Personal Relationships in Supply Chains

Abstract

This study explores a determinant of escalation of commitment when a personal relationship is present between managers of buying and supplying firms in the supply chain context from an agency theory perspective. As there is very limited research in this area, a qualitative, case study method, employing ten semi-structured interviews with senior managers of buying firms was undertaken. Findings from this study reveal that higher interpersonal trust which develops as a result of a personal relationship between managers of buying and supplying firms compels managers of buying firms to escalate their commitment. Results also unveil that escalation of commitment increases operational risk of buying firms. Buying firms can use this finding to understand how and why their managers engage in an escalation of commitment when they share a personal relationship with a manager from the supplying firm. The paper concludes by discussing research limitations and future research directions.