Creating and Capturing Value in Repeated Exchange Relationships: Managing a Second Paradox of Embeddedness

Organization Science, Forthcoming

45 Pages Posted: 28 Jul 2010 Last revised: 25 Apr 2017

See all articles by Daniel W. Elfenbein

Daniel W. Elfenbein

Washington University in St. Louis - John M. Olin Business School

Todd Zenger

University of Utah

Date Written: April 24, 2017

Abstract

Prior empirical studies suggest repeated exchange develops increasing value in buyer-supplier relationships. A first order implication of this finding is that buyers will concentrate exchange among a relatively small number of suppliers to generate maximum value in relationships. However, buyers are equally concerned with value capture. By distributing rather than concentrating exchange, buyers may position themselves to capture more of the value created, leaving buyers potentially conflicted concerning the choice. We label this dynamic the second paradox of embeddedness, distinguishing it from Uzzi’s (1997) paradox driven by technological uncertainty. By examining the procurement activities of a large, diversified manufacturing company, we then test for supplier and buyer behavior consistent with the conditions that give rise to the second paradox and behaviors that result from it.

Keywords: relational capital, buyer-supplier relationships, value appropriation, procurement, portfolio of relationships

JEL Classification: D21, D23, L14, D44

Suggested Citation

Elfenbein, Daniel W. and Zenger, Todd R., Creating and Capturing Value in Repeated Exchange Relationships: Managing a Second Paradox of Embeddedness (April 24, 2017). Organization Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1649464 or http://dx.doi.org/10.2139/ssrn.1649464

Daniel W. Elfenbein (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States

HOME PAGE: http://www.elfenbein.net

Todd R. Zenger

University of Utah ( email )

David Eccles School of Business
1655 East Campus Center Drive
Salt Lake City, UT 84112
United States
801 585-3981 (Phone)
801 581-7939 (Fax)

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