Friendships among competitors in the Sydney hotel industry

Citation: Paul Ingram, Peter W. Roberts (2000) Friendships among competitors in the Sydney hotel industry. The American Journal of Sociology (RSS)
Internet Archive Scholar (search for fulltext): Friendships among competitors in the Sydney hotel industry
Tagged: Sociology (RSS) economic sociology (RSS), embeddedness (RSS), social networks (RSS), business ethics (RSS)

Summary

Ingram and Roberts provide a sociological account of market competition by presenting an analysis of the effects and structures of friendship networks among competitors in the Sydney hotel industry. They suggest that their paper makes a number of contributions:

• They emphasize friendship ties between managers as opposed to buyers and sellers, joint ventures, or board interlocks.
• They focus on ties between organizations which are horizontal and which compete directly with each other.
• They ultimately connect friendship ties directly to economic performance (in their case, this is yield on the number of the rooms).

The authors emphasize that the mechanism they are interested in is collaboration and they go to somewhat extreme lengths to argue that they are not talking about collusion. These collaboration included referrals to other hotels when one was overbooked and collaboration on projects like large conferences that would benefit multiple hotels. That said, the collusion suggestion remains an important cloud overhanging their basic argument and raises important questions about the collaboration and collusion relationship.

The authors offer the following hypotheses:

1. Managers' friendships with competitors will improve the performance of their organizations.
2. The greater the cohesiveness of a manager's friendship network, the better the performance of his or her organization will be.
3. The greater the cohesiveness of friendship among an organization's competitors, the better its performance will be (essentially just another cohesion effect).

The authors also try to work the basic idea around backward to see if managers are in fact more likely to be friends when they are in competitive situations:

1. The great the degree of competition between two manager's organization, the greater the likelihood that they will be friends.

The authors test their theory with data from the Sydney hotel industry and provide complete data for a niche with 51 hotels that form of all of Sydney's "international" hotels. They surveyed the managers of each of the hotels and used 12 months of performance data from 1998 in the analysis (they issued the survey in the middle of the period).

The authors find support for all four of their hypotheses.

Theoretical and Practical Relevance

Ingram and Robert's article has been cited more than 250 times since its publication 10 years ago. These have come primarily from the literatures on embeddedness and economic sociology.