EMBEDDED PARTNER SELECTION IN RELATIONS BETWEEN FIRMS

This chapter addresses how firms buying information technology (IT) products select their suppliers. We argue that social embeddedness, in the sense of own experiences with suppliers and information about experiences of third parties, influences these types of selection decisions. More specifically, we claim that social embeddedness is more important if: (1) the potential damage for the buyer from receiving an inferior product is larger and (2) if it is more difficult for the buyer to monitor the quality of the product. We use large-scale surveys of IT transactions in the Netherlands and Germany to test these hypotheses. In general, our hypotheses about the effects of social embeddedness on partner selection are supported. We find that buyers tend to assign greater weight to product quality if the potential damage for the buyer is larger. Negative third-party information is particularly important if the buyer has large problems to monitor the quality of a product.