Supply chain relational capital and firm performance: an empirical enquiry from India

Abstract

PurposeThe purpose of this paper is to examine how over-reliance on buyer-supplier relational capital (created through the interconnected supply chain and social network) impacts firm performance in the context of the emerging market, i.e. India.Design/methodology/approachThe study uses the Prowess database (on Indian firms) to identify the firms that rely heavily on relational capital and employs panel data regression analyses to test the effect of relational capital on firm performance (supply chain performance and financial performance).FindingsThe results show that over-reliance on relational capital leads to lower supply chain performance (proxied by supply chain cycle) and financial performance (proxied by Tobin's Q). The results also reveal that supply chain performance mediates the relationship between over-reliance on relational capital and financial performance. Together, these results indicate that over-reliance on relational capital created through the interconnected supply chain and social network for supply chain management may negatively affect a firm's competitive advantage, which in turn can significantly impede its financial performance.Originality/valueIn light of the supply chain literature and relevant theories, the study develops an objective understanding of over-reliance relational capital created through the interconnected supply chain and social network, by relying on a large panel dataset of manufacturing firms and hence contributes to the supply chain literature. Also, it presents a novel idea to operationalize the measure for relational capital using the Prowess database.