Shaun Cheah1 and Cameron Gordon2*
1Lecturer, Faculty of Art and Design, University of Canberra, Australia
2Associate Professor, Research School of Management, Australian National University, Australia
*Corresponding author: Cameron Gordon, Associate Professor, Research School of Management, Australian National University, Australia
Submission: July 01, 2020Published: April 6, 2021
ISSN:2770-6648Volume2 Issue3
This paper explores and provides an understanding of how B-to-B relationships can be better understood by incorporating a Social Capital (SC) framework. It argues that SC dimensions (i.e., relational, cognitive and structural), underpin alliances that are salient to International Business (IB). A synthesis of the literature on B-to-B SC and loyalty into a single, process-based framework is established, together with institutional texture insights for firms to harness and develop for success. The central argument is that investments in relationship building not only enhance B-to-B loyalty but over time fashion the nature and depth of the alliance for the international firm. The paper adds to the literature on international B-to-B collaborations whilst having the potential in providing managerially relevant (“actionable”) results in ‘how’ and in ‘what way’ B-to-B SC can be harnessed in the 21st century IB system.
Keywords: Social capital; International business; Inter firm (B-to-B) collaborations; Loyalty
International Business (IB) research is increasingly focusing on intra and inter-firm
coordination with Mathews [1], Peng [2], Buckley [3] and Dunning [4] calling for closer
specification of how institutions facilitate and underpin cross-border trade and investment.
This international system of production that emerged in the late 20th century is becoming
increasingly institutionally based, rather than purely market transaction focused. The
emerging business environment is well captured in the term global factory, where changes
in managerial style and innovations are essential to warrant success in a highly competitive
global economy. Here, the evolution of the global factory requires managers to have a greater
understanding whilst acting as coordinators across the system of internationally interconnected
firms Buckley [3]. Institutions matter, but how? The point of departure taken in
this article is to expand on the current understanding of IB institutions by incorporating
the formation of Social Capital (SC) into the specific and important challenge of Businessto-
Business (B-to-B) institution building. It will be argued that the accretion of SC through
relationship building (and nurturing) is central to the formation of networks for and between
firms. In a sense an SC framework can better accommodate B-to-B institutions, relationships
and transactions than an institutional perspective alone.
The outline of this article is as follows: The literature on B-to-B and SC relationships will
be reviewed focusing on how SC allows businesses to harness and develop for success. A
conceptual model is then proposed which argues that SC influences loyalty intentions through
the network of relationships (structural dimension of SC); quality of those relations (relational
dimension of SC); and the shared beliefs of the relationship partners (cognitive dimension
of SC). Particularly important is SC’s unique feature associated to other forms of capital as
SC is inherently bound with the organization and development of the business Walker [5],
Nahapiet [6], Moran [7]. The paper ends with a proposed research agenda that could bring
together a wide range of measures that have been applied in marketing and IB literature and
answers the call for closer qualitative examination of B-to-B SC relationships.
Inter-firm (b-to-b) strategy, institutions, and transaction costs in international business: The traditional view
What drives firm performance and strategy in International
Business (IB)? What governs the success and failure of firms
(and B-to-B relationships) around the world? Traditionally, the IB
literature outlines two perspectives; an industry-based view, which
argues that “conditions within an industry, determine firm strategy
and performance” Porter [8] and a resource-based view, which
suggests that it is “firm-specific differences” that drive strategy and
performance Barney [9]. These observations are principally in the
field of strategic management. Given how the ‘new institutionalism’
has progressed in social sciences in past years North [10], Oliver
[11], Williamson [12] and Hall [13], the notion that ‘institutions
matter’ is hardly novel. What is intriguing though is ‘how’ and it
‘what way’ it matters. This is reinforced by Narula [14] who posit
that the “process of globalization requires us to develop, modify
and improve the available theoretical and conceptual frameworks
that the IB literature provides us”.
