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Buying Products From Whom You Know: Personal Connections And Information Asymmetry In Supply Chain Relationships, Ting Chen, Hagit Levy, Xiumin Martin, Ron Shalev

Publications and Research

This study investigates the role personal connections play in a crucial element of the supply chain—supplier selection. We find that the likelihood that a potential supplier (hereafter, a vendor) is selected to be an actual supplier (hereafter, supplier) increases when personal connections between executives of the vendor and the customer exist. The magnitude of the effect varies predictably across management ranks and positions and is stronger when information asymmetries between a vendor and a customer are high. Conditioning on the existence of a supply-chain partnership, a departure of a personally connected executive prompts the termination of the supply-chain relationship more …