migration. In our regression results we do not find an effect of shrinking regions on mobility intentions. Thus, living in a shrinking area is by itself not a reason to move away or to invest
less in social capital. However, if an individual considers to move away she reduces her participation in informal and formal networks. Individuals characterised by strong informal ties, i.e. strong relationships to friends, rel atives or neighbours show a significantly lower probability of moving away. And, more qualified types of social capital as participation in local politics or initiatives seem to encourage spatial mobility.