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  • 2021
  • Working Paper
  • HBS Working Paper Series

The Value of Professional Ties in B2B Markets

By: Navid Mojir and Sriya Anbil
  • Format:Print
  • | Language:English
  • | Pages:58
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Abstract

We study how a particular form of social ties (i.e., professional ties proxied by past employment) affect price and profitability in business-to-business (B2B) markets. While most of the work on social ties focuses on information diffusion in business-to-consumer markets, we ask: Do B2B buyers receive higher or lower prices from sellers with whom they have a professional tie? Answering this question is challenging because it is difficult to observe B2B prices, the individual decision-makers (IDMs), and elements of differentiation that drive price variation. We resolve these challenges by leveraging confidential data from the Federal Reserve on the largest market for short-term loans with daily transactions of over $2 trillion, the repo market. In addition, we use financial disclosure laws to unmask IDMs at sellers and use LinkedIn to reveal their ties. We show that a seller IDM who is the buyer's former employee, charges the buyer, on average, 25 basis points more than other buyers with no ties. This extra expense translates into 1.6% of additional revenue for the average seller. The mechanism driving this price increase involves a reliability premium." Sellers with a professional tie to the buyer act more reliably towards the buyer in the face of supply-demand imbalances. Our work suggests professional ties can affect B2B prices beyond observable supply-demand dynamics and provide value for sellers and buyers.

Keywords

Professional Ties; Social Ties; Business-to-business Marketing; B2B Marketing; Repo; Individual Connections; B2B Pricing; Pricing; Decision-making In Financial Markets; Marketing; Relationships; Price; Financial Markets; Decision Making

Citation

Mojir, Navid, and Sriya Anbil. "The Value of Professional Ties in B2B Markets." Harvard Business School Working Paper, No. 22-037, November 2021.
  • SSRN
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About The Author

Navid Mojir

Marketing
→More Publications

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More from the Authors
  • Lilium: Preparing for Takeoff By: Navid Mojir, Vincent Dessain, Mette Fuglsang Hjortshoej and Emer Moloney
  • Borusan CAT: Monetizing Prediction in the Age of AI By: Navid Mojir
  • CRM and AI in Time of Crisis By: Michelle Y. Lu and Navid Mojir
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