Strong Enough to Fight or to Flee? Executive Social Capital and Ship Jumping in Declining Firms

Abstract

How does executive social capital, i.e., executives’ social connections with external stakeholders, affect executives’ ship- jumping behavior in declining firms? Should the executives stay, using their social capital to help turn around the firm, or should they use their social capital to find a position at another firm? Drawing upon resource dependence theory, we resolve this dilemma by highlighting the way in which executive social capital affects executives’ dependencies on external employment opportunities and their current declining firms, which together determine the potential benefits and opportunity costs of ship- jumping. The evidence from specially treated (*ST) public firms in China confirms that executives are less likely to jump ship from a firm in crisis when their social capital endowments are particularly low or particularly high. Moreover, executive social capital also moderates the effects of social capital endowments of other (peer) upper-echelon executives in a firm and the firm’s alli...