How Do Businesspeople Get Embedded? A Longitudinal Study of the Influence of Economic, Institutional, and Social Forces on Embedded Ties in Interfirm Relationships

Project: Research

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Doing business in China has often proven to be a formidable challenge not only for foreigners but for locally-based businesspeople as well. The first advice a businessperson typically receives in China is to build an effective Guanxi network, predicated on personal, well-embedded ties at the individual level as defined in this research. Yet, very little effort has been devoted to address the essential issue: How do businesspeople become embedded?Embedded ties, or the interpersonal relationships between firm boundary agents, have gained significant attention from organizational scholars, because they represent an additional governance form that carries strong expectations of trust and deflects opportunism (Granovetter 1985; McEvily and Marcus 2005; Uzzi 1996, 1997). Researchers argue that it is rather simplistic to assume that persons are either innately self-interested or cooperative. That is, businesspeople can be selfish and cooperative simultaneously; whether they behave selfishly or cooperatively depend on the structure of the organization and the market in which they are embedded (Uzzi 1997).Building on previous studies, we contend that embedded ties result from not only social forces but also economic and institutional factors. These forces combine to form embedded relationships in interfirm relational exchanges. We develop an integrative, testable model of embedded ties formation, drawing on resource dependency theory, institutional theory, and social exchange perspectives. This parsimonious model extends current research on relational exchanges and enables us to assess simultaneously the various potential antecedents and consequences of embedded ties.Through an empirical examination of matched samples from sales firms and distributors, we intend to (1) examine the direct and indirect effects of the key components of these three perspectives on each element of embedded ties and their relative importance, (2) highlight the partial mediating role of interpersonal interactions in forming embedded ties, and (3) uncover the asymmetric effect of each antecedent force for both manufacturers and distributors. The proposed theory moves beyond mere economic approaches (e.g., resource dependence theory) and more recent institutional theories pertaining to relational governance at the organizational level. The findings in turn will offer managers a broader and deeper understanding of the driving forces behind embedded ties in interfirm relationships.


Project number9041618
Grant typeGRF
Effective start/end date1/11/1020/06/14