Stay or Go? It May Be Who You Know

Executives at failing companies are embedded in a myriad of networks that come into play when they leave a job. Earlier studies on these networks have looked at leaders forced out, but management and organizations assistant professor Han Jiang recently led a team of researchers into the unexplored scenario of executives who “jump ship,” leaving a company as it fails.

Jiang looked at three variables: executive social capital, defined as ties with external stakeholders; peer social capital, defined as personal connections to other high-level leaders; and alliance networks, referring

to collaborative relationships between a firm and its partners. He found that executives with low or high levels of executive social capital were most likely to leave a failing company, while those with moderate levels were more likely to stick it out. The study also showed that higher levels of peer social capital and more robust alliance networks were correlated with less ship-jumping.

Jiang pointed to a number of factors that could explain the patterns. For example, high executive social capital likely means more job opportunities on an executive’s radar, making it easier for one to leave a failing company. At the same time, stigma can be a barrier

to leaving – one with less effect on those with low executive social capital. Those in the middle – those with something to lose but fewer opportunities – are most motivated to try to save their failing companies.

Other factors are likely at play when it comes to network alliances, Jiang suggested. Strong alliance networks can sometimes help firms turn around. They can secure social support to deal with external uncertainties and provide access to resources and support from their own partners at relatively low cost. In other words, the stronger a company’s alliances, the more reasonable for an executive to believe he or she can get it back on its feet, and, it follows, the less motivation to exit.

practical implications his research brings to light. Declining firms should pay attention to their leaders’ executive social capital, knowing that those with high levels are more likely to leave if things go south. He noted that leadership research tends to see high levels of executive social capital as a significant boon to a company. In fact, it may be a double-edged sword. “Thinking of executive social capital as a firm-level resource,” he said, “is a mistake at worst, and incomplete at best.” – Eric Van Meter