There is already much study of the institutional responses
of firms to these changes in the global marketplace. In particular
the use of strategic alliances, defined by Gulati [15], as “voluntary
arrangements between firms involving exchange, sharing, or codevelopment
of products, technologies, or services...occurring as a
result of a wide range of motives and goals, [and taking]...a variety
of forms...across vertical and horizontal boundaries”, are now a
universal phenomenon and their propagation has led to a rising
stream of research by strategy and organizational scholars who
have examined the partnership processes, causes and outcomes,
mostly at the dyadic level Auster [16]. As is well-known in the
literature, B-to-B partnerships are set across a continuum, ranging
from minimal inter-firm connections except that which is explicitly
contracted for on a transaction-by-transaction basis (for example, a
foreign export agent that connects an offshore firm with domestic
clients) all the way to deep, equity-based firm entwinement (such
as wholly owned subsidiaries or jointly owned strategic alliances
and partnerships) Peng [2]. Whatever such collaborations entail,
they are usually seen by both academics and businesspeople in
transactional terms, positing that an alliance (or any other related
inter-firm coordination mechanism) is a matter of benefits versus
costs. If net benefits become negative for too long the alliance will
suffer or even fall apart.
However, there are many examples where one-party benefits
much more from a relationship than the other, yet it still carries
on. A case in point would be in the Apple and Foxconn relationship.
The Apple-Foxconn business partnership was outlined by Chan
[17] as being ‘highly unequal’. The ‘competitive advantage’
that Apple has lies in the combination of corporate leadership,
technological innovation, design and marketing Lashinsky [18]
whilst its financial success lies primarily from the ‘hard-nosed’
management of production of its suppliers who are mainly based in
Asia. As a result, Apple’s volume, coupled with ‘ruthless’ business
dealings allow them to ‘take advantage’ of its suppliers Satariano
[19]. In this instance Foxconn accommodated Apple’s ‘squeeze’
while continuing to reduce labor expenditures, including cuts
in wages (mainly overtime premiums) and benefits Gulati [15].
This collaboration is mostly financial, based upon transactional
cost economics, and demand responsive. But the value of the
relationship and its corresponding repercussions to its business
partners (i.e., Foxconn), though secondary, does seem to have
some independent value, enough so that even with rather blatant
inequality it has proven to be resilient.
Certainly, the economic motivations for most business alliances
are paramount. Firms don’t form alliances as symbolic social
affirmations but base these alliances on strategic complementarities
that are offered to each other. Yet it could be that the conditions
of mutual economic advantage are necessary but not sufficient for
inter-firm (B-to-B) alliance formation. Gulati [15] had postulated
that firms entering alliances face considerable ‘moral hazard’ issues
because of partner behaviour unpredictability and the likely costs
from opportunistic behaviour. This is the case with the Apple-
Foxconn alliance. Here Apple, is behaving opportunistically and
although Apple’s partnership with Foxconn is ‘somewhat efficient’,
the literature suggests that having a better relationship can enhance
this efficiency Chan [17], Lashinsky [18].
The concept of ‘somewhat efficient’ is an important one.
Hagedoorn [20] argued that the selection of partners representing
profit maximizing entities is optimal only in a static environment.
Kay [21] however explains that “it is necessary to engage in networks
with certain firms not because they trust their partners, but in order
to trust their partners”. Thus, transaction cost economics and related
theories (such as internalization theory) cannot always be utilized
as a complete explanation for international activities, especially in
a dynamic setting. This is more so as human characteristics such
as trust and bonding are not fully captured. This is where the SC
concept can be useful both in theoretical understanding and in
business practice.
The social capital concept and business
The literature reveals over 19 definitions of social capital
Knoke [22], Coleman [23], Burt [24], Adler [25], Moran [7], Krause
[26] and Eklinder [27] with the differences relating mainly to
whether social capital (SC) is analyzed within an organization, in
partnerships amongst organizations and their external actors, or
both. Overall, the consensus is that ‘relationships’, whatever their
specific form (e.g. strategic alliance) are an essential part and a
critical dimension of SC, with SC itself existing as an independent
intangible asset arising from such relationships. SC can be said to
be the goodwill established to facilitate action Adler [25] while it
is the interacting members who facilitates the reproduction of this
social asset Bourdieu [28], Portes [29], Putnam [30] and Lin [31].
