The effects of CEOs' social networks on organizational performance through knowledge and strategic flexibility

Abstract

Purpose This study seeks to analyze theoretically and empirically how different intermediate strategic variables related to knowledge (combinative capabilities and absorptive capacity) and strategic flexibility influence the relation between CEOs' social networks and organizational performance. To date, very little research has analyzed the direct and indirect relationships between these variables. Design/methodology/approach Based on the literature, a theoretical model is developed that shows the interrelations between these variables. The methodology used was LISREL analysis. The model is then tested using data from 203 Spanish organizations. Findings This investigation shows the influence of CEOs' social networks (larger networks with strong ties) and capabilities (combinative capabilities and absorptive capacity) on the level of strategic flexibility. It then shows the influence of their strategic flexibility level on organizational performance. It adds theoretical and empirical arguments to the importance of CEOs' social networks for the organization. Originality/value Today's information and knowledge society requires new CEOs who can confront a reality based on knowledge and foster strategic flexibility to achieve improvements in organizational performance. However, organizations sometimes fail to achieve sustainable competitive advantage due to their limited understanding of the relationships between these strategic variables. This paper develops a complete framework of the capturing of knowledge and information from outside the organization performed by CEOs and the process they use to assimilate, transform and use this knowledge in the organization.