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

Production and Operations Management

42 Pages Posted: 2 Apr 2020 Last revised: 15 Aug 2023

See all articles by Haoyuan Ding

Haoyuan Ding

Shanghai University of Finance and Economics

Yichuan Hu

Tongji University - School of Economics and Management

Han Jiang

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics

Jing Wu

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

Yu Zhang

Peking University - Guanghua School of Management

Yichuan Hu

Tongji University

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 termi- nation 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 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 a negligible effect on the subse- quent termination of supply chains in business-with-friend links. In contrast, in friend-in-business links, the dissolution of managerial ties between two firms is associated with a significantly higher likelihood for their supplier-buyer exchanges to dissolve afterward. We find strong empirical evidence for the above propositions using a nuanced dataset that integrates the managerial tie information and the supply chain data. 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 and Hu, Yichuan, Social Embeddedness and Supply Chains: Doing Business with Friends vs. Making Friends in Business (March 9, 2020). Production and Operations Management, 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 ( email )

777 Guo-ding Road
Shanghai, 200433
China

Yichuan Hu

Tongji University - School of Economics and Management ( email )

Siping Road 1500
Shanghai, Shanghai 200092
China

Han Jiang

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
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

Yichuan Hu

Tongji University ( email )

1239 Siping Road
Shanghai, 200092
China

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