The centerpiece of this work is the proposition that social relationships matter in economic life not only because they provide distinct benefits, as a result of trustworthy exchange or cooperative innovation, but also because they evoke personalized commitments that inspire additional efforts for improvement. It is suggested that the embeddedness of firms in social networks can benefit them in a more intangible manner than hitherto anticipated, providing incentives to achieve high performance that are otherwise unavailable in the market.; The analysis takes place in the context of Industry Peer Networks (IPN). IPN members are industry peers but not market competitors, gathering on a regular basis to share knowledge and review each other's performance. IPNs are characterized by a unique atmosphere of trust and mutual sharing. In contexts of embedded ties, social comparison intensifies peer pressure and competition for status. The anxiety associated with the threat of status loss and the pressure toward normative conformity are the principal forces driving motivation enhancement. These forces are differentially experienced depending on the position occupied in the social structure.; The analysis demonstrates that firms that are more deeply embedded in the network, by virtue of either high prestige or integration in group life, are more committed to improvement. These effects are strongest for members who have been in the network longer. Dense networks stimulate the pursuit of improvement, but a mixture of cooperative and competitive forces appears most favorable to achieving high performance. This is the first systematic evidence that social structure shapes the motivation of firms to improve performance, which is typically taken for granted in both economics and sociology.
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