Research
Publications
Mazzelli, A, Nason, R, Foley, A. [title omitted for peer-review]
Under Review (Management Science)
The paper explores the relationship between family ownership and the use of offshore financial companies (OFCs).
Working Papers
Foley, A., Sine, W., Coles, R. - "The Family that Builds the Iron Cage Together, Stays Together… or Does It? An Intervention Assessing the Impact of Formal Structure for Family Ventures in Peru"
Manuscript in preparation for submission
Prior research has highlighted that firm formalization generally improves the performance of new ventures through the purging of particularism – or, the bending of rules, standards, and criteria to accommodate personal relationships and motives. However, few empirical studies have considered how the involvement of an entrepreneur’s family in their ventures influences these dynamics. We build on this work by integrating the literatures on firm formalization and family business. Specifically, we highlight that whether purging particularism improves the performance of young firms will be contingent on the extent to which the firms maintain clear boundaries between their business and family systems. In contrast with prior work, we theorize that purging particularism within young firms which do not maintain clear boundaries between these systems will result in decreased performance. This argument builds on the view that particularism within family firms is often a means by which family members leverage unique, family-centered assets such as altruism and an intergenerational commitment to the business. Interfering with this process should thus reduce performance. Results from a randomized controlled trial (RCT) of 1,401 new ventures in Peru support our hypotheses. Implications for the formal structure of family-controlled ventures are discussed.
Foley, A., "Honor Among Thieves: Vulnerable Network Positions, Norms of Reciprocity, and Exit Rates in the Biotechnology Sector" Manuscript in preparation for submission
Indirect ties to competition through a powerful intermediary may expose young firms to resource misappropriation. Prior work has demonstrated that certain attributes of the relationship between a young firm and an intermediary – such as the amount of physical distance or the level of mutual commitment between them – may attenuate these risks and that young firms often seek to further protect themselves via an array of strategic defense mechanisms. I focus here on exchange relations among powerful intermediaries and how these relations can impact the success and failure of the young firms to which they are connected. In a longitudinal study of venture capital deals in the biotechnology sector, I find that venture capitalists investing in many competing firms in this industry face incentives to redirect information and resources away from firms in their portfolios with weaker financial fundamentals but that they will refrain from doing so when these firms are also in the portfolios of other venture capitalists to whom they are socially indebted via norms of reciprocity. I thus offer the insight that exchange relations between powerful intermediaries play a key role in determining whether a given network position represents a strategic vulnerability for young firms.
Foley, A., Ahuja, G. "Recombination & Rank: The Role of Status Configurations on Tertius Iungens Brokerage in Creative Projects" Manuscript in preparation for submission
In this paper, we systematically integrate the literatures on status and structural holes to develop a theoretical model of tertius iungens (TI) brokerage in creative projects. Our model contributes to the literature on structural holes in creative projects in four ways. First, it calls attention to the fact that the TI model, with its focus on coordinating diverse alters, explicitly raises issues of status differentiation in ways that other models of brokerage - such as the Tertius Gaudens (TG) - do not. Second, it explicitly accounts for the fact that TI brokerage in creative projects is not simply an event, but is rather a multi-staged process. Third, our model accounts for and explains the risks associated with brokerage strategies at each phase of the brokerage process; these risks stem from the uncertainty associated with convening diverse actors of different skill and rank together from across a structural hole. Fourth, we also explain how differences in status among a broker and their alters exacerbate or mitigate these risks. In so doing, we draw greater attention to the role that alters - and not just the broker - play in the dynamics of brokerage in creative projects.
Hiatt, S., Coles, R., Foley, A. "Inequality and the Spirit of Capitalism: Social Capital and the Impact of Income Equality on Entrepreneurship"
Manuscript in preparation for submission
The relationship between economic inequality and entrepreneurship is complex and contested: while prior research has shown that inequality can stimulate entrepreneurial activity in some settings, it suppresses it in others. We argue that these conflicting findings reflect an overlooked mechanism through which economic inequality affects entrepreneurship within communities - social capital, or the network of trusting relationships that enable resource-sharing and coordinated action. Using a 12-year panel dataset (2000–2011) covering all Mexican municipalities, we find a curvilinear relationship. At low levels of inequality, rising inequality fosters the proliferation of organizations which provide financial resources and key material inputs for doing business. However, beyond a critical threshold, further inequality erodes local social capital - measured by the density of civic and associative organizations - undermining the relational infrastructure that supports new venture creation and increasing the transaction costs of entrepreneurship. These findings reveal the dual role of inequality as both a catalyst and a constraint, offering new theoretical insight into how inequality shapes entrepreneurship by altering the social fabric of communities.
