1. ¹Area of Management, Rawls College of Business, Texas Tech University, Lubbock, USA
2. ²Department of Management, Chinese University of Hong Kong, Shatin, Hong Kong
3. ³Department of Management, W. P. Carey School of Business, Arizona State University, Tempe, USA

Correspondence: WP Wan, Texas Tech University, Area of Management, Rawls College of Business, Box 42101, Lubbock, TX 79409, USA. Tel: +1 806 742 1517; Fax: +1 806 742 2308; E-mail: william.wan@ttu.edu

Received 13 April 2004; Revised 3 August 2007; Accepted 26 August 2007; Published online 21 February 2008.

Abstract

We propose a social perspective emphasizing the opportunities and constraints of bank–firm relationships to understand the determinants of relationship banks' performance, using Japanese banks to test our theory. Using social exchange and role theories, we found banks that have strong social relationships performed differently during Japan's macroeconomic expansion and contraction cycles. However, our results indicate that social exchange and role relationships are context-specific: banks benefited from internationalization during a domestic macroeconomic expansion as a result of their home-country social relationships, but they were less constrained by the same social relationships in their international operations during a domestic macroeconomic contraction.