Socially Connected Supply Chains

38 Pages Posted: 2 Apr 2020 Last revised: 13 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 the formation of business relationships in the product market. With a unique and comprehensive dataset incorporating social networks and supply chain interactions of 4,081 listed U.S. firms, we find that social connections, measured by the manager-to-manager personal connections, predict supply chain network formation between firms. The predictive relationship is stronger for connections between executives and when the connection is a long-standing one, and also applies to second-degree indirect connections to a lesser extent. An identification strategy with exogenous death shocks to companies' social networks is adopted to establish causality. The mechanisms of 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 assets and risky investments, and more importantly, benefit the firm in the long run, albeit with a relatively lower short-run performance due to the expansions.

Keywords: Social Network, Supply Chains, Trust, Information Asymmetry

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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