Therefore, SC is an important resource because individuals work
together more efficiently when they know one another, understand
one another, as well as trust and identify with one another. In
this sense SC is a supplement to transaction costs management
in business setting, both because it lowers costs (genuine trust is lower cost than enforcement without trust) and by creating an
‘asset’ that has independent value that can weather unforeseen
events better.
SC derived from business relationships has been shown to
impact bottom line results Cohen [32], Jones [33] and as such an
understanding of SC’s nature is essential as a key element of a firm’s
competitive advantage. Further, a primary factor of successful
relationship and SC building is a dedication to work towards
mutually beneficial relationships. Therefore, the development of
B-to-B SC is affected by the dynamics of actors between businesses,
and thus can limit or enhance any advantages that that SC renders.
In the best case, SC can create a virtuous circle whereby solid trust
builds SC which deepens trust which further enhances SC. SC is
also differentiated by sociologists and organizational theorists into
various dimensions: structural SC - the number of ties between
relationship partners Burt [34]; relational SC – the strength
of relationship or the quality of an actor’s personal relations
Granovetter [35]; and cognitive SC - the shared beliefs of the
relationship partners Nahapiet [6].
Structural SC includes social interaction and is embedded in
components such as social dimension ties, network connection
consequences and strength, and network density. In essence, it is
fundamentally the extent to which businesses are connected. The
relational dimension of SC is the quality of B-to-B relationships
and stems from relationship-reliant consequences. It essentially
describes the relationship strength developed by network members
through a history of interactions Nahapiet [6]. The cognitive
dimensions of SC are characteristics of the environment, embedded
in person-related intangible skills where businesses work together
for the common good. It is the extent to which their social networks
share a common goal in the areas of beliefs, interests, values,
language, norms of behavior, and systems of meaning Nahapiet [6].
Cognitive SC is also rooted in the study of communal relationships
and sociology where common goals assist in facilitating collective
behaviors. In summary, the literature suggests that the relationship
strength and shared beliefs typically result in higher SC. In a
business setting this may result in improved performance and
competitive advantage, though obviously these outcomes depend
on many other factors. Moreover, research has posited positive
effects relating to commitment, closeness of relationship (which
is relational SC proxies) on loyalty-related outcomes Barnes [36],
Bansal [37]. It is based upon the above that the three SC dimensions
will be used as a key construct to reflect how they contribute to the
study of B-to-B SC relationships in the IB context.
Social capital and inter-firm (B-to-B) relationship
Several studies have explored the importance and effectiveness
of social embeddedness on the formation of inter-firm (B-to-B)
cooperation. For instance, studies have used the social network of
prior B-to-B alliances to show that those with more prior alliances
were more likely to enter into new alliances. They did so also
with greater frequency Kogut [38], Gulati [39]. Similar findings
have also been reported for the influence of firm alliance include
alliance networks among bio-technology firms, semi-conductor firms and their patent citation networks Podolny [40], and those
of top management teams of semi-conductor firms Eisenhart [41].
Each network highlights a different underlying social process that
enables central firms to enter alliances more frequently.
As far as B-to-B alliances breaking down, the literature shows
that B-to-B partnerships with a prior history of ties were less likely
to terminate their collaboration Kogut [42]. In another important
set of studies, Levinthal [43], Seabright [44] determined that
the duration of exchange relationships is not only influenced by
changes that occur in task conditions, but there may be ‘dyadic
attachments’ between firms that lead to the persistence of such ties.
Marketing and strategy scholars have also resorted to extensive
studies administered to the individual managers responsible
for the alliance from each partner Heide [45], Parkhe [46]. Such
approaches enable the collection of a host of measures, subjective
and objective, on which the B-to-B alliances can be assessed.
The theoretical underpinning of these findings goes as follows.
Firms are embedded in a social structure of dependence that
can possibly alter the power dynamics in a potential alliance.
