The ties that bind: Buyer-supplier relations in the construction industry

This study considers the consequences of Inter Organisational relations at two levels: the micro level of the individual, and the macro level of the organisation. Merging Transaction Cost Economics with theories on the Social Embeddedness of relations, the paper tackles several hypotheses about problems in buyer–supplier relations. We amend the general hypothesis, as has been put forward by other researchers, that having a common past in combination with an expected common future in business will reduce the likelihood that problems and conflicts occur. Our focus lies on whether this shared past and future can preclude problems better when the organisational relations are at the micro level. Our analyses of survey data from 448 contractor–subcontractor relations from the contractor's perspective in the construction industry reveal mixed support for effects of a shared past or future. We hardly find any of the expected positive effects of a shared past on supplier performance. However, we do find support for the hypothesis that a larger likelihood of future business with the same business partner has a stronger (negative) effect on the occurrence of problems if the expected future business is at the level of individuals (instead of at the level of organisations).