The External Ties of Top Executives: Implications for Strategic Choice and Performance

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Abstract
We examine the extent to which executives' boundary spanning relations inside and outside their industry affect organizational strategy and performance. We posit that the informational and social influences of external ties will be reflected in the degree to which the organization's strategy conforms to or deviates from the central tendencies of its industry and that the alignment of executives' external ties with the firm's strategy will be beneficial to firm performance. Using a multiyear sample of firms in the branded foods and computer industries, we find that executives' intraindustry ties are related to strategic conformity, that extraindustry ties are associated with the adoption of deviant strategies, and that alignment of executives' external ties with the informational requirements of the firm's strategy enhances organizational performance. Our results also show that a unique or differentiated strategy is not universally advantageous and that the benefits accruing from strategic conformity are especially strong in the more uncertain computer industry.