How do a buyer’s political ties affect the market-based selection of suppliers?

Although the differential roles of political and business ties are recognized in the literature, the interplay between political and business ties remains unclear. This study aims to explore how political ties affect the formation of business ties with unfamiliar partners by analyzing how a buyer’s political ties affect the market-based selection of suppliers, an important channel through which the buyer forms business ties with unfamiliar suppliers.

A survey of 204 Chinese manufacturing firms was conducted to elucidate the relationship between political ties and the market-based selection of suppliers.

The findings suggest that buyers with strong political ties are more likely to engage in the market-based selection of suppliers; this positive relationship is diminished when social control is preferred over contractual control in the buyer’s supplier governance and is enhanced when technological uncertainty is high.

First, this study sheds light on the interplay between political and business ties by revealing how the buyer’s political ties affect the formation of business ties with unfamiliar suppliers, as represented by the market-based selection of suppliers. Second, it uncovers the boundary conditions of the effect of political ties by revealing the moderating effect of social control preference and technological uncertainty. Third, it extends the interorganizational governance structure literature from its focus on the complement-substitute debate on social control and contractual control to examine the contingent effect of a hybrid governance structure.