“No man is an island” (Donne, 1624); the same is true for organizations (Merton, 2005). Research on social capital theory (Bian, 1997) has revealed that social ties denote the ability of individuals to access scarce resources through social connections with the external environment (Marsden, 2017). In the context of business research, scholars have defined the social ties of top managers as informal, interpersonal social connections with external actors (Ivy et al., 2018; Van Dijk, 1996; Westphal, 1999). Previous research has reported the value of top managers’ social ties as a primary outcome of social capital, and has examined its antecedent factors, such as personal goals and personality traits (Johnson et al., 2003; Shea & Fitzsimons, 2016).

Scholars have recently begun to realize the importance of top managers’ social ties with respect to economic activities (Jiang et al., 2018; Meyer, 2017), and have paid close attention to the outcomes brought about by these social ties for the corresponding organizations. Some have observed a positive relationship between personal-level social ties and firm-level performance (Ellis, 2011; Ko & McKelvie, 2018; J. J. Li et al., 2009). However, others have stated that the relationship between social ties and performance may be unstable (Zhu et al., 2017). For example, Uzzi (1997) proposed that top managers’ social ties with business actors whose firms are facing failure might negatively affect the performance of those managers’ businesses. Further, J. J. Li et al. (2009) found that when top managers build close ties with government officials, this can decrease firms’ profitability. This raises the question of how microlevel social ties affect macrolevel firm performance.

To address this issue, previous studies investigated the direct impact of social ties on firm performance (Breuer et al., 2013; Van Dijk, 1996). However, social ties are unlikely to convert directly into superior performance (Chahine & Goergen, 2013; Zhu et al., 2017); rather, conversion mechanisms are required for social ties to enhance firm performance. Thus, we examined the mediating role of resource acquisition in the relationship between social ties and firm performance.

Literature Review and Hypotheses

Individuals’ existence in an environment depends on other agents within the environment (Lin, 1999). Such linkages between the focal individual and their partners constitute the social ties in social capital research (Dubos, 2017), and are based on mutual trust, social connection, and value sharing (Tilly, 2015). In the context of business and organization research, managers who have better interpersonal connections with their partners tend to earn more benefits for their firms (Chen et al., 2018; Peng & Luo, 2000). By building ties with their partners, top managers can provide additional potential opportunities for accessing valuable knowledge and resources from outsiders (Batjargal, 2003; Nieto & González-Álvarez, 2016), such as managerial expertise, financial resources, and key information. This resource acquisition is then converted into superior firm performance (Zhang et al., 2010).

Top managers’ connections with their partners facilitate resource acquisition in various ways. First, top managers’ close ties with their partners facilitate resource exchange, including managerial expertise and other information (Weng et al., 2018), because these ties generate mutual trust and norms of reciprocity (Dickinson et al., 2017). These resources are important because they inform a firm of changing customer preferences and updated technology, which helps to attenuate the risks introduced by market unpredictability (Weng et al., 2018). Furthermore, managerial expertise acquired from outsiders can help firms improve their internal technical capabilities and management routines (Dutta, 2008).

Second, top managers’ close ties with their partners facilitate financial resource acquisition from outsiders (Florin et al., 2003). Close ties may help the focal firm to enhance its reputation and prestige, and to establish a reputation for reliability in the marketplace. This, in turn, can increase the availability of resources, such as financial support. For example, having close ties with government officials may help firms obtain subsidies from the government, and having close ties with investors may help firms access economic resources (Ferris et al., 2017).

We anticipated that resource acquisition would mediate the relationship between a top manager’s social ties and their firm’s performance. As noted above, building ties with partners can offer additional opportunities for accessing valuable knowledge and resources (Meyer, 2017). For example, having close ties with government officials may help top managers obtain policy support while settling negotiations, which is beneficial with respect to firm performance (H. Li & Zhang, 2007). Further, having a close relationship with suppliers will provide top managers with effective supply expertise and quality materials and services (Chen et al., 2018). Finally, developing a close relationship with customers may allow top managers to obtain greater customer loyalty and valuable market demand information for their firm (Heirati & O’Cass, 2016). Resource acquisition drives organizational performance by providing firms with the tangible and intangible support of resources (Sirmon et al., 2007); thus, acquiring external resources serves to improve firm performance.

