Social Capital, Legal Contracts, and Market Knowledge Acquisition in Supplier-Buyer Relationships

In today's business world, it is imperative for any firm to actively acquire market knowledge to survive and prosper. This project combines social capital theory and transaction cost economics to examine how social capital and contracts affect the acquisition of two different types of market knowledge (i.e., explicit and tacit knowledge) in interfirm relationships. The researchers propose that social capital has a stronger positive impact on tacit than explicit knowledge acquisition whereas contracts have a stronger effect on explicit than tacit knowledge acquisition. However, contracts and social capital jointly offer a potent strategic combination for both tacit and explicit knowledge acquisition. Furthermore, drawing on absorptive capacity theory, the researchers propose that the effects of social capital and contracts are constrained by a firm's absorptive capacity. The hypotheses will be tested using data from a sample of 400 matched supplier-buyer dyads in China. The results of this project carry important theoretical and menagerial implications for market knowledge acquisition.