Creating and Capturing Value in Repeated Exchange Relationships: The Second Paradox of Embeddedness

Daniel W. Elfenbein () and Todd Zenger ()
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Daniel W. Elfenbein: Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130
Todd Zenger: David Eccles School of Business, University of Utah, Salt Lake City, Utah 84112

Organization Science, 2017, vol. 28, issue 5, 894-914

Abstract: Prior empirical studies suggest repeated exchange develops increasing value in buyer–supplier relationships. A first order implication of this finding is that buyers will concentrate exchange among a relatively small number of suppliers to generate maximum value in relationships. However, buyers are equally concerned with value capture. By distributing rather than concentrating exchange, buyers may position themselves to capture more of the value created, leaving buyers potentially conflicted concerning the choice. We label this dynamic the second paradox of embeddedness, distinguishing it from Uzzi’s [Uzzi B (1997) Social structure and competition in inter-firmnetworks: The paradox of embeddedness. Admin. Sci. Quart. 42(1):35–67.] paradox driven by technological uncertainty. By examining the procurement activities of a large, diversified manufacturing company, we then test for supplier and buyer behavior consistent with the conditions that give rise to the second paradox and behaviors that result from it.

Keywords: relational capital; buyer–supplier relationships; value appropriation; procurement; portfolio of relationships (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (14)

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