In sum, we have provided a basis for the linkages between the microlevel social ties of top managers and macrolevel organizational performance. Thus, we proposed the following hypotheses:
Hypothesis 1: The social ties of top managers will be positively related to resource acquisition.
Hypothesis 2: The social ties of top managers will be positively related to firm performance.
Hypothesis 3: Resource acquisition will be positively related to firm performance.
Hypothesis 4: Resource acquisition will mediate the relationship between top managers’ social ties and firm performance.

Method

Participants and Procedure

Questionnaire Design
We formulated the questionnaire on the grounds of existing research, then conducted several pilot-scale surveys and in-depth interviews to examine the rationality and suitability of the items and constructs. We modified the means of expression according to feedback from the survey and in-depth interviews, to ensure that the respondents fully understood the meaning of each item.

Data Collection
We collected data using random sampling. We interviewed top managers from small- and medium-sized enterprises (SMEs) across several cities in China, and invited senior managers of these SMEs to fill out the questionnaire. Data were collected in two ways: on-site interviews and email invitations. For the on-site interviews, after obtaining the consent of the surveyed companies, we invited the top management of the company to fill out the questionnaire. For the email invitations, we contacted the targeted firms through telephone, introduced the purpose of the survey and after receiving consent of the other party, sent questionnaires using email links, which were accompanied by online interviews. Participants provided informed consent before taking part in the study.

We communicated with each respondent in a timely manner to ensure that they fully understood the meaning of the items. The time span of the survey was from April to December 2019. Of the 1,350 surveys we distributed, 689 were returned and 253 were valid (effective rate of return = 18.7%).

Participants
The participants consisted of 143 men (56.3%) and 110 women (43.5%) who were top managers of SMEs. Regarding level of education, 14 had completed senior high school or had a lower level of education (5.5%), 49 had graduated from junior college (19.4%), 142 held a bachelor’s degree (56.1%), 45 held a master’s degree, and three held a doctoral degree (1.2%). With respect to age, 13 were aged under 30 years (5.1%), 173 were aged between 31 and 40 (58.4%), 53 were aged between 41 and 50 (20.9%), and 14 were aged between 50 and 60 (5.5%).

Measures

All scales were translated from English into Chinese by using back-translation to ensure content validity. We conducted multiple rounds of translations to ensure the consistency of the connotations of Chinese and English concepts. Items were rated on a 5-point Likert scale ranging from 1 = strongly disagree to 5 = strongly agree.

Social Ties
Social ties were measured using six items adopted from Acquaah (2007). We asked whether the top managers had established close relationships with customers, suppliers, competitors, investors, leaders in industrial bureaus, and officials in regulatory and supporting organizations. Cronbach’s alpha was .94 in this study.

Resource Acquisition
Resource acquisition was measured using four items developed from Sirmon and Hitt (2003). We assessed whether the managers had acquired advanced technologies, managerial expertise, financial resources, and key information from outside their own organization. Cronbach’s alpha was .86 in this study.

Firm Performance
Firm performance was measured using four items from H. Li and Zhang (2007). We asked about the growth rate of total sales, return on investment, return on assets, and market share of the firms at which the top managers worked. Cronbach’s alpha was .91 in this study.

Control Variables
We controlled for top managers’ gender, level of education, and age because these traits may affect the relationships between social ties, resource acquisition, and firm performance. Dummy coding was used for these variables: gender was coded as 0 = woman, 1 = man; level of education was coded as 1 = below bachelor’s degree, 1 = bachelor’s degree, 3 = master’s degree, 4 = doctoral degree; and age was coded as 1 = under 30 years, 2 = 31–40 years, 3 = 41–50 years, 4 = over 50 years.

Results

Common Method Variance

Because we collected data on the three focal constructs using the same survey, we carried out Harman’s single-factor test to assess the likelihood of common method variance affecting our results. A principal component analysis resulted in three different components explaining 76.09% of the variance, where the first component explained only 31.86%. Thus, common method variance was not a threat to the validity of this study.

