Effect of relationships in supply networks: A long-term analysis in the automotive industry

Abstract

This work uses cointegration analysis to study the strength of relationships with the partners in supply networks in the Taiwan automotive industry. The purposes of this paper are: (1) to examine how firms form networks and to explore whether firms in supply networks should have long-term relationships; (2) to investigate the strength of relationships with the other partners and illustrate firm behavior in supply networks. The analytical results demonstrate two findings. First, the assembly and the automotive component manufactures have long-term relationships in a supply network. Subsequently, the results of cointegration analysis illustrated firms’ convergent (divergent) behavior. Sharing shareholder value, complementary resources, and sustained competitive advantage enables firms to converge to the long-term equilibrium. Partners will be amalgamated with other firms to construct a financial vision caused divergent behavior. Thus, this study provides empirical evidence of the strength of relationships and contemporaneously examines firm behavior in supply networks. Key words: Supply networks, relationship, cointegration analysis.