Supplier's network churn, buyer-supplier embeddedness, and transaction price outcomes

Supply chain management and marketing scholars have extensively studied the benefits of long-term buyer-supplier relationships and exchange outcomes. They have assumed, however, the availability of complete information regarding the long-term viability of exchange partners. Highlighting the information frictions in partner evaluations and using a network lens, we theorize that the network churn of the supplier in question and the buyer-supplier embeddedness play a pivotal role in whether the focal buyer pays a ‘premium’ to the supplier in terms of the price per unit in an exchange. Using a dataset of 1,775 unique dyads formed by 160 buyers (liner operators) and 249 suppliers (vessel owners) during the 2000-2019 period in the container shipping chartering market, we find that a) supplier’s network churn is negatively associated with the price per unit paid by the buyer, b) buyer-supplier embeddedness is positively associated with the price per unit paid by the buyer, and c) buyer-supplier embeddedness attenuates the negative influence of supplier’s network churn.
(ISM Best Supply Chain Paper Award winner at Academy of Management Annual Meeting 2021)