Bermiss & Greenbaum (2015). Loyal to Whom? The Effect of Relational Embededdness and Managers’ Mobility on Market Tie Dissolution

Authors:

Y. Sekou Bermiss – University of Texas at Austin

Bruce E. Greenbaum – Cal Poly San Luis Obispo

Interviewers:

Paola Zappa – Maynooth University

Alberto Monti – Bocconi University

Article link: http://journals.sagepub.com/doi/abs/10.1177/0001839215619198

Question 1. In your article, the departure of an exchange manager to a rival firm leads the clients to break the tie with the manager or with his/her former firm, which are treated as alternative options. Yet, you suggest that in some circumstances the clients can break or maintain either tie. Could you elaborate a little more on this point? When would you expect the clients to break or maintain either tie? What challenges would the exchange manager in the new firm and his/her former firm face when they share the same clients?

In the professional services context, a client may have a broad relationship with its service provider. For example a client may use their law firm may provide corporate, criminal defense and trust and estate services; or their advertising firm to provide print, broadcast, internet advertising services as well as public relations and crisis management services. When the relationship between a client and provider is multiplex it can often withstand the departure of an exchange manager (see recent article by Michelle Rogan on this topic). As we show in our paper, some relationship characteristics appear to influence a client’s decision to end a relationship with a departing exchange manager. In the increasingly complex environment of professional services, an exchange manager may possess specific content knowledge that cannot be easily replicated by another exchange manager – which could make terminating the relationship more difficult for the client.

Sharing clients between the two firms (new and former) may indeed be challenging for all parties involved. The guiding hypothesis for our investigation was that, in general, most clients were likely to choose the firm over the departing individual. However, it may be a little easier for clients to split their business when the two firms service distinct aspects of the shared client’s business. Within the lobbying context, for example, lobbyists specialize in particular legislative areas such as environmental regulation and food safety or have relationships to particular politicians. In these cases, the two firms may be able to continue relationships with the client to the extent that their services do not overlap.

Question 2. You argue that the clients’ propensity to remain at a firm, when the exchange manager leaves to a rival firm, can be moderated by some aspects of the manager-client relationship. Natural extensions of this reasoning could consist in accounting for the rival firm as well as for potential changes within the client’s firm. Would you expect the characteristics of the rival firm – e.g., firm’s power, prestige, etc. – to affect the likelihood of the exchange manager losing the clients? Would you expect a change in the top management of the client’s firm to affect the likelihood of both the firm and the manager losing the clients?

We agree with the notion that there are aspects of the rival firm that could attract potential clients and/or affect the existing relationships between clients and relationship managers. In the lobbying setting, the characteristics of the rival firm (including the addition of new, high-powered lobbyists; rise of specific issues that are at the heart of the rival firm’s capabilities) could certainly attract new clients. It is worth noting that the characteristic of the rival firm that is most appealing for clients is often the individuals that are employed at the rival firm. In the paper, we highlight the example of the conflict between two lobbying firms in our sample, HillCo and Focused Advocacy, when two prominent lobbyists left the former for the latter. Clients that left HillCo for Focused Advocacy went on record saying that they did so in order to continue their relationship with the two prominent departing lobbyists.

We would also expect changes in the client’s top management team to place all firm relationships under increased scrutiny. New leadership often brings new strategic priorities and a thorough review of existing exchange relationships. Joe Broschak and Emily Block published an insightful paper comparing the exit of individuals on both sides of the exchange tie. They found that the exit of a client manager/executive has a much stronger effect on the likelihood of market tie dissolution than the exit of an agency manager/executive. They theorize that this is due to the power differences between buyers and sellers in the professional services market. Our analysis also finds support for the combination of power and embeddedness logics to fully explain exchange relationship dynamics.

Question 3. Part of what makes your paper so brilliant is the combination between the identification of a clear gap in the literature and the choice of an empirical setting to which the dynamics you describe can be easily related. Could you tell us what the starting point of the paper was? Were you more inspired by the literature, by observing lobbyists at work or by other elements?

We thank you for that wonderful compliment! We both came to this project with a deep interest in professional services. Dr. Bermiss studied professional services as part of his dissertation work and other subsequent research, and both of us have extensive professional work experience in a variety of professional services settings, including technology consulting, management consulting, and investment banking. These prior experiences in research and practice within the professional services context provided a strong interest for us to gain a deeper understanding of the “inner workings” of the relationships established in this market.

