Impact of Environmental Uncertainty and Contractual Embeddedness on Supplier's Sales Probability

Abstract

Existing literature offers limited knowledge about online markets that consist of open contractual and supply networks. Online markets allow consumers to develop their supply chains by choosing suppliers from the open contractual network. Suppliers’ contractual embeddedness (SCE), which is how they are contracted with each other, may influence their sales probability in online markets. However, SCE is conceptually vague because literature posits both linear and nonlinear effects of embeddedness on performance mostly based on subjective measures. Also, suppliers change their contracts in online markets to adapt to environmental uncertainty over time, but this remains poorly understood in the literature. Hence, this study explores how the environmental uncertainty dimensions of dynamism, munificence and complexity and objective measures of SCE such as degree and closeness centralities impact the supplier’s sales probability by mainly invoking Complex Adaptive System theory and Social Network theories. Applying panel logit regression model to Australian-based Open Food Network data from 2012 to 2016, this study empirically validates that SCE generally improves the supplier’s sales probability and environmental uncertainty dimensions moderate that relationship. Network diagrams illustrate the local optimisation behaviour of network clusters and how they evolve into different network patterns over time.