Exploring the antecedents of social liabilities in CVC triads—A dynamic social

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importanttodevelopatleastsomedegreeofsharedunderstandingandcommonideasofwhatwasnowcoming,whichalsomeantmovementfromourside.Oncewegotthatclear,andthatisthehardestpartifyouaskme,wewereoffandrunningveryquickly....Wechangedtheoldstructurestomakethemsounderandbroughtthem[thePCs]togetherwithourproductionandsalespeople.(CVC9)

Intriadswithlittleornorelevantknowledgetransfer,however,thepartiesnevercametoapproacheachother'slanguagecodes,meanings,ormotives,soeachactorpresumedthattheotherwasinterestedmostlyinmaximizinghisownbene?t.Someintervieweestoldofinterestdisparitiesthathadimmediatelydampenedthedesireforknowledgetransfer,cooperation,orasharedvision—virtuallyprecludingthem.“Itisaprofessionalrelationship.Wedoourjob,theydotheirs.Wehaveourinterests,theyhavetheirs”(PC3).“Theyarenotourfriends,theyareourinvestors”(PC9).Attheextreme,thesecognitivedifferencesescalatedintoseeminglyunbridgeableculturalabysses.“Wetreatedeachotherlikestrangerstheentiretimebecausehecamefromaworldthatwasreallyforeigntome,andIwasfromaworldthatwasreallyforeigntohim”(CVC11).Mutualgiveandtakewasnonexistentinthesetriads.“Thosepeopleargueverystubbornlyfromtheirtechnicalperspective.Wewereunabletobringinadifferentviewpointonceinawhilesothattheycouldoccasionallyseethemarket”(CVC9).

Someofthetriadsmanagedtoenlargetheirinitialnetworkcon?guration,toproactivelyusethenetworksthattheinvestmentcontracthadpotentiallyopenedtothem,andtostrengthenexistingrelationships.Theywereabletochange,dissolve,orreplaceengrainedcognitivepatternsandtoestablishnewrelationshipsindifferentareasofinterest.Othertriadswerelesssuccessful.Inadditiontomarketsthathadcollapsedandprototypesthathadfailed,thecausesoftheseoutcomesrangedfromtheabortivetransformationoftheinitialsocialcapitalthathadexistedinthepreinvestmentphasetothechangesinthebasicconditionsinthepostinvestmentphase.Rootedpartlyinthecomplexityandinterrelatednessofthedimensionsofsocialcapital,thesedif?cultiesinthetransformationprocessturnedintolock-insandsocialliability.

5.2.4.Structuralandpersonallock-insandsocialliability

Structuralandpersonallock-insarepartlyinterrelatedandinterdependent.Intheinterestsoftheory-building,weanalyzebothtypesandtheirrelationtosocialliabilityseparately.

5.2.4.1.Structurallock-in.Strategicmis?t.Ifafaultydecisiontoinvestwasmadeinthepreinvestmentphase,speci?cstructuralcharacteristicsofactors'socialcapital(potentialaccesstothepartners'network)couldcoincidewithspeci?ccognitivecharacteristics(e.g.,insuf?cientlyheededinterestdisparityorabsenceofasharedvision).Suchaconjunctionconstrainedtheactors'possibilitiesofexploitingthetheoreticallyfruitfulcon?gurationofnewexternalties.ItthushinderedthebuildingofsocialcapitalbecausetheBU'sknowledgeandresourcesthatwerenowavailablethroughthenewtiesfailedtomatchthePC'sresourceneedsandinterests.Werefertothissituationasstrategicmis?t.Forinstance,onePCreportedassurancesandpromisesmadebytheCVCinthenegotiationforsharesduringthepreinvestmentphase.Thesecommitmentsconcernedthepotentialcomplementaritiesthatwouldfacilitateknowledge,contacts,andotherresources.TheseresourceseventuallyprovedtohavelittleornovaluetothePC.

Inretrospectwehitcheduptothewrongpartner.ThereasontheycouldnotopenanydoorsforuswasthataCVCwithoutstrongpresenceinaparticulartargetgroupisnotabletoopendoorsforyouinthatmarket.Itsimplydidn'tmatch.Ishouldhaverecognizedthat.(PC5)

TheproblemwasthattheiralignmentwithouroperativebusinesswasnotsoclosethatIwouldsayitwasaclearcaseofsynergyorstrategic?t....Wecansaytodaythatoneofthereasonsforthisunsuccessfulenterprisewastheirinabilitytoutilizethevaluewehadtoofferthemasastrategicinvestor.Theycouldn'tbuildonanynetworksorthelike.(CVC7)