We started our discussions regarding this project from a position of deep interest in the broader context of how relationships form and dissolve. One of the central reoccurring questions within professional services is how to assess the strategic value of individuals in the firm as compared to the value of the collective firm. The constant movement of workers between firms in the professional service sector means that firms, individuals, and clients are continually trying to assess the central source of value within the firm. Through our discussion, we kept coming back to the paradox that strongly embedded exchange manager-client ties are both stabilizing and destabilizing force for market ties. We wanted to try and investigate this paradox and see if we could uncover some systematic patterns. We both had interest in the lobbying industry because it was an underexplored yet tremendously influential industry within professional services sector. More importantly, the reporting requirements for lobbyists provided meaningful and rich data about the work that individual exchange managers do for their clients that is unavailable in the contexts of previous research (e.g., banking, law, and advertising).

Question 4. Your article tells an interesting story about the process of article’s framing and reviewing. You developed hypotheses to test the influence of managers’ social embeddedness on the dissolution of inter-organizational ties and used the partial rejection of these hypotheses to build an alternative theory, based mostly on resource dependence and power. Rejection of crucial hypotheses is not unusual, yet it could discourage young scholars and refrain them from developing the paper further. How did you approach the unexpected results? How did they affect the crafting of your paper? In your opinion, did this structure of the paper affect the R&R process? Did you have to face particular challenges?

When the results didn’t go as expected, we did three things that helped us continue to develop the paper. The first natural step was to re-examine the data. We wanted to see if there was any peculiar about the setting or if we missed anything. Second, we revisited our theory to see if we had misinterpreted arguments in previous papers on this topic. We poured back over the embeddedness literature from the work of Macaulay and Granovetter work in the 1960s-1970s all the way to the present research. Third, we talked with practitioners. We had the benefit of being located in the Texas state capital, which provided many opportunities to speak with practicing lobbyists within our sample. They provided us with useful contextual and anecdotal insights. Once we were sure that our results were robust and that our measures properly reflected industry reality, we decided to keep the paper with the rejected hypotheses. We didn’t think of it as a “failure” for the paper, but as a challenge to refine some of the generally accepted predictions about how embeddedness operates in markets.

The ASQ review process was encouraging for us. There was not much critique about the paper’s structure. The reviewers were primarily concerned about the same things that we were; that the empirical results were robust and that the alternative explanations for our results were properly addressed. Our editor (Jerry Davis) supported our forthrightness in reporting null and contradictory results, but he pushed us to formulate an interpretation of these findings as a basis for future work. Perhaps this constituted as a particular challenge, but it helped us to greatly improve the paper. We discovered how our results aligned with previous research on power imbalance within market ties. Our findings also aligned with several comments from lobbyists who told us that some behaviors that might appear to signal an embedded relationship (i.e. lobbyist spending a majority of their time with one client) are often the result of coercion from powerful clients.

Question 5. Given the richness and uniqueness of your dataset and research setting, what would be the primary follow-up research questions? If you were to advise young scholars who were fascinated by this paper and wanted to do a follow-up study, what would be your suggestions? What would be an alternative empirical setting?

One of the primary follow-up research questions we are interested in exploring is to investigate how the characteristics of the market relationships itself (i.e., the issues that the clients have hired the lobbyists to work on their behalf) affect tie preservation/dissolution. Are firms, for example, drawn to employ lobbyists on a one-time basis for specific issues, rather than develop deeper (and longer) relationships to address specific, or multiple, issues?

For young scholars (a group with which at least one of us still identifies!), it could be very interesting to explore market exchange relationships in greater depth through qualitative studies. Multiple case studies delving into the relationships between exchange managers and their clients could provide rich theoretical insights into the drives of market tie formation, preservation and dissolution. There are a variety of other settings that could be useful for this type of research – beyond the lobbying context – including financial analysts, and real estate agents. Alternatively, someone could seek another lobbying context to examine similar relationship dynamics to our study. For example, there is a forthcoming paper by Joe Raffiee which investigates similar questions at the federal lobbying level.

Lastly, for scholars interested in resource dependence and power in markets, there are a variety of potential research questions that could be pursued. Are there specific resources held by exchange partners that are particularly relevant to preserving or dissolving relationships? How does power shifts between relationship partners over time impact market tie relationships? We look forward to engaging in these research conversations in the future!

 

References:

Broschak, J. P., & Block, E. S. (2014). With or Without You: When Does Managerial Exit Matter for the Dissolution of Dyadic Market Ties? Academy of Management Journal, 57(3) 743–765

Casciaro, T., & Piskorski, M. J. (2005). Power Imbalance, Mutual Dependence, and Constraint Absorption: A Closer Look at Resource Dependence Theory. Administrative Science Quarterly, 50(2), 167–199.

Raffiee, J. (2017), Employee Mobility and Interfirm Relationship Transfer: Evidence from the Mobility and Client Attachments of United States Federal Lobbyists, 1998–2014. Strategic Management Journal, 38: 2019–2040. doi:10.1002/smj.2634

Rogan, M. (2014), Executive Departures Without Client Losses: The Role of Multiplex Ties in Exchange Partner Retention. Academy of Management Journal, 57(2), 563–584.

 

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