Cooperation Beyond the Network

Abstract

It is well known in economics, law, and sociology that reputation costs in a closed network give insiders a feeling of being protected from bad behavior in their relations with one another. A person accustomed to doing business within a closed network is therefore likely to feel at unusual risk when asked to cooperate beyond the network because of absent reputation-cost security. It follows that business leaders in more closed networks should be less likely to cooperate beyond their network (H1). Success reinforces the status quo. Business leaders successful with a closed network associate their success with the safety of their network, so they should be even less likely to cooperate with a stranger (H2). We combine network data from a heterogeneous area probability survey of Chinese CEOs, with a behavioral measure of cooperation, to show strong empirical support for the two hypotheses. CEOs in more closed networks are less likely to cooperate beyond their network, especially those running successful businesses: Successful CEOs in closed networks are particularly likely to defect against people beyond their network. The work contributes to a growing literature linking network structure with behavior: here, the closure that facilitates trust and cooperation within a network simultaneously erodes the probability of cooperation beyond the network, thereby reinforcing a social boundary around the network. Taking our results as a baseline, we close sketching new research on personality, homophily, network dynamics, and variation in the meaning of “beyond the network.”