Partnering firms are also likely to have greater confidence (and
trust) in each other, whilst the network creates a natural deterrent
for bad behavior that will damage reputation. Trust enables
greater exchange of information, promotes ease of interaction and
facilitates a flexible orientation on the part of each partner. These
can create enabling conditions under which the success of an
alliance is much more likely Gulati [47]. Such social structures can
limit opportunistic behaviors (as with earlier noted Apple-Foxconn
alliance) leaving firms to be more willing to make non-recoverable
investments, which in turn enhance alliance performance. Surveybased
evidence also further confirms that both interpersonal and
B-to-B level trust can be influential in the performance of exchange
relationships Zaheer [48]. Also, while there have been several
efforts to explore differences in ‘embedded’ ties between firms,
studies don’t directly assess whether embedded ties perform any
better than other ties. Also, while embedded ties differ from other
ties, we have less understanding of the extent to which alliances,
with embedded ties, actually perform better or worse than other
alliances and why. Research of B-to-B relationships have primarily
focused on the implications of embeddedness, yet the social and
economic contexts in which firms are embedded on their choice of
alliances remains underexplored. There may also be implications
from the embeddedness of firms in other types of social networks
that could influence the design of alliances, but this has yet to be
examined. A key consideration in operationalizing all this research
would be to focus directly on the ways social networks (through
social capital dimensions) play a role and whether the extent of
embeddedness in social networks is an important factor. While
there have been advances in assessing these B-to-B alliances, few
of these efforts have considered the impact of social networks
(and relationships), specifically through SC dimensions Medlin
[49]. As such, there has been considerable interest in uncovering
the processes that underlie the development of B-to-B alliances,
something that would allow firms to anticipate such conditions and
modify the structure of their relationship accordingly Powell [50].
The model shown in Figure 1 reflects a causal ordering derived
from the literature reviewed and considers inter-relationships
between various SC dimensions and linking them to key aspects of
B-to-B collaborations. This continuum draws from research in the
field of ‘relationship marketing’ Dwyer [51], Crosby [52] in which
the aim is to strengthen existing relationships whilst increasing
loyalty Zeithaml [53].
In addition, social network theory Freeman [54] and social
exchange theory Blau [55] has been used a basis for the model as
synthesizing these theoretical perspectives enables the evaluation
of synergies among the SC dimensions (structural, cognitive and
relational) and loyalty. It is also aimed at supporting the premise
that B-to-B loyalty derive not only from the number of B-to-B
ties, the authority of the contact portfolio, and the interaction
amongst partner organizations Morgan [56], Siguaw [57]. For
example, social exchange theory suggests that commitment and
trust between two organizations are key drivers of loyalty, whereas
social network theory suggests that other attributes, such as the
level of interconnectedness among network entities, are key
determinants of performance and loyalty Wuyts [58]. Also, as B-to-B
exchanges often entail relationships and fall within the continuum
of organisation interaction, social network theory provides insight
into “missing” drivers of relationship loyalty between B-to-B
organizations. In addition, the agency theory approach has also
been applied to examine the special relationship that binds B-to-B
partnerships as this has been argued to be a useful first step in
diagnosing opportunities to advance co-operative behaviors Ellis
[59]. According to the agent theory, organizations enter into a
relationship because of the benefits of specialization and as a
means to control risk Logan [60].
Figure 1:Proposed B-to-B SC model.
The proposed model also builds on the theoretical framework
conceptualized by Moran [61], Nahapiet [62] which studied how
structural, relational and cognitive SC facilitate value creation
through combinations of exchange of resources. Here, Nahapiet
[62] relied on Granovetter [63] distinction between structural
and relational SC, which was also a distinction made in the work
of Lindenberg [64], Hakansson [65]. Within this, social interaction
remains key for structural SC as the contact’s location allows for
certain advantages. Here, organizations use their contacts to obtain
information or to access specific resources. Relational SC, in contrast,
refers to assets (such as trust and loyalty) that are rooted in these
relationships. Loyalty acts as a governance mechanism (and an
attribute) for relationships Uzzi [66] and since loyalty is prompted
by joint efforts Gambetta [67], Ring [68], a trusted organization
partner is more likely to obtain their organization partners’ loyal
support. Cognitive SC also facilitates an understanding of the
appropriate ways of acting in a social system and this is carried out
through collectivity as a resource Portes [69]. Moreover, cognitive
SC captures the essence of what Coleman [23] described as “the
public good aspect of social capital”. For example, a shared vision
or a set of common values in an organization assist in developing
SC’s cognitive dimension, which in turn facilitate actions that can
benefit the whole organization. As such the research narrative is
directed at analyzing the various SC dimensions and its effect on
the loyalty chain with objective-based indicators. The indicators
in question are in B-to-B contract cessation or/and continuance.
