Network literature has widely documented that if there are managerial ties between corporate leaders in two firms, such ties can effectively stabilize or facilitate the establishment of business ties between the two firms, such as the formation of supply chain partnerships. However, such social connections are a dynamic process, and their changes will have an impact on subsequent business collaborations between the firms, especially supply chain collaborations. A collaborative paper by Prof. Jiang Han at the School of Management and Economics of The University of Hong Kong, Shenzhen (CUHK-Shenzhen), Social Embeddedness and Supply Chains: Doing Business with Friends vs. Making Friends in Business, examines the impact of dynamic changes in social connections between executives on inter-firm business relationships and the influence on supply chain partnerships after the disruption of these connections. Recently, the paper was accepted and published by Production and Operations Management, a top international business journal.
Author Jiang Han
Associate Professor, School of Management and Economics, CUHK-Shenzhen
Social Network and Social Capital, Corporate Governance and Strategic Leadership, Entrepreneurship and Venture Financing, Global Supply Chains and Cross-border M&A
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 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 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 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.