Market Networks and Corporate Behavior

TLDR

Corporate market interfaces range from exclusive long‑term ties to short‑lived transactional ties and are conceptualized as firms’ efforts to reduce dependence and exploit power advantages. The study uses data on market relations between a large population of corporations and investment banks to examine the pattern of direct market ties between firms and their banks. The analysis shows that strong relationships persist, transaction interfaces are rare, most firms employ hybrid interfaces, and interface patterns systematically relate to power‑dependence factors such as resource intensity, criticality, power asymmetry, organization size, exchange standardization, and tandem strategies.

Abstract

Data on market relations between a large population of corporations and investment banks are used to study the organization-market interforce-the pattern of direct market ties between a firm and its banks. Forms of interfaces range from a long-term, exclusive tie (the relationship interface) to many short-lived, episodic ties (the transaction interface), with hybrid forms between the two poles. Contrary to widespread belief, the article finds that strong relationships still exist. Transactions interfaces are rare. Most firms use hybrid interfaces. A firm's interface is conceptualized as the intentional result of its efforts to reduce dependence and exploit power advantages. Observed interfaces are shown to be related systematically to various power-dependence concepts, including resource intensity (number of transactions and dollar amounts raised), criticality (the availability of resource alternatives), power asymmetry between a firm and its main bank, organization size, standardization of exchange, and the use of tandem strategies (director interlocks).