Abstract
Existing network studies pay much attention to the benefits of structural embeddedness. However, Uzzi (1996) points out the marginal benefits of structural embeddedness may follow a pattern of diminishing returns. Using major customer disclosure data from Compustat, this study investigates the curvilinear relationships between multiple aspects of structural embeddedness and productive efficiency. Applying both Wang and Ho (2010) and Chen and Lin (2009) stochastic frontier models, we confirm the diminishing returns of eigenvector and betweenness centralities with a partial support for interconnectedness. Implications from our findings can help decision makers better understand the effects of structural embeddedness and help devise network structural change strategies for productive efficiency.
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