The dark side of buyer–supplier relationships: A social capital perspective⋆

• DOI: http://doi.org/10.1016/j.jom.2010.09.001
• Author: Thomas Y. Choi,Elena Revilla,Verónica H. Villena
• Published date: 01 September 2011
• Date: 01 September 2011

Journal of Operations Management 29 (2011) 561–576

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

The dark side of buyer–supplier relationships: A social capital perspective夽

Verónica H. Villenaa,∗, Elena Revilla a, Thomas Y. Choib

aDepartment of Operation and Technology Management, IE Business School, Maria de Molina 12, 5aPlanta, 28006 Madrid, Spain

bDepartment of Supply Chain Management, Arizona State University, Tempe, AZ 874706, USA

article info

Article history:

Received 31 March 2010

Received in revised form 31 August 2010

Accepted 10 September 2010

Available online 27 October 2010

Keywords:

Buyer–supplier relationships

Value creation

Performance

Social capital

abstract

The literature on supply chain management (SCM) has consistently promoted the “bright side” of col-

laborative buyer–supplier relationships (BSRs). Based on the social capital argument, SCM scholars have

investigated how a buyer can gain access to and leverage resources through its collaborative BSRs. Our

study extends this research stream by considering the “dark side” of social capital in BSRs. It evaluates

how social capital in its cognitive, relational, and structural forms contributes to or impedes value cre-

ation within BSRs. Both primary survey measures and secondary objective measures have been used in

data analysis. The results show the presence of both the bright side, confirming the existing literature,

and the dark side, extending the literature. There is an inverted curvilinear relationship between social

capital and performance: Either too little or too much social capital can hurt performance. This study

confirms that building social capital in a collaborative BSR positively affects buyer performance, but that

if taken to an extreme it can reduce the buyer’s ability to be objective and make effective decisions as

well as increase the supplier’s opportunistic behavior. Our study also examines how a buyer can delay

the emergence of the dark side. It opens up new research avenues in the collaborative BSR context and

suggests directions for future research and practice.

© 2010 Elsevier B.V. All rights reserved.

1. Introduction

The literature on supply chain management (SCM) is unequiv-

ocal regarding the value of collaborative buyer–supplier relation-

ships (BSRs) (for a review, see Chen and Paulraj, 2004; Terpend et

al., 2008). SCM scholars have studied how building social capital

creates value for firms participating in collaborative BSRs1(Autry

and Griffis, 2008; Cousins et al., 2006; Cousins and Menguc, 2006;

Krause et al., 2007; Lawson et al., 2008; Min et al., 2008). These

scholars suggest that building social capital between buyers and

suppliers allows them to gain access to and leverage resources

residing in their relationships. They highlight that social capital

夽We thank Manuel Becerra and Steven West for their helpful comments on an

earlier version of this paper. We are also grateful for the suggestions by the faculty

mentors of the Operations Management Doctoral Consortium at the 2009 Academy

of Management Meeting, in particular to Aleda Roth, Thomas Gattiker, and Johnny

Rungtusanatham.We finally acknowledge the helpful comments of Associate Editor

and three reviewers.

∗Corresponding author. Tel.: +34 91 568 97 33.

E-mail addresses: veronica.villena@ie.edu (V.H. Villena), elena.revilla@ie.edu

(E. Revilla), thomas.choi@asu.edu (T.Y. Choi).

1We conceptualize collaborative BSR as a relationship based on partnership or

alliance. Both the buyer and the supplier voluntarily enter into an agreement that

involves the exchange, sharing, or co-development of products, technologies, or

services (Gulati, 1998).

reducesthe likelihood of conflicts and promotes cooperative behav-

ior because of its association with shared vision, trusting relations,

and social ties. Clearly, the SCM literature has hitherto focused on

the bright side of social capital.

