“Security Analyst Networks,Performance and Career Outcomes” is an article written by J.Horton andG.Serafeim in December-2009.
Authors studyrelationship of social-network connectedness and whether it provides anyinformational-advantage to security analysists in the form of performance-forecastingand bargaining power.The article begins with discussionof 3-advantages of information arbitrage-opportunities. These advantages are: informationdiversity, information early access, information control (Horton &Serafeim, 2009, pp 6-8).
Authors introduce two hypothesisesthat used to build-up on the argument of social-network importance and furthertested. In consequent results-sections, they ran regressions and collectedestimates which have explanatory power. Also, authors stress about implication ofinnate-ability and network-position are independent, and innate-ability cannotinfluence forecast-error. Results support the theory of information advantageas of “word-of-mouth effects” (Horton & Serafeim, 2009, p 17) due to betternetwork-position. Hence, better-connected individual able to make more precise,timely forecasts, which is consistent with their first hypothesis. Authors thenstate that information received via strong social-networking influences on performance,thus, lower probability of losing job in favour of their second-hypothesis.
Finally, they study factorsthat determine future network-position by controlling for accuracy of forecastperformance by introducing special-variables. They received contradict resultsabout the accuracy of analyst which carefully interpreted as: “Apparently, itwould appear optimistic analysts rewarded with the ability to build a stronger networkwhich then enables them to make better forecasts.” (Horton & Serafeim,2009, p 23).
It does not matter, whetheryou are accurate or experienced specialist, the informational advantage ofnetwork position exists outside of analyst’s innate ability or experience.Therefore, “quantity is better than quality in social networking” is preciselya quote that describes the relationship between performance and social capitalthat analyst builds-up. Consequent question for further discussion is whetherthis informational advantage is sufficient enough for a capital analyst or not,against competitors who have higher innate ability?