The Conditional Nature of Embeddedness: A Study of Borrowing by Large U.S. Firms, 1973-1994.

Economic and organizational sociologists have increasingly demonstrated that the actions of individuals and firms are affected by the social networks within which they are embedded. In recent years scholars have begun to recognize that the effects of these social networks may vary across populations or types of relations. In this paper we examine the extent to which the effects of interfirm networks on the behavior of firms is historically contingent. Focusing on the level of debt financing among approximately 140 large U.S. corporations over a 21-year period, we show that from the early 1970s through 1987, firms? behavior was strongly influenced by the behavior of those with which they were closely tied through director interlocks. After 1987, however, the effect of network closeness on borrowing largely disappeared. We argue that the decline in the network effect reflected a shift in conceptions within the corporate community about how best to identify and justify an appropriate course of economic action. We conclude that corporate financing is socially embedded, but this embeddedness is historically contingent. [ABSTRACT FROM AUTHOR]