Foley, A., Choi, J., Sine, W. - "Interorganizational Endorsements or Golden Handcuffs? The Role of High-Status Ties on Startup Pivoting"
Manupscript in preparation for submission
High-status ties are often referred to as “interorganizational endorsements” for young ventures. Prior work has found, for instance, that such ties can help young firms overcome the “liability of newness” by granting them legitimacy and higher perceived status in the eyes of potential resource providers; this legitimacy, in turn, should increase their survival rates. However, much of this prior work has tended to assume that the new venture would continue to pursue the strategic direction it undertook at the time the high-status tie was formed. In this paper, we suggest that high-status ties may have a detrimental effect on young ventures by restricting their propensity to “pivot” and pursue new opportunities, thereby reducing their survival rates. These effects will be strongest in nascent or turbulent industries in which uncertainty – and hence a need to experiment - is highest. These relationships are also mediated both by the feelings of overconfidence and greater fear of loss that such ties instill in entrepreneurs. We test our hypotheses via a novel combination of archival and laboratory studies. Analyses are still underway, but we currently find broad support for our claims.
Research in-progress
Foley, A. "Economic Action & The Problem of Indebtedness: the Mutually Contingent Effects of Relational Embeddedness and Reciprocity on the Success of VC Deals"
Data collection complete; Data analysis in progress
This project attempts to reconcile theoretical tensions between social exchange theory (Blau, 1964; Cropanzano et al., 2016) and the embeddedness view of networks (Granovetter, 1985; Uzzi, 1996). This tension stems from the fact that, while exchange theory suggests that individuals often form ties through a process of social exchange in which one sends the tie and the other receives it, the majority of the embeddedness literature takes any level of relational embeddedness as given. In other words, the embeddedness literature tacitly ignores the process of exchange that leads to various levels of embeddedness. In response, I build theory suggesting that the effects of relational embeddedness on economic action – which generally stem from shared norms and ease of information transfer - will be contingent on whether a single actor in a group has initiated a majority of the ties within the group. I test these hypotheses in the context of VC syndication data over a 20-year period and observe how relational embeddedness (the number of times two investors have previously coinvested) and patterns of exchange (who has sent more deals to whom) interact to influence: 1) rates of deal failure within syndicates and 2) the primary mode of exit pursued by a syndicate’s investments. This paper aims to contribute to the embeddedness literature by suggesting that the effect of relational embeddedness on economic behavior will often be contingent on the patterns of exchange and reciprocity that generated it.
Foley, A, Huang, R. (Alphabetical Authorship). Balancing the Ties that Intertwine: Achieving Balance in Multiplex Exchange Relations
Data collection complete; Analysis in Progress
Exchange relations tend toward balance: we seek to repay those who have helped us and avoid prolonged debt. Prior research, however, has largely examined balance in uniplex relations - those in which actors exchange a single good or transaction type. Yet in practice, multiplex exchange relations - those in which actors exchange multiple types of exchanges governed by different transactional norms within a single relationship - are common in social and economic life. How actors achieve balance across multiple, normatively distinct exchanges within these layered relationships remains theoretically unclear. We address this question by leveraging panel data from 16 Thai villages (1998–2012), covering 696 households and 5,544 dyads across seven exchange types. We find that whether and how multiplex exchanges tend toward balance depends on the nature of the resources exchanged. When resources fall within the same transactional category (social or economic), category logics prevail: multiplex relations composed entirely of social exchanges (e.g., gifts, free labor) are governed by norms of reciprocity, leading to negatively associated balances across types, whereas relations composed entirely of economic exchanges (e.g., loans, paid labor) follow transactional norms, resulting in unrelated balances. When resources span multiple categories, however, resource attributes govern the applicable exchange norms. Particularistic exchanges (e.g., free and paid labor) foster emotional closeness between the parties, prompting the advantaged party to over-give and leading to positively associated balances. In contrast, universalistic exchanges (e.g., gifts and loans), which lack emotional closeness, invoke transactional norms that demand repayment, producing negatively associated balances between the actors exchanging them. This study advances understanding of multiplex exchange by specifying when and how actors achieve balance across transactions embedded within them.