Structural closure and exposure: Performance and autonomy of American corporations

This thesis is motivated by the observation that in any social system actors simultaneously occupy multiple social statuses. The totality of statuses in which an actor is involved is called a status-set. To characterize the nature of an actor's status-set, I develop a structural model of status-sets. I focus on structural interdependencies associated with statuses in a status-set and outline two basic characteristics of a status-set: structural closure and structural exposure. Structural closure captures structural interdependencies between statuses in an actor's status-set. Structural exposure captures structural interdependencies between statuses in the status-set and those outside the status-set.; I hypothesize that the two characteristics of a status-set have two significant implications for its occupant. First, in the performance hypothesis, I argue that optimally beneficial status-sets maximize structural closure and minimize structural exposure. Second, in the autonomy hypothesis, I argue the structural characteristics of a status-set protect the occupant from being replaced even when better performing alternative occupants exist.; I test these hypotheses using a particular realization of status-sets: diversified American corporations. Although the notion of a status-set does not, at first sight, elicit the image of a diversified firm, the concepts I develop here have direct analogs in the organization of American industry. In this context, industries are statuses in the network of inter-industry trade. Patterns of transactions between industries and the organization of these industries determine structural interdependence between industries. Diversified firms are status-sets, by the virtue of operating in a number of industries. Thus, they can be described in terms of structural closure and structural exposure.; To provide evidence for the performance hypothesis, I examine the relationship between changes in firm's structural closure and structural exposure following an acquisition or a divestiture and market excess returns associated with the announcements of these transactions. To provide evidence for both the performance and the autonomy hypothesis, I examine the relationship between firm's structural closure and structural exposure and the likelihood that it receives a hostile takeover bid in the 1980s. The two analyses present consistent evidence that supports the performance and the autonomy hypotheses. The results presented here inform debates regarding the optimal scope of the firm. They also outline the conditions under which the market for corporate control will not be able to punish poorly performing managers. More broadly, the concepts of structural closure and structural exposure allow for further exploration in status-set analysis.