The Positive Externalities of Social Capital: Benefitting from Senior Brokers

The importance of an actor’s network to his/her private benefits is well explored. Less well understood are the positive externalities of social capital, that is whether an actor’s social capital “spills-over” and improves the outcomes of those to whom s/he is connected, creating broader, not just private, benefits. This paper examines how investment bankers add value to one another in the course of everyday work. The authors' concern is with a banker’s second-order social capital. The main question is whether being connected to a broker matters to the ability of the focal actor to add value to those around him/her. The authors argue and find that connecting to brokers matters contingent upon the broker being more senior than the focal actor. The networks of contacts who are of higher rank and/or the focal actor’s leader positively contribute to the ability of the focal actor to add value. Second-order social capital does matter, contingent on the contacts: senior brokers.