Working Papers
Modernizing without Westernizing: Social Structure and Economic Action in the Indian Financial Sector
Authors: Chen Guoli, Vissa Balagopal
In seeking to understand whether the transition by Asian countries to market
economies mirrors the path taken by the West, the authors ask how embedded network ties
between equity analysts and the CEOs of the firms they follow in India influence the
accuracy of analysts’ earnings forecasts. The authors contrast traditional institutions of caste
and regional language with contemporary institutions such as universities as the locus
for such ties.
The authors posit that CEOs from the post-economic-reform generation in India
are more likely to transfer material private information via their school ties while prereform
generation CEOs favor caste or language ties. They then contrast domestic
business groups (BGs) with western MNCs as organizational contexts and argue that
BGs legitimate the transfer of private information along particularistic ties, whereas
MNCs mitigate such transfers.Their conceptual framework is supported by analyses
that draw on a sample of 1,552 earnings forecasts issued from 2001 to 2010 by 296
equity analysts. Our findings suggest that the embeddedness perspective should be
broadened to incorporate the influence of larger historical social structures within
which economic action is embedded, and to view BGs as carriers and repositories that
blend modern management practices with particularistic behavioral patterns among
top executives.
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