Social Embeddedness and Supply Chains: Doing Business with Friends vs. Making Friends in Business

33 Pages Posted: 2 Apr 2020 Last revised: 31 Jan 2022

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)

Han Jiang

Tulane University - A.B. Freeman School of Business

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

Network literature has widely documented that the managerial ties between corporate leaders in two firms can promote their economic exchanges in supply chains, i.e., social embeddedness. In this study, we strive to advance this line of inquiry by exploring the dynamics of such socially embedded supply chains, examining whether and when the dissolution of managerial ties between two firms would cause the subsequent termination of their supplier-buyer exchanges. We address this question by distinguishing two types of socially embedded supply chains based on their different relational origins: business-with-friend links chains in which the managerial ties precede the supply chains, and friend-in-business links in which the supplier-buyer exchanges precede the managerial ties. We posit that the managerial tie dissolution has only a negligible effect on the subsequent termination of supply chains in business-with-friend links. In contrast, in friend-in- business links, the dissolution of managerial ties between two firms would significantly increase the likelihood for their supplier-buyer exchanges to dissolve afterward. We find strong empirical evidence for the above propositions by using a nuanced dataset that integrates the managerial tie information from BoardEx and the supply chain data from FactSet Revere. In sum, we show that socially embedded supply chains with different origins (“doing business with friends” versus “making friends in business”) would have distinct patterns of evolution and dissolution.

Keywords: Supply Chain Dynamics, Relationship Dissolution, Managerial Tie, Social Embeddedness

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

Suggested Citation

Ding, Haoyuan and Hu, Yichuan and Jiang, Han and Wu, Jing and Zhang, Yu, Social Embeddedness and Supply Chains: Doing Business with Friends vs. Making Friends in Business (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

Han Jiang

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
380
Abstract Views
1,762
rank
112,768
PlumX Metrics