Thiscombinationofthesocialcapital'sstructuralandcognitivecharacteristicsconstrainedthePC'slegalshort-termoptionstodissolvethenetworktieswiththenetworkpartnerinexchangeforanewonewithpotentiallyhighercompatibility.Suchactionwasusuallyprecludedbytheinvestmentcontract,towhichbothpartieswerebound(structurallock-in)unlesstheymutuallyagreedtoitsdissolution.AsoneCVCinvestmentmanagerreported,

Thecompanyhasnothingtodowithourcoreactivities....Nowtheywantustoexit.Theyeventhreatentotakelegalactionifwedonotdecidetoexittheinvestmentandgivethembackalltheirsharesandrights.Theyessentiallywanttoexpropriateusbywithdrawingourshares.Butwedonotwanttoexit.Thecompanyis?nanciallypromising.(CVC9)

Therelationshipthatwassupposedtocreatesocialcapitalturnedintoasocialliability.

Strategicreorientation.Eitherparty'sstrategicreorientationinthepostinvestmentphasewasusuallyinitiatedbytheBU(thecorporation).Itwasacon?uenceofchangingcognitivecharacteristicsofsocialcapital(e.g.,avisionshiftingbecauseofmarketconditions)andrelatedstructuralcharacteristics.Thischangingconstellationconstitutedstructurallock-in,foritconstrainedtheactors'possibilitiesofcontinuingtobene?tfromtheexistingexternalnetworktieswhosesocialcapitalwassovaluable.ForthePCthislock-inmeantthattheoftenhard-wonaccesstotheBU'snetworkwasclosedbecausetheBU,afteritsreorientation,considerednewnetworktiesmoreimportant.Thisrealignment,whichentailedasigni?cantlossoftrust,usuallymeanttheendofcooperationorevenofthePC'soperationswiththeBU.

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Ourrelationshiphasnowdeterioratedtotheextentthatwesay,‘Wenolongerwantanythingtodowithyou’.Thereissimplynobasisleftforcontinuingourcooperation.(PC9)

WhenaBUchangesitsstrategy,thenthis[thePC]iscompletelychoppedoff.Itnolongerexists.Andthenthey[theCVC]havetheonlycontacttothecompany.Thishashappened....Wedidn'tmakeanyeffortafterthat.Tosomeextentwedidn'teventakeontheobserverroleoranythingsimilar.Wereallyjustlookedtoguardourinterestsordilutetheequity.(CVC10)

Aswiththestrategicmis?t,theinvestmentcontractbetweenCVCunitandPCconstrainedthePC'slegaloptionsandcompetencetoreactimmediatelytothestrategicreorientation,dissolvethehenceforthmeritlessties,andenterintocomparablenewones.“Theproblemwasthatwewereunabletobringinasuitablecorporateinvestorsoquickly.Ourcontracthadaclausethattemporarilyprohibiteddealingwith[theBU's]directcompetitors”(PC5).

Tosummarize,someofthePCsbecameensnaredinastructurallock-inbecauseofstrategicmis?torreorientation.Thisoutcomeillustratedthefragilityofthetriadicstructuralcon?gurationsthatdidnotalwayshelpbuildsocialcapitalasintended;theysometimesledinsteadtosocialliabilityandtherewithhinderedknowledgetransferandlearningtooccur,.

5.2.4.2.Personallock-in.Unlikestructurallock-in,whichtookplaceattheorganizationallevel,personallock-inwaspredominantlydrivenbyindividuals.

Changeofrelevantactors.Actorsinatriadwoundupchangingtheirroles.MostlytheCVCmanagerswitchedtoanindependentventurecapitalistortoaPCbecauseofitsmoreattractiveremunerationormoreenterprisingcorporateculture.ChangesinthePC'smanagementwereusuallyinitiatedbytheinvestors,oftenasaconsequenceofastrategicreorientation.ChangesinBUswereusuallytriggeredbythenormal?uctuationwithincorporations.“Suchachangeintherelevantgroupsofactorshasanimpactonsharedcommunicationandinteractionpracticesdevelopedovertimeandonrelationshipsoftrustsubsequentlyestablished”(CVC8).

Werevealedaloss,replacement,orsuddenalterationofparticularstructuralcharacteristicsoftheactors'socialcapital(intensityandfrequencyofrelationshipswithkeyactors).Thesekindsofchangescoincidedwithalterationsinspeci?crelationalcharacteristicsofactors'socialcapital(leveloftrustbetweenindividualsinchangingconstellations)andinspeci?ccognitivecharacteristics(changingdegreeofsimilarityinactors'visionandcognitiveschemes).Theconcurrenceofthesestructural,relational,andcognitivedimensionsoftheactors'socialcapitalconstrainedactors'optionstoexploitthehithertofruitfulcon?gurationofexistingtiesandreducedtheirmotivationtoinvestinbuildingtiesfromscratchwithnewactors.

