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

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