Inter-Firm Managerial Social Ties, IT Supplier Selection and IS Complexity

Abstract

By combining the theoretical lenses of social embeddedness, agency problem, and inter-firm relationship formation, this study investigates the impact of focal firms’ inter-firm managerial social ties (IMST) on the firms’ selection of IT suppliers and the consequences of such IT supplier selection. We use a dyad-level analysis to examine how IMST may drive a focal firm to select an individual IT supplier and use a firm-level analysis to examine how social connections through IMST may affect focal firms’ choices of IT suppliers that influence their organizational IS complexity. Our findings suggest that, at the dyad-level, IMST between a focal firm and an IT supplier significantly increases the firm’s likelihood and intensity of using this supplier. Furthermore, firms socially connected with more IT suppliers through IMST tend to use more IT suppliers in total. Our results also show that for firms possessing broader social connections with more IT suppliers and more diversified IMST, the increase of their total IT suppliers is associated with a greater escalation of their organizational IS complexity, suggesting a potential agency problem in socially driven IT supplier selection. The study generates important implications that contribute to multiple streams of research on social embeddedness, IT supplier selection, and IS complexity.