Ihaveseenportfoliocompanieshavingsufferedasaresultofsuchchanges.Asaninvestmentprofessional,youhaven'tpersonallymadethedeal,sothemotivationtopushthingsalongislowerthanwiththeotherportfoliocompanies,inwhichyouhavepersonallyinvestedthemoneyandyourownheadisontheline.(CVC4)

Thealteredcharacteristicsofsocialcapitaltherebycompromisedtheeffectivenessofthetriadandreducedsocialcapital.Indeed,socialcapitalcouldevenleadtosocialliabilityifthenewkeyactorwereunwillingorunabletoreplacetheexchangedkeyplayeradequately.Asaresult,thelikelihoodofknowledgetransferandthegenerationofinnovationwouldwane.

Theworstiswhentheactorschange.TheBUcanbetotallysatis?ed.NowtheCVCmanagerhandsthingsovertosomeone,andanimmenseamountgoesdownthetubes.[Thatis]becauseit'sdrivenbypeopleandrelationsthathadbeenbuiltup—ahistory—andthehistorycan'tsimplybehandedover.(CVC10)

ThelossofthetrustedpartnergenerallyalsomeantthelossofthePC'smentororpromoterwithinthecorporation.ThatmentorwasthepersonwhocarefullyshepherdedandnurturedthePCoutofasenseofpersonalcommitmentandpotentialeconomicgain.

Mr.F.didpushitandsaid:“Thesearemypeople,thisismybaby.”[Itwas]averypersonalandtrustingrelationship.Whenheleft,wefoundnocommongroundwithhissuccessor.Hefeltthatmanythingswerewrongattheverycoreanddidnotengageasmuchashispredecessorhad,sothedoortothecorporationwaseffectivelyshut.(PC11)

SucheffectsseemedtobelessharmfulwhenthePChadalreadyhadthechancetobuilditsownnetworkinsidethecorporation.ThisbufferingwasparticularlyevidentwhenthePCmanagedtoestablishstrongandfruitfultieswiththerelevantBU(s)andtherebymitigatetheinitialdependenceontheCVCunit.ThePCscouldpartlyreduceitbybringinginseveralinvestorsrightfromtheoutsetoffundingorbyforgingcontractualtieswithspeci?cpersons.

Inoursecondroundof?nancing,Inowfocusonwhoistakingcareoftheportfoliocompanyandarrangeacommitmenttoitintheparticipationcontractitselfsothatthepersonsdon'tsimplychange,divestingusofvaluablecontactsandsoon.(PC7)

Brokenpromises.Intentionallyorunintentionally,promisesweresometimesbrokenbyactorsofthetriads.TheselapsesoccurredintheparentcompanyeitheriftheCVCmanagerdidnot(orcouldnot)ful?llhisroleasenablerandmediatororiftheBUmanagerdidnot(orcouldnot)provideoradheretotheoriginallyagreedupontransferofknowledgeandresources.Analogous

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situationsexistedamongmanagersinthePC.Theintendedtransferofknowledgeandresourceswasthereforeatrisk.“Idon'tknowwhywejoinedforces.Intheend,theyneverdeliveredtheirinitiallyannouncedcontactsonwhichwehadcounted”(PC8).

Caseevidencesuggeststhatparticularrelationalcharacteristicsoftheactors'socialcapital(lackoftrust,obligation,andreciprocity)inconjunctionwithparticularcognitivecharacteristics(divergingvaluesandgoals)constrainedactors'motivationtobuildnewrelationshipsandinvestinexistingones.Theabilityofactorstoexploittheirtieswasfetteredlikewise.Reducingthepotentialofthesocialcapitalthatwastheoreticallyaccessiblethroughthestructuraldimension,theseconstraintsultimatelycreatedpersonallock-in.Hence,thereportedbreakingofinitialpromiseshaditsoriginintheabsenceofcognitiveandaffectiveconnectivity.

Therewasneverabasicsenseoftrustwiththemanagingdirector....Thisisaquestionofchemistry.Therearepeopletowhomyousimplycan'tconnect;there'snocommonground.Andhehappenedtobeoneofthosepeoplewithwhomitwasvirtuallyimpossible.(CVC2)

Inotherinstances,thefailuretofollowthroughwasdueeithertoalackofcompetenceortothefactthatthepromisedresourcesneverornolongerexisted(e.g.,becauseofstrategicreorientationinthecorporationorthePC).A“changeofrelevantactors”and“brokenpromises”werethereforestronglyconnectedtotheparticularindividual.Bothoutcomesledtopersonallock-insthatturnedtheinitialorpotentialsocialcapitalintosocialliability.Asaresult,littleornoknowledgetransferandsubsequentlynogenerationofinnovationtookplace.

