Financial benefits and risks of dependency in triadic supply chain relationships |
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| Affiliation: | 1. College of Business Administration, Georgia Southern University, PO Box 8036, Statesboro, GA 30460 United States;2. Ivey School of Business, Western University, 1255 Western Road, London, ON N6G0N1 Canada;1. Michigan State University, Eli Broad College of Business, 632 Bogue Street N370, East Lansing, MI 48824, United States;2. Texas Christian University, Neeley Business School, PO Box 298530, Fort Worth, TX 76129, United States;3. University of Minnesota, Carlson School of Management, 321 19th Ave. S., Minneapolis, MN 55455, United States;1. Department of Marketing, University of Missouri – St. Louis, MO, 63021, United States;2. School of Management, Xi’an Jiaotong University, Xi’ an, Shaanxi, 7100049, China;3. Faculty of Business and Economics, University of Hong Kong, Pokfulam, Hong Kong;1. Faculty of Management, Science and technology, Open University of the Netherlands, P.O. box 2960, NL-6401 DL Heerlen, The Netherlands;2. Faculty of Behavioural, Management and Social sciences, University of Twente, P.O. box 217, NL-7500 AE Enschede, The Netherlands;3. Department of Operations, Faculty of Economics and Business, University of Groningen, P.O. Box 72, NL-9700 AB Groningen, The Netherlands;1. Massachusetts Institute of Technology (MIT), Global Supply Chain and Logistics Excellence Network, United States;2. Mississippi State University, Department of Marketing, Quantitative Analysis and Business Law, United States;3. University of Tennessee, Department of Marketing and Supply Chain Management, United States;1. Esade Business School, Universitat Ramon Llull, Spain;2. Department of Decision Sciences, School of Business, Macau University of Science and Technology, Macau;3. Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hong Kong;4. University College Dublin Michael Smurfit Graduate Business School, Ireland |
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| Abstract: | The economic consequences of interdependent relationships with suppliers and customers have long been of interest to supply chain managers and academics alike. Whereas previous studies have focused on the benefits or risks of embedded relationships that accrue to buying firms, this study simultaneously investigates the effects of a supplier's and a customer's embeddedness, arising from resource dependency, on a focal firm's financial performance in triadic supply chain relationships. Using 1,144 unique focal firm-years for U.S. firms from Compustat, we find that a supplier's and a customer's dependency both increase the focal firm's performance in terms of return on assets (ROA) and return on sales (ROS) by increasing asset turnover (ATO). As levels of supplier and customer dependency on the focal firm increase, however, the economic benefits of customer dependency diminish beyond a certain point, while those of supplier dependency continue to increase above that threshold. Thus, our findings show the paradoxically differing risks of the supplier's versus the customer's dependency, while establishing the unequivocal economic benefits of supplier and customer relations for focal firms in the middle of concentrated triadic relationships. |
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| Keywords: | Relationship embeddedness Resource dependency Financial performance Triadic supply chain relationships Econometric analysis |
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