The dilemma of centrality : eliminate or promote opportunistic behavior : from a network perspective

Abstract

This master thesis is a research proposal focusing on the extent to which a firm’s position, within a network structure, impacts opportunistic behavior. Much of the recent literature on inter-firm relationships pays great attention to strategies controlling opportunism. Prior research has proved that conduct and performance of firms can be more fully understood by examining the network of relationships in which they are embedded. While a majority of study focuses on dyadic relationships, little attention has been paid to a wider scope, network perspective. The author advances a conceptual model, in order to describe how a firm’s position can influence its opportunistic behavior within a network structure. More specifically, the author precisely focuses on the central firm’s opportunistic behavior. Firms that occupy a central position can obtain asymmetric power; but it is also easier to be observed when acting improperly. These two factors, asymmetric power and visibility, are used as mediators to deliver the impacts on opportunistic behavior caused by a central position. The firm holding asymmetric power has the potential corrupting influence; however, opportunistic behavior will be easily supervised in a central position. The total effect of a central position remains indistinct due to the conflict scenario caused by two mediators. Network density has been introduced as the contingency in the conceptual model. It is not enough to describe the mechanism by only considering a position. With more recent work on the relational norm, a dense network promotes relational governance and an increase in the level of the norm. A central firm may have a better conscience not to behave opportunistically within a network that has a high level of the norm. Respectively, a central firm within a network has a low level of the norm, which has more possibility to behave opportunistically. The main contribution of this research is to understand the mechanisms of opportunistic behavior under a social structure. This would provide a new version to control or monitor opportunistic behavior beyond dyadic relationship. Another construct is to augment transaction cost theory: this research proposal extends transaction cost theory with power theory and network theory.