Normallytheexpectationisthatallpartiespulltogetherinthesamedirectionandthatisgreat,ofcourse.Butwithus,thingstookanothercourse:completelydifferentassessmentsofthesituation,completelydifferentinterests,andacompletelyincompetentCVCmanager.(PC9)

Aspointedoutabove,personalandstructurallock-inswereinterrelatedandinterdependent.Strategicreorientation,forexample,oftencoincidedwithanexchangeofrelevantactors.Thisinteractionwasespeciallytrueforbrokenpromises.Suchbreakdownsoftenoccurredinisolation,butwealsoobservedthemhappeningincombinationwithorasaresultofstrategicmis?t,strategicreorientationorachangeofrelevantactors.Inthelattercase,thereemergednewcon?gurationsinwhich“new”individualscametogetherwhichsometimesmadeasocialliabilityoutofaconstellationthatoriginallyofferedsocialcapitalorthepotentialforitsemergence.Fig.2summarizesthelock-insdescribedintheliteratureandinthisstudy.6.Discussionandconclusion

DrawingontheempiricalCVCcontext,thisstudyhasexploredtheformationandtransformationofsocialcapitalandtheoccurrenceofsocialliabilitiesinintra-andinterorganizationalsocialnetworkcon?gurations.Itshedslightontheantecedentsofsocialliabilitylatentinthesenetworks.Itfurtherfocusesontheimpactthatsocialcapital—orsocialliability—hasontheinterorganizationaltransferandcreationofknowledgeaspreconditionsforinnovation.

Our?ndingscoverareasofresearchthathavereceivedlittleattentionintheliteraturetodate.First,theyarebasedonaunitofanalysisthat,asanintra-andinterorganizationalnetworkcon?guration,isconsideredenrichingforthesocialnetworkresearchbutthathasseldombeenempiricallyinvestigated.Second,our?ndingsextendcurrentresearchonsocialcapitalbyrevealingtheemergenceanddynamicsofsocialcapitalanditspossiblesubsequenttransformationintosocialliability.Theycontributetoexistingresearchbyidentifyingantecedentsofsocialliabilitybeyondthetwoalreadydescribed.Third,weexpandonInkpenand

Fig.2.AntecedentsofsocialliabilityinCVCtriads.

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Tsang's(2005)?ndingsonknowledgetransferindifferenttypesofnetworkbyaddinganewinter-andintraorganizationaltypeofnetworkthatshowsdistinctcharacteristicsofsocialcapital.6.1.Formationandtransformationofsocialcapital

OurchosenapproachtoresearchallowedustoportraythecomplexityoftheCVCtriadappropriately.Itenabledustoanalyzeanddepictthelinkagebetweeninter-andintraorganizationalcontextsandtheirreciprocalin?uenceontheformationandstructureofsocialnetworks,ahithertolargelyneglectedtopic.Thisstudythushelps?llagapinthescholarlyworkonthesubject.Bycontributingapertinentexampletocurrentliteratureonprocessissuesinsocialnetworkresearch,itrespondstoParkheetal.'s(2006)callforempiricalworkinthisarea.Inaddition,weincreaseCVCliteraturebyexaminingtheCVCtriad,whichhasnotbeenpreviouslydealtwithfromasocialnetworkperspective.RevealinghowCVCnetworksformandchangeovertime,weempiricallycon?rmHiteandHesterly's(2001)theoretical?ndingsonthechangesthroughwhichalmostallcompaniesseemtopassduringtheirlifecycle.

ForeachCVCtriad,weidenti?edapreinvestmentphaseandapostinvestmentphase,twodistinctperiodsfromthenetworkperspective.Thedatainthisstudycouldnotcon?rmMaurerandEbers's(2006)two-phaseclassi?cation(earlystart-upandbusinessdevelopment).Onereasonmightbethattheyplacedlittleemphasisonthe?nancingofthePCs.However,aroundofprofessional?nancingiscrucialforthesurvivalofaPCandcontractuallybindsittoitsinvestorsinthemediumandlongterm.Theclassi?cationthatarosefromourexploratoryanalysishas—unlikethatfromMaurerandEbers(2006)—cleardemarcations.Itisalsocommonlyappliednotonlyintherelevantliteraturebutalsoinbusinesspractice.

