An ace in the hole: The effects of (in)accurately observed structural holes on organizational reputation positions in whole networks

Abstract

A large body of the literature has found that occupying structural holes positively affect organizational outcomes. Structural holes pose strategic opportunities for organizations that are knowledgeable of their advantageous position. However, most studies do not consider whether organizations observe their structural holes accurately. Such observational (in)accuracy might explain variation in return-on-structural-holes. This study investigates the effects of (in)accurate perceptions of organizations’ structural holes position on organizational reputation. We consider scenarios where organizations (correctly) observe or (incorrectly) miss existing structural holes or where they incorrectly observe structural holes. We collected data in two whole networks in the healthcare industry. We find that accurately observing one’s structural hole position increases organizational reputation. Contrary, organizations that perceive structural holes that actually do not exist, suffer negative reputation effects. Our research implies that similar network positions can yield differential reputation effects depending on the accuracy of the knowledge of the organization occupying this position.