It also evaluates how SC in its cognitive, relational, and structural
forms contributes to or impedes loyalty as the three dimensions
capture a different aspect of B-to-B relationship. It is noted
though that loyalty intention is further enhanced when these
dimensions reinforce one another Palmatier [70]. The premise of
synergies among SC dimensions to loyalty is also consistent with
research in social networks. As Wuyts [58] summarize, different
aspects of network structure capture the “ability, opportunity,
and motivation” of network partners, and these characteristics
reinforce one another to enhance performance and loyalty. In
Figure 1, the SC dimensions of structural, relational and cognitive
‘arrows’ represent causal effect and direction. In other words, the
arrows between each dimension proposed influence lines between
one factor and another in a causal direction.
Table 1 describes the association of structural and relational
SC. This is evident in research conducted in relation to weak and
strong ties and the association between this and relational SC
stems from recent studies on customer-employee rapport Gremler
[71]. The study found that a series of interactions (structural SC)
are associated with a personal connection (relational SC). It also
follows studies which suggest that structural SC is a driver of
relational SC. For example, frequent interactions (structural SC) are
often closely associated with trust and commitment (relational SC)
in the psychology literature Fehr [72]. Hinde [73] also suggests that
frequency of interaction and duration of relationship (structural
SC) are highly cited reasons for strong relationship development
(relational SC).
Table 1: Describes the association of structural and relational SC.
Table 2 describes the association of cognitive and relational SC and this initially stems from research pertaining to friendships and romantic partnerships. Here, studies have suggested that cognitive SC is an antecedent to relational SC Burke [74]. Moreover, close relationships are often formed within communities where the presence of shared meanings and norms (cognitive SC) allow for stronger ties (relational SC). Research in psychology also suggests that relationship strength is more likely to develop sooner within groups than with outsiders Hinde [73] and thus this is expected to follow suit in the B-to-B context. Table 3 describes the association of structural SC to cognitive SC This is where the structural and cognitive SC association rely on the premise that social interactions play a critical role both in shaping a common set of organization values and goals Hinde [73].
Table 2:Describes the association of cognitive and relational SC and this initially stems from research pertaining to friendships and romantic partnerships.
Table 3:describes the association of structural SC to cognitive SC.
Table 4 describes the association of all three SC dimensions to loyalty. Here, Sitkin [75] maintained that trusting relationships (relational SC) not only increases loyalty but are rooted network density or the level of inter-connectedness amongst network members (structural SC). Network research shows that these forms of network inter-connectedness positively affect cooperation, knowledge transfer, communication efficiency, and product development performance Rowley [76], Sai [77] and Walker [5]. More network partners (structural SC) also provide access to and control more valuable information and resources, which supports increased value creation (and loyalty) from network ties Baum [78], Burt [34]. Hence, an organization occupying a central location in a social interaction network is likely to have higher loyalty ties to other organizations in the network Granovetter [79]. Thus, organizations are more inclined to be loyal, as they can expect to work towards collective goals and will not be hurt by the pursuit of self-interest. Krackhardt [80] also posited that the organizations’ social interactions (relational SC) often influence the formation of a shared vision (cognitive SC). Here, the literature on organizational socialization. Lindenberg [64] highlighted the importance of informal social interaction in forming loyalty ties. Hence, frequent and close social interactions permit organizations to know each other, share important information whilst creating common views. For example, the social interaction process has led organizations to realize and adopt languages, codes and practices and may share a collective orientation toward the pursuit of similar goals and plans. This constitutes the vision and therefore organizations are more likely to maintain loyalty with other business units in the network Nahapiet [62].
Table 4:Describes the association of all three SC dimensions to loyalty.
