Bonding Ties, Bridging Ties, and Firm Performance: The Moderating Role of Dynamic Capabilities in Networks

ABSTRACT Purpose: Building on the dynamic capabilities view and the configuration of network ties, this study investigates how dynamic capabilities moderate the relationships between bonding and bridging ties and firm performance, thus an area with potential to explain the divergent empirical results contained in the existing literature on the relationship between intra/extraorganizational ties and performance. Methodology: This study employed a mail survey to senior executives. A total of 169 firms operating in an industrial district were collected. Regression analysis was employed to test the proposed model. Findings: This study found that the combination of dynamic capabilities and bonding/bridging ties helps improve firm performance. Furthermore, this study found a positive relationship between bonding ties and firm performance, but no equivalent relationship for bridging ties. Research Implications: Research results indicate that firm performance is significantly enhanced by bonding ties, which provide opportunities for sharing information and exchanging resources. Moreover, the empirical results reaffirm the proposition that dynamic capabilities are important transformational mechanisms for managing resources. Practical Implications: The findings reveal that managers can improve firm performance by simultaneously building social ties and developing and implementing dynamic capabilities. Originality/Value: This study demonstrates that the components of dynamic capabilities (i.e., sensemaking and reconfiguration) are transformational mechanisms and can moderate the positive relationship between bonding and bridging ties and firm performance, empirically supporting recent perspectives from the literature on dynamic capabilities and social networks.