Academics have increasingly recognized the benefits derived from social networks embedded within companies’ buyer–supplier relationships. However, prior research has only examined the influence of social capital elements on performance, either individually or in part. We propose an integrative model examining the relationships among relational, structural and cognitive dimensions of social capital, and between these dimensions and the cost and innovation performance of the firm. A sample of 163 buyer–supplier relationships is used to test the model. Regression results indicate that the relational dimension of social capital fully or partially mediates the effect of the cognitive dimension on performance, and partially mediates the link between the structural dimension, operationalized as social interaction ties, and innovation performance. Further, high levels of legal bonds were found to moderate the relationship between the relational dimension of social capital and performance outcomes. Implications for theory and managers are discussed.
Social Capital Theory (SCT) has become an important perspective for theorizing the nature of connection and cooperation between organizations (Adler and Kwon, 2002). As the ‘relational glue’ underpinning effective supply chain relationships (McGrath and Sparks, 2005), social capital is a valuable asset that can help explain how buyer–supplier relationships contribute to a company's competitive advantage. A growing stream of supply chain management research has examined the effects of the various elements of social capital on performance either independently, or in part. For instance, Cousins et al. (2006) studied the effect of relational capital on buyer performance; Lawson et al. (2008) explored the effects of relational and structural capital on buyer performance; and Krause et al. (2007) investigated the effects of structural and cognitive capital in explaining firm performance in terms of quality, delivery and flexibility.
We initiated the present study to provide a more holistic, empirical test of social capital configuration in key buyer–supplier relationships. In doing so, we extend previous work such as Tsai and Ghoshal (1998) who had examined social capital from a network perspective within 15 business units of a multinational electronics company. Our study examines social capital in a supply chain context with the unit of analysis being the strategic relationship between buyers and suppliers of large manufacturing firms. We examine the relationships among all three dimensions of social capital, namely structural, cognitive and relational dimensions, and test the effect of social capital on performance improvements for the buying firm. Moreover, recognizing that buyer–supplier relationships are embedded within a broader legal context, we also test for the moderating effects of legal bonds on performance. Three overarching research questions guide this study: First, what are the relationships among the three dimensions of social capital in buyer–supplier relationships? Second, what effect does social capital have on the performance of the buying firm? Third, what effect does the presence of legal bonds have on buyer performance in the context of social capital?
Our study contributes to the supply chain and social capital literatures in a number of ways. First, our study extends previous research by examining each dimension of social capital, and highlighting its individual and integrated impact on buyer performance. We do so by analyzing survey data collected from manufacturing firms in the United Kingdom (UK). Second, in examining the configuration of the dimensions of social capital in buyer–supplier relationships, we provide further evidence of the multidimensional nature of social capital. In addition, we examine the contingent effects of complementary governance structures (i.e., legal bonds) on social capital and performance and thus extend existing research on social capital (e.g. Tsai and Ghoshal, 1998). Incorporating a contingency analysis highlights the dynamic nature of social capital formation and its influence on firm performance.
The findings of our study provide important insights into the social exchange process and value creation within strategic buyer–supplier relationships. The remainder of this paper proceeds as follows. Section 2 presents the theoretical foundation on which this study builds. Section 3 develops hypotheses for the relationships between the associated constructs. The research methodology is described in Section 4, while Section 5 presents the data analysis using OLS regression. Section 6 discusses our findings, the implications for theory and practitioners, and summary conclusions.
This paper developed an integrative framework of social capital in industrial buyer–supplier relationships and tested its effect on buyer performance. Our findings present a range of issues for supply chain and purchasing managers seeking to manage their supplier relationships effectively in order to improve performance. Social capital was shown to be the relational glue of buyer–supplier exchange through its facilitation of cooperation and collaboration. In considering how to identify, design and manage the dimensions of social capital, we highlight that practitioners can benefit from understanding each component, its effectiveness, how to leverage it and the implications for its existence in a buyer–supplier relationship. In particular, the mediating role of relational capital is foremost. Legal bonds are also shown to be an effective, complementary means of governance, adding value when used in conjunction with relational capital. Overall, the results of this study provide guidance for managers and academics considering how to identify, design and manage the dimensions of social capital within buyer–supplier relationships.
