Socially Connected Supply Chains

40 Pages Posted: 2 Apr 2020

See all articles by Haoyuan Ding

Haoyuan Ding

Shanghai University of Finance and Economics - School of International Business Administration

Yichuan Hu

East China Normal University (ECNU)

Jing Wu

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Yu Zhang

Peking University - Guanghua School of Management

Date Written: March 9, 2020

Abstract

We examine how social connections built up via shared past working experience or non-business activities would help formal business relationships in the product market. With a unique and comprehensive dataset incorporating social network and supply chain interactions, we find that social connections, measured by either the presence of (or the number of) manager-to-manager personal connections, predict supply chain network formation and sustainment between firms. The predictive relationship is stronger for connections between executives as well as long-standing connections, and also applies to second-degree indirect connections to a lesser extent. An identification strategy with exogenous deaths shocks to companies’ social network is adopted to establish causality. Two mechanisms, the trustworthiness and information channels, are provided to interpret our results. At last, we provide strong evidence that firms with socially connected supply chains tend to expand their size in asset and risky investment, and more importantly, benefit the focal firm in the long run, albeit a relatively lower short-run performance due to the expansions.

Keywords: Social Network, Supply Chains, Trustworthiness, Information Channel

JEL Classification: D82, D86, G30, G34, L14

Suggested Citation

Ding, Haoyuan and Hu, Yichuan and Wu, Jing and Zhang, Yu, Socially Connected Supply Chains (March 9, 2020). Available at SSRN: https://ssrn.com/abstract=3551005 or http://dx.doi.org/10.2139/ssrn.3551005

Haoyuan Ding

Shanghai University of Finance and Economics - School of International Business Administration ( email )

777 Guo-ding Road
Shanghai, 200433
China

Yichuan Hu

East China Normal University (ECNU) ( email )

North Zhongshan Road Campus
3663 N. Zhongshan Rd.
Shanghai, 200062
China

Jing Wu (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

HOME PAGE: http://www.jingwulab.org

Yu Zhang

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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