Our?ndingsrevealthatthesocialnetworkoftheCVCtriadunderwentanespeciallyenduringchangefromthepre-tothepostinvestmentphaseleadingforthemostparttonewnetworkconstellationsforallthreeparties,especiallyforthePC.Insomecases,relationshipsweredissolvedbecausetheybecameobsolete;inothers,relationshipsdeepenedandful?lledpartiallyalteredtasks.Insuchcases,forinstance,theinitiallyweakrelationaltiebetweentheCVCunitandthePCoftenevolvedintoastrongtie,greatlyenlargingthequantityofsocialcapital.Hence,ourresultspointinthesamedirectionasthoseofThornhillandAmit(2001),whofoundthatthe“parent–venturebond”isdynamicinnatureandgenerallyremainsstrong.

Lastly,our?ndingsunderlinethenecessityofadoptingacontingentviewwhenanalyzingthevalueofsocialcapital(Burt,1997).Inthepreinvestmentphase,theCVCtriadsneedtosatisfyknowledgeandresourcerequirementsdifferentfromthoseofthepostinvestmentphase.Wethereforecon?rmthe?ndingsreportedbyMaurerandEbers(2006),whoshowthatanever-changingsocialnetworkisessentialinordertosuccessfullyreachandcompletethepostinvestmentphase(whichoverlapswithwhattheycallbusinessdevelopmentphase).Inourstudy,thisprerequisitewastrueforallCVCtriadsirrespectiveoftheindustryinwhichtheparentcompaniesandthenewventureswereoperating.Hence,ourdatasuggestthatthenecessityofcontinuallyadaptingsocialnetworksseemstoberelevantacrossallindustries.6.2.Socialcapitalandsocialliability

InmostCVCtriadswefoundthatadditionalsocialcapitalwasinitiallybuiltinthepostinvestmentphase.Wethenempiricallydemonstratedhowtheconstrainingforcesofsocialcapitaloperated,thatis,howtheinterplayofspeci?cstructural,relational,andcognitivecharacteristicsturnedinitialsocialcapitalintosocialliability.Weaugmentexistingliteratureonantecedentsofsocialliabilitybyaddingtwonewadditionallock-ins—structuralandpersonal.

Structurallock-in:Wefoundthatastrategic?t,complementarycorecompetencies,wereinitiallyhelpfulforbuildingsocialcapital,butcouldimplyacertaindegreeofin?exibilityordependenceintheeventofaone-sidedstrategicreorientation.Insuchcases,thePC'scorecompetenciesthatnolongercomplementedthoseoftheparentgraduallydegeneratedintocorerigidities.Astructurallock-inresultedandchangedpotentialsocialcapitalintosocialliability.Suchlock-insmayoccurifthepartiesinvolvedjoinforceswiththe“wrong”contractualpartnerinalong-termagreement.WhereasforthePCthisunfortunateconstellationisexistential,itisforthecorporationmostly“merely”a?nanciallossandcouldbeconsideredpartofalearningprocess.Noneoftheparent-companyrepresentativesinvestigatedevermentionedgreatconcernfortheirown?rm'ssurvivalorcompetitivenessinthesekindsofconstellations.

Personallock-in:Thistypeoflock-insolelyoccursattheleveloftheindividual.Wehavebeenabletoshow,however,thatithasanimpactattheorganizationallevel.WetherebyintegratetheindividualandtheorganizationallevelassuggestedbyIbarraetal.(2005),whostresstheimportanceofconsideringtheinterplaybetweenlevelsofanalysiswhenstudyingtheeffectsofsocialcapital.Wedemonstratethatindividualswholackmotivation,involvement,orability,orwhohaveincongruoussocialnormsofinteraction,candestroysocialcapitalthathasaccruedattheorganizationallevel.Suchdamagehaspredominantlyadverseconsequencesforknowledgetransferandthegenerationofinnovation.

Ourdatarevealthatstructuralandpersonallock-insarenotinevitableconsequencesofnetworktransformationsbutthatatleastsomeofthemareavoidableorpartiallycontrollable.Ourinitialobservationisthatthepreventionofstructurallock-insontheorganizationallevelseemsmuchmorefeasiblethanthepreventionofpersonallock-ins,particularlybrokenpromisesbecausepsychologicalconceptsandadditionaldimensionssuchasthewillingnessfortransparencyanddisclosurecomeintoplayattheindividuallevel.

6.3.Socialnetworks,socialcapital,andknowledge

Our?ndingssuggestthatsomenetworkcon?gurationsaremoreandsomearelessadvantageoustothetransferandmutualcreationofknowledgeandresources,dependingontheamountoftherelationship's(newlybuilt)socialcapital,thedurationof