Rusbult [81] investment model of commitment also depicts
the positive link between investment and loyalty - a proxy for
relational SC. Structural and relational SC may also stimulate
loyalty as previous studies have suggested that loyal relationships
evolve from social interactions Gulati [82], Granovetter [79]. As
organizations interact over a period of time, relationship quality
become more concrete Gabarro [83] and this enhances cooperative
behaviors, which in turn affects decisions that increases loyalty
Donaldson [84]. High-quality relationships are also a result of
trust, commitment, and reciprocity and entail an efficient cost of
maintaining the relationship with a “minimum of hassles” Wulf [85].
Moreover, the network literature has documented the implications
of strong social interaction for trust and loyalty Krackhardt [86].
Thus, in a B-to-B context, relationships that include interpersonal
ties can better uncover key information, build strong B-to-B
relationships, and influence behaviors beyond the contractual
setting Bendoly [87], Granovetter [79].
Relational and cognitive SC may also enhance loyalty as it
encourages the development of trusting relationships whilst
erasing the possibility of opportunistic behaviour Barber [88],
Ouchi [89]. In this regard, relational SC entails the strength of the
relationship built over time, whereas cognitive SC refers to the
commitment to align cultures and goals within the relationship.
Overall, this model poses the ‘how’ question for inter-firm alliances
and highlights important sets of conditions deriving from the use of
SC dimensions (in the context of social networks firms are placed
in), which in turn influences their behaviour, and ultimately the
continuance or cessation of the partnership. The benefits to the
firm of cognitive, relational and structural SC result in loyalty but
to what extent is the relation forms core of this research study.
Thus, an understanding of the significance of SC’s three dimensions
that influence alliance formation provides insights for managers
on the path-dependent processes that may lock them into certain
courses of action, as a result of constraints from their current ties.
Such concerns can then be anticipated and thus can be proactively
initiated to enhance their informational capabilities. In another
instance, a potential advantage can stem from economies of scope
and applying relevant resources in different contexts. In a similar
light, and in relation to transactional costs, the costs of maintaining
the network are in the management of information (structural SC)
and mutual leniency, reinforcing trustworthy behaviour (relational
SC) whilst underscoring network commitment (cognitive SC) and
having a good grasp of how these interact and influence each
other in loyalty building will be useful. For example, loyalty can
be a ‘cause’ of both continuance and cessation which the various
dimensions of SC are interrelated to ‘cause’ loyalty. Effective B-to-B
relationships are of core importance and building (and sustaining)
long-term relationships serve as a key target for successful business
activities. Heskett [90] first point to loyalty as the essential element
or condition of an effective business strategy. The economic value of
loyalty also has been discussed by Jones [91], Reichheld [92], where
a complete understanding of the concept of loyalty highlights the
need for a balance of value between businesses and the need to
develop loyalty as a long-term investment. Thus, the benefits to the
firm of SC, resident within the relationship, are the generation of
loyalty. Besides, a number of loyalty indicators are evident in the
services literature and this includes concepts such as ‘repurchase
intentions’ and willingness to pay more Barry [93], Saura G [94],
Mosisescu [95] and in the models’ case, ‘cessation’ and ‘continuance’.
Furthermore, Palmatier [70] asserts that firm loyalty has proven to
be key in determining the health of B-to-B relationships. So how
does inter-firm trust lead to greater loyalty? Knowledge-based
trust (resulting from mutual awareness) and deterrence-based
trust (resulting from reputational concerns) results in ‘contractual
safeguards’, leading to greater loyalty Bradach [96], Powell [50]. As
a result, contractual concerns are more likely to be alleviated when
trust is established, and this is due to the social network existence
Gulati [39]. This is where the various dimensions of SC can be
studied.