However, further consideration needs to be given to the risks

and potential negative consequences associated with social capital,

which we shall refer to as the dark side of social capital. Sociologists

(Granovetter, 1985; Portes and Sensenbrenner, 1993) and strategy

scholars (Adler and Kwon, 2002; Gargiulo and Benassi, 1999; Uzzi,

1997) have warned us of the presence of the dark side. Consider-

ing the dark side of social capital in BSRs has important managerial

implications, given that buying firms invest significant resources

in building social capital with their suppliers (Adler and Kwon,

2002; Autry and Griffis, 2008). Hard-earned social capital may in

fact lead to loss of objectivity (Locke, 1999), opportunistic behav-

iors (Granovetter, 1985), and poor decision making (Grover et al.,

2006; McFadyen and Cannella, 2004). Therefore, blindly calling for

building higher levels of social capital within BSRs can lead to a

waste of resources and frustrations (Portes and Landolt, 1996), and

the indiscriminate promotion of social capital may actually hurt

rather than enhance performance.

Our study aims to consider both the bright and the dark sides of

collaborative BSRs. Some leading firms may be taking on this per-

spective. For example, Toyota and Johnson Controls Inc. (JCI) have

enjoyed their collaborative relationship since 1984 when Toyota

0272-6963/$ – see front matter © 2010 Elsevier B.V. All rights reserved.

doi:10.1016/j.jom.2010.09.001

562 V.H. Villena et al. / Journal of Operations Management 29 (2011) 561–576

first arrived in Georgetown, KY, to produce the all-time best sell-

ing Camry sedans (www.johnsoncontrol.com). However, presently,

they appear to be re-evaluating their celebrated long-term, col-

laborative relationship. There have been signs of restructuring

in their relationship. Toyota and JCI are phasing out a long-

standing partnership at Trim Masters, their joint-venture company

(www.autonews.com).With this measure, Toyota seems to be look-

ing for more competition among seat suppliers while JCI seems

to be pursuing more autonomy to explore other potential cus-

tomers and ventures. Both firms seem to be acknowledging the

downside of their long-term partnership. Our study aims to inves-

tigate the underlying dynamics of such a phenomenon—how a

well-established BSR, on the one hand, generates value (the bright

side) but, on the other, causes relational inertia (the dark side) that

inhibits partners’ capacity to meet changing market demands.

We take the SCM literature beyond the bright side of collabo-

rative BSRs by considering the bright side and dark side in a single

model. We do so theoretically and empirically by using the con-

cept of social capital. Consistent with previous studies (e.g., Krause

et al., 2007; Lawson et al., 2008), we accept that building social

capital within BSRs has a positive impact on buyer performance,

at least initially. However, we offer additional theoretical preci-

sion to this argument. We posit that the synergies emerging from

accumulated social capital are subject to diminishing returns. That

is, the value of social capital might begin to decay and the rate

of benefits slow down as inherent risks and costs of social capital

increase. As a result, we postulate that the accumulation of social

capital improves performance up to a point where increasing risks

and costs offset the benefits and that beyond this point buyer per-

formance declines. We thus suggest that the relationship between

social capital and performance has a curvilinear rather than a lin-

ear effect. This curvilinear relationship might also explain why

some studies analyzing collaborative mechanisms in BSRs have

been unable to show the expected performance gains (Gulati and

Sytch, 2007; Petersen et al., 2005; Swink et al., 2007).

Further, previous studies have limited the analysis of social cap-

ital to its relational dimension (Cousins et al., 2006; Johnston et al.,

2004), structural dimension (Capaldo, 2007), or a combination of

the two (Autry and Griffis, 2008; Lawson et al., 2008). Very few

studies have investigated all three forms of social capital (Nahapiet

and Ghoshal, 1998) in a single model, with the notable excep-

tion of Krause et al. (2007). The current study jointly examines

three forms of social capital—cognitive (e.g., shared culture and

goals), relational (e.g., trust, friendship, respect, and reciprocity),

and structural (e.g., social ties), thereby addressing the different

ways these forms influence performance outcomes.

