Dissolution of Socially Connected Supply Chains: Doing Business with Friends versus Making Friends in Business

42 Pages Posted: 2 Apr 2020 Last revised: 1 Jul 2021

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 upper echelons in two firms can promote their economic exchanges and vice versa, thus fostering the pluralistic relationships between the two firms. In this study, we strive to advance this line of inquiry by exploring the potential dissolution of such relational pluralism, examining whether and when the dissolution of managerial ties between two firms would cause the subsequent dissolution of their economic exchanges. We address this question by highlighting the implications of an important yet understudied issue - the origin of relational pluralism. That is, we distinguish two types of pluralistic relationships based on their different origins: socially originated pluralistic relationships (SOPRs) versus economically originated pluralistic relationships (EOPRs). We posit that the managerial tie dissolution has only a negligible effect on the subsequent dissolution of economic exchanges in SOPRs. In contrast, in EOPRs, the dissolution of managerial ties between two firms would significantly increase the likelihood for their economic exchanges to dissolve afterward. Using a nuanced field dataset that integrates the managerial tie information from BoardEx and the supply chain data from FactSet Revere, we find strong empirical evidence for the above propositions. In sum, we show that pluralistic relationships with different origins (“doing business with friends” versus “making friends in business”) would have distinct patterns of evolution and dissolution.

Keywords: Supply Chain, Managerial Tie, Relational Pluralism, Embeddedness

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

Suggested Citation

Ding, Haoyuan and Hu, Yichuan and Jiang, Han and Wu, Jing and Zhang, Yu, Dissolution of Socially Connected Supply Chains: Doing Business with Friends versus 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

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