Whenever two firms enter an alliance, whatever its exact
institutional structure, their network proximity is posited to
influence the specific governance structure used to formalize the
alliance Gulati [47]. Also, the extent to which two partners are
socially embedded can influence their preceding behaviour and
affect the alliance future success. Moreover, a firm’s portfolio of
alliances and its network position can have a profound influence
on its overall performance Gulati [39] and as such exploring
the development of B-to-B SC can play an important role. The
conceptual framework above provides greater insights into
the potential evolution of networks, where strategic action and
social structure are closely intertwined. This facilitates greater
understanding of the extent to which B-to-B alliances are locked
into path-dependent courses of action as it allows firms to also
be able to select path-creation strategies Garud [97]. As a result,
firms can then visualize the desired network structure of alliances
in the future and work backwards to define their current alliance
strategy. Gulati [39], also observed that firms which independently
initiated new alliances turned to their existing relationships first
for potential partners. The manner and extent to which were
embedded were likely to influence key decisions, their choice of partner, the type of contracts used, and how the alliance developed
and evolved over time. Gulati [39], fieldwork concluded that prior
ties in social networks influenced the creation of new ties whilst also
affecting their design, their evolutionary path, and their ultimate
success. A similar orientation also can be applied for studying the
consequences of B-to-B SC alliances. Here, firms entering alliances
can use social networks as SC becomes a basis for competitive
advantage Burt [98]. Moreover, firms are able to extract superior
terms of trade because of possible control benefits as a result of
SC. Therefore, the informational benefits from social networks can
have implications for the growth and corresponding success of the
alliance itself.
Eisenhart [41], in their study, also determined that alliances
form when firms are in vulnerable strategic positions either
because they are competing in highly competitive industries or
because they are attempting to pioneer technical strategies. Their
findings also conclude that alliances form when firms are in strong
social positions such that they are led by large, experienced, and
well-connected top management teams. Overall, this conceptual
framework forms part of building blocks and allows one to
distinguish how the context of the society that is being studied
differs from other studies in existing literature. This method is
in line with the practice proposed by Inkpen [99]. Incorporating
social network factors into firms’ alliance behaviour also provides
a more accurate representation of key indicators which influences
strategic actions of firms, and this has implications for managerial
practice, which has so far been underexplored.
It has been argued that SC is a useful concept to incorporate into
IB research into B-to-B relationships (and by extension relationships
with consumers). But how could this usefully be done? A way
forward is proposed, and this consist of specific research questions,
case analysis and particular data collection methods and analysis.
This discussion will be brief but useful to touch on because of its
potential practical implications in the business arena. Because SC
and B-to-B relationships are so contextually specific, and because
relatively little is known about the causes and effects at present in
IB systems, several research questions appear paramount:
“How can businesses entering strategic alliances with other
businesses use social capital to manage B-to-B relationships and
enhance loyalty?”
This is elaborated by the following sub-questions:
A. What aspects of the SC dimensions play a more critical
role in influencing loyalty intentions?
B. How can the B-to-B relationship be managed to support,
plan and assess the activities which influence loyalty intentions?
These questions are highly contextual. As relationships are
central to SC, it is argued that case research is best suited to exploring
SC in a B-to-B context, both to validate the proposed framework and
to properly amend and adjust it. Case research also allows a more thorough investigation of the B-to-B phenomenon in the IB context
as concrete nature of case study evidence is more cogent than
statistical findings Dickson [100]. A useful methodology to address
the research question(s) is by comparative case studies through
interpretive analysis, using the proposed model whilst applying
phenomenological and explanatory research (i.e., asking ‘how’
and ‘why’ types of questions). Two primary methods of gathering
data are through company files, archival documents and in-depth
interviews with B-to-B managers. Interviews in particular could
explore in detail the respondent’s own perceptions and accounts
on their B-to-B relationship and apply ‘convergent interviewing’
by gathering insights into respondents’ views and attitudes about
their B-to-B relationship, and their perceptions about why and how
firms build relationships.
To further validate the research questions, a quantitative study
is recommended with the following propositions to test.
A. Significance of SC’s relational dimension to loyalty:
1. The greater the trust between firms the greater the loyalty
2. The greater the commitment between firms the greater
the loyalty
3. The greater the reliability between firms the greater the
loyalty
4. The greater the long-term commitment between firms the
greater the loyalty
5. The greater the satisfaction between firms the greater the
loyalty
B. Significance of SC’s structural dimension on loyalty:
1. The greater the social interaction between firms the
greater the loyalty
2. The greater the communication intensity between firms
the greater the loyalty
3. The greater the resource exchange between firms the
greater the loyalty
4. The greater the network ties between firms the greater
the loyalty
C. Significance of SC cognitive dimension on loyalty:
1. The greater the shared vision between firms the greater
the loyalty
2. The better the managerial skills between firms the greater
the loyalty
3. The greater the person-related competencies between
firms the greater the loyalty
Comparative case studies as described above, together with company documentary evidence can result in case descriptions useful to forming an understanding of the ‘how’ and ‘why’ of SC dimensions and successful B-to-B collaborations. These can provide templates for more generalized data collection and analysis.