Also, most previous studies have framed the benefits of social

capital primarily within a narrow range of operational performance

outcomes. However, in reality, buyers attempt to advance a much

wider range of performance goals within their BSRs (Krause et al.,

2007; Sanders, 2008; Im and Rai, 2008). Our study thus considers a

set of strategic benefits (e.g., the development of new products and

markets) in addition to operational performance measures used in

previous studies. In doing so, we provide a more comprehensive

examination of a buyer’s performance gain based on the building

of social capital with its collaborative supplier.

The paper is organized as follows. We first review the literature

on social capital and performance, and then we develop hypothe-

ses based on how the three dimensions of social capital impact

performance. The unit of analysis is framed as the buyer–supplier

dyad. The research methodology section discusses how objective

and subjective data from 132 Spanish firms were collected and

analyzed. The results confirm that there is an inverted curvilinear

relationship between social capital and performance. The results

also show that it takes longer to reach the threshold when buyers

and suppliers work together to achieve strategic benefits com-

pared with when they seek operational benefits. Finally, we discuss

theoretical and managerial implications and offer future research

directions.

2. Theoretical foundation

2.1. Social capital theory

Social capital is defined as a valuable asset that stems from

access to resources made available through social relationships

(Coleman, 1990; Granovetter, 1992). Nahapiet and Ghoshal (1998)

synthesize social capital in three dimensions: cognitive, relational,

and structural. The cognitive dimension represents shared meaning

and understanding between actors; the relational dimension refers

to trust, friendship, respect, and reciprocity developed through a

history of interactions; and the structural dimension involves the

patterns of relationships between actors. In this section, we review

the literature pertaining to these three dimensions of social capital.

We then consider the performance implications based on an obser-

vation that social capital can facilitate as well as inhibit actions

required to improve performance (Nahapiet and Ghoshal, 1998;

Tsai and Ghoshal, 1998).

2.1.1. Cognitive social capital

Cognitive social capital refers to “the resources providing shared

representations, interpretations and systems of meaning among

parties” (Nahapiet and Ghoshal, 1998, p. 244). It provides a shared

vision that embodies the collective goals and aspirations (Tsai and

Ghoshal, 1998). Inkpen and Tsang (2005) highlight shared culture

and congruent goals as the main dimensions of cognitive capital.

Shared culture refers to the degree to which norms of behavior gov-

ern relationships, whereas congruent goals represent the degree to

which parties share a common understanding and approach to the

achievement of common tasks and outcomes.

Parties with similar cultures facilitate individual actions and

constrain undesirable behavior in favor of the collective interests

(Coleman, 1988). The set of institutionalized rules and norms that

govern appropriate behavior by parties facilitates common actions

within a social structure (Gulati et al., 2000). These rules and norms

provide a harmony of interests and suppress the possibility of

opportunistic behaviors, leading to lower monitoring costs and

higher commitment (Ouchi, 1980). Furthermore, the establishment

of congruent goals can guide the nature, direction, and magnitude

of the efforts of the parties (Jap and Anderson, 2003). Commit-

ted parties have a deeper understanding of why the relationship

exists and how they can contribute to the attainment of compatible

goals. In this manner, goal congruence cannot only reduce the like-

lihood of conflicts (Jap, 1999) but also improve the joint returns for

both parties because they perceive the synergistic potential of the

relationship (Tsai and Ghoshal, 1998). However, a lack of cultural

similarities and compatible goals may not only trigger conflicts

that result in frustration and have negative effects on performance

(Inkpen and Tsang, 2005; Lei and Pitts, 1997) but also detract from

developing and implementing innovative strategies because of the

time and energy spent resolving disputes (Holcomb and Hitt, 2007).

In sum, cognitive capital in the form of shared culture and con-

gruent goals provides a shared vision through which committed

parties gain a better understanding of the behavioral norms and

common goals within the relationship. Herein, the role of social

relations lies in establishing whether there is a potential for align-

ing business philosophies and achieving better terms of negotiation

that lead to congruent goals. Parties who aim to enhance their com-

petitiveness in the short and long terms should thus commit to

developing some similarities in organizational cultures and seek to

attain congruent goals that benefit their relationship.