Buying products from whom you know: personal connections and information asymmetry in supply chain relationships

This study investigates the role personal connections play in a crucial element of supply chain—supplier selection. We find that likelihood potential supplier (hereafter, vendor) is selected to be an actual supplier) increases when between executives vendor and customer exist. The magnitude effect varies predictably across management ranks positions stronger information asymmetries are high. Conditioning on existence supply-chain partnership, departure personally connected executive prompts termination relationship more often than unconnected executive. Additional analyses show associated with less restrictive procurement contracts improved performance after formation relationship. Overall, our highlights reducing asymmetry improving operating efficiency chain.