Friday, January 24, 2014

Executive Departures Without Client Losses: The Role of Multiplex Ties in Exchange Partner Retention

ROGAN Michelle
Read the working paper
INSEAD Working Paper 2014/08/EFE

To reduce vulnerability to exchange relationship loss when executives leave, firms often form multiple ties to the same exchange partners. Despite the assumed importance of interorganizational multiplexity for relationship retention, theory and evidence of its effect are lacking. Analysis of a longitudinal sample of client ties of advertising firms confirms that in general multiplexity improves retention. However, only relationships that span intraorganizational units with convergent interests reduce the positive effect of advertising agency executive departures on client tie loss. The findings highlight the need to consider the implications of intraorganizational structure for theories of interorganizational relationship retention and suggest an additional rationale for the persistence of the holding company structure in professional services firms despite limited returns to scale.