Supply networks and performance: the joint role of relationship strength and structure

Abstract

Relationship strength, structural characteristics of supply networks, and their implications on performance have received increasing attention from scholars and practitioners in recent years. However, scholars have petitioned for research that incorporates relationship strength and supply network structure in tandem to move towards a better understanding and management of supply network relationships for improved performance. We seek to complement this growing stream of research by investigating several underlying characteristics of customer and supplier relationships and their influence on firm performance. Namely, we examine two characteristics related to relationship strength: the type of supply network relationship a firm invests in (relationship type) and the degree to which they invest in such relationships (relationship intensity). We also examine two characteristics related to supply network structure: the level of shared relationships between a firm’s partners (supply network interconnectedness) and the speed at which a firm can reach other members in the supply network (closeness centrality). We draw on prior research on buyer-supplier relationships, supply chain management, and organization theory. We use social network analysis to capture structural characteristics which specifically account for a firm’s supply network as a whole. We empirically validate this framework by analyzing supply chain relationship and financial data for firms in the automotive, drug, and electronics industries. Multilevel mixed-effects models are used that allow us to combine firm level and customer-supplier dyad level effects. Our results suggest that firm performance is influenced by the level of shared relationships between a firm’s partners and the firm’s willingness to invest in certain supply chain-related resources from its partners.