Construct Validity

We conducted a confirmatory factor analysis to assess the reliability and validity of the measures. The three-factor measurement model (social ties, resource acquisition, and firm performance) had a satisfactory fit to the data, chi-square/degrees of freedom ratio = 2.72, root mean square error of approximation = .083, goodness-of-fit index = .96, Tucker–Lewis index = .94, confirmatory fit index = .95. Thus, the measures demonstrated adequate reliability and convergent validity. According to the chi-square difference tests for all paired constructs, the three-factor model fit the data significantly better than did either the two-factor or one-factor models, indicating satisfactory discriminant validity.

Descriptive Statistics and Correlation Coefficients

We examined the descriptive statistics and discriminant validity of the study variables, as well as the fit of the entire model. Means, standard deviations, and correlations for the variables are presented in Table 1, where it can be seen that the square roots of average variance extracted for each construct were all greater than each of the off-diagonal elements in the corresponding rows and columns. This implies that the three variables of social ties, resource acquisition, and firm performance could be discriminated from each other.

Hypothesis Testing

We used structural equation modeling to examine our hypotheses. As described above, the fit indices we assessed show that the proposed model provided a very good fit to the data. Next, we tested for the significance of the mediating effect in the hypothesized model by using the bootstrapping estimation procedure in Amos 22.0 (5,000 replications).

Table 2 shows the total, direct, and indirect effects of each path of the structural equation model. There were significant positive relationships between social ties and firm performance, between social ties and resource acquisition, and between resource acquisition and firm performance, and the 95% confidence intervals for these effects did not include zero; thus, Hypotheses 1, 2, and 3 were supported.

Further, resource acquisition had a significant positive mediating effect in the relationship between social ties and firm performance, with a 95% confidence interval that did not include zero, whereas the direct path between social ties and firm performance was nonsignificant; thus, Hypothesis 4 was also supported.

To further explain the effect of top managers’ social ties on firm performance and the mediating effect of resource acquisition in this relationship, we have illustrated the coefficients of each path in Figure 1.

Discussion

We integrated the linkages between microlevel social ties and macrolevel firm performance, and examined resource acquisition as a mediating mechanism of how such connections are built. Our results show that social ties facilitated resource acquisition and then promoted firm performance.

This study has important theoretical implications. First, our findings contribute to the literature by explaining how resource acquisition transforms microlevel social ties into macrolevel firm performance. Second, the findings support previous research assumptions that top managers need to form social connections with other actors for the purpose of resource acquisition (Peng & Luo, 2000), such as tangible financial and technical resources, intangible reputation, and information. These resources, in turn, help to improve firm performance.

Our findings also have practical implications. First, top managers should pay attention to both tie building and resource acquisition, which are two key elements in performance improvement. For example, they could build close relationships with supplier executives who can provide them with effective information and quality materials and services. Further, they could build close relationships with customer executives, who may have access to highly loyal customers and valuable market demand information.

This study has certain limitations. First, the use of a cross-sectional research design precludes explanation of the causal relationships between social ties, resource acquisition, and firm performance (Solem, 2015). Future researchers could use longitudinal methods to confirm the causal inference. Second, we focused on the mediating role of resource acquisition in the relationship between social ties and firm performance. However, social ties may have other purposes, such as legitimation, which may also mediate the link between social ties and firm performance. We recommend that future researchers examine these other mediators instead of resource acquisition. Finally, our sample was concentrated mainly in China, which limits the generalizability of our findings. We encourage future studies to expand the research context, such as sampling from other countries and regions, to expand the generalizability of findings regarding microlevel and macrolevel linkages.

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This work was funded by the National Natural Science Foundation of China (71772027

72002094)

and the Humanities and Social Science Fund of the Ministry of Education of China (20YJC630020).

Yunqing Liu, School of Management and Economics, University of Electronic Science and Technology of China, No. 2006 Xiyuan Ave., West Hi-Tech Zone, 611731 Chengdu, Sichuan, People’s Republic of China. Email: [email protected]