SC derived from B-to-B relationships can impact its bottom line
whilst the interactions establish a pattern of expectations based
on norms of reciprocity and equity. If these two patterns persist,
the sum of resources that accrue to a business transpires and an
SC base is built. Thus, an understanding of SC’s nature in IB is
necessary because it is a key element of a business’s competitive
advantage. A synthesis of the literature on B-to-B SC and loyalty
into a single, process-based framework has been presented here.
The literature suggests that stronger relationships, shared beliefs
between partners, and multiplex ties result in higher SC. This
approach redefines relationships by expanding on the present
understanding of SC dimensions and offers insights into alliance
formation in IB. It also provides an understanding of how B-to-B
relationships, as understood via the established SC dimensions
(i.e., relational, cognitive and structural), underpin networks and
alliances that are salient to IB.
By examining the specific way in which social networks (via
SC dimensions) influence firms’ future actions, firms can begin to
take a more pro-active stance in the new ties they enter. This will
be in designing networks, outlining implications on future partners
and also in obtaining control benefits. Similarly, there are several
insights that result from understanding the complexities associated
with managing a portfolio of alliances and relational capabilities.
Ultimately, managers want to know how to manage B-to-B alliances,
and the recognition of B-to-B SC dimension dynamics that influence
the performance of alliances can be extremely beneficial. The
challenge for scholars studying networks and alliances is to bridge
the gap between theory and practice and translate some of their
important insights for managers of the alliances.
The proposed model is also specifically intended to explore
the inter-dependence of SC, embedded in B-to-B relationships as a
greater understanding of SC dimensions can be valuable conduits
of information that provide both opportunities and constraints
for firms. It can also have important behavioural and performance
implications for their B-to-B alliances, as by channeling information,
the management of SC dimensions will enable firms to discover
new alliance opportunities and can thus influence how often and
with whom those firms enter into alliances.
Hence, empirical testing is required as it has the potential to
provide managerially relevant (“actionable”) results in ‘how’ and
in ‘what way’ B-to-B SC can be harnessed in IB. Research along this
path also further expands understanding of SC’s role in altering
existing B-to-B exchange relationships and the manner by which
firms use alliances to create and add value. It also adds to the limited
literature on B-to-B service relationships in a global context whilst
having the potential to provide managerially relevant (“actionable”)
results in ‘how’ and in ‘what way’ B-to-B SC can be harnessed in the
21st century IB system. There are, of course, limitations to this, as
any, model, and a number of issues should be further addressed.
One has already been noted in the earlier discussion of strategic
alliances, namely the fact that SC can have costs as well as benefits.
These are more diffuse and subtle than those under a transaction’s
costs rubric, but they must be kept in mind in any future study. Not
all relationships are worth having (or continuing) and the SC capital
they create may be value-destroying in some cases.
There are also important cross-cultural issues. In China, ‘guanxi’
plays a pivotal role in building B-to-B relationship. How does this
relate to SC? In this particular case the properties of ‘guanxi’ can
be seen as the result of the interplay between resource scarcity and
Chinese cultural context, low trust-radius, familyism, and the lack
of overarching norms, in effect both a possible cause and an effect
of SC and one where business and personal spheres are often highly
mixed. Li Y [101] proposed a type of network-based SC which
account for the dynamics (and its dimensions), comprising of dense
strong ties accompanied by sparse weak ties. On the other hand, the
boundary between business and social lives in Western countries is
more unambiguous and thus individuals tend to separate business
and social networks. Here, the SC concept and formulation will be
somewhat different than in China and other non-western societies
(and, indeed, this paper has implicitly been based in the western
paradigm) [102-108].
© 2021 Cameron Gordon. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and build upon your work non-commercially.