Supply Network Strategy and Social Capital

Abstract

The focus of this chapter is on interorganizational supply networks and, specifically, the social capital and liability within them. Supply networks are sub-networks nested within interorganizational networks that include the actors, resources and activities associated with value adding processes converting resources to goods and services. To describe the nature of supply networks and the concept of supply, the literature review within the chapter traces the development of the concept through the different systems levels of supply within the firm boundary, within dyadic supplier-customer relationships, within chains of relationships, and within whole focal firm supply networks, providing examples of social capital and social liability.

A normative, rational view of supply network strategy is presented, using examples such as Benetton and Toyota to support the argument that social capital may not be an emergent feature of supply networks but may actively be pursued by firms seeking to increase competitive advantage; this view is in opposition to much of the work of the Industrial Marketing and Purchasing (IMP) group that maintains the coping nature of players in interorganization networks. Firms such as Benetton and Toyota appear to have taken on the role of supply network hub, facilitating and coordinating more effective and efficient flows of materials and information. They also appear to have focused strategically on end customers and their requirements.

Findings are also presented to support the view that social capital in networks, rather than being a tangible, measurable asset, is a function of actors’ expectations and perceptions of performance and is therefore a subjective notion.