Kim, Choi - 2018 - Tie Strength and Value Creation in The Buyer-Supplier Context A U-Shaped Relation Moderated by Dependence Asymmetry PDF

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JOMXXX10.1177/0149206315599214Journal of ManagementBuyer-Supplier Relationship
Journal of Management
Vol. 44 No. 3, March 2018 1029–1064
DOI: 10.1177/0149206315599214
© The Author(s) 2015
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Tie Strength and Value Creation in the

Buyer-Supplier Context: A U-Shaped Relation
Moderated by Dependence Asymmetry
Yusoon Kim
Oregon State University
Thomas Y. Choi
Arizona State University
This study integrates two disparate genres within tie-strength literature into one model to inves-
tigate the mechanisms for value creation in the buyer-supplier context. This research brings
together the opposite ends of the tie-strength continuum: the “weak ties,” which are instrumen-
tal in tapping into novel ideas and emerging technologies, and the “strong ties,” which promote
joint resource investments and capability development. By doing so, we bring salience to the
existence of “intermediate ties” (i.e., the ties of moderate strength) and their implications for
value creation. Even though the intermediate ties are likely most common in the buyer-supplier
context, they have been given short shrift in the literature. We predict a U-shaped relation,
where weak ties and strong ties are more effective than intermediate ties in value creation.
Furthermore, we explore the moderating role of dependence asymmetry. Our hypotheses are
tested using survey data from a major global automaker and its North American suppliers. The
results demonstrate that both the weak and strong buyer-supplier ties lead to higher value cre-
ation, whereas intermediate ties do not increase value creation. Also, the study illustrates that,
overall, asymmetric buyer-supplier ties show diminished value creation, and this moderating
effect is particularly pronounced for intermediate ties.
Acknowledgments: This article was accepted under the editorship of Patrick M. Wright. We thank the action edi-
tor for her guidance throughout the review process and two anonymous reviewers for their constructive criticisms
and insightful suggestions. We are grateful to the anonymous global automaker for its generous support to collect
the data from its managers and North American supply base. Also, we thank CAPS Research (a leading nonprofit
supply chain research organization jointly sponsored by the member companies, W.P. Carey School of Business at
Arizona State University, and the Institute for Supply Management) for providing financial support and administra-
tive assistance in conducting this research. There are no conflicts of interest regarding this paper.
Corresponding author: Yusoon Kim, College of Business, Oregon State University, 443 Austin Hall, Corvallis, OR
97331, USA.
E-mail: yusoon.kim@bus.oregonstate.edu
1029
1030 Journal of Management / March 2018
Keywords: buyer-supplier relationship; tie strength; value creation; dependence asymmetry;

resource complementarity; distributive fairness
Introduction
In the last two decades, firms in general have increased their level of outsourced produc-
tion (Gilley & Rasheed, 2000). Consequently, suppliers play a bigger part in value creation,
and understanding how to manage these suppliers has taken on increased importance for
buying firms (Sobrero & Roberts, 2002). Firms that make better use of the collective
resources and capabilities in their ties with various suppliers are likely to be more productive
and bring greater value to downstream customers (Morris & Snell, 2007). With this knowl-
edge in mind, a question comes to the fore: How can buying firms better manage their ties
with suppliers to sustain the value creation?
Value creation can come in the form of improved productivity, product innovation, or
enhanced problem-solving skills (Benner & Tushman, 2003; Moran & Ghoshal, 1996;
Schumpeter, 1934). According to the resource-based view of a firm (Barney, 1989; Peteraf,
1993), the sources of value creation lie in the resources a firm possesses and can access,
where resources are heterogeneously distributed across firms. At the firm level, value cre-
ation occurs when a firm generates economic rents from the use of its resources and exceeds
its competitors in satisfying customers (Amit & Schoemaker, 1993; Peteraf & Barney, 2003).
In the interfirm context, value creation occurs when the two parties earn rents (i.e., via
resource transfer or combination) over and above what could have been achieved without the
partnership (Madhok & Tallman, 1998).
Much of the literature at the interfirm level has examined value creation through the lens
of tie strength, which informs how resources flow and operate between firms (Hansen, 1999).
Strong ties, characterized by close and frequent interactions, promote joint refinements of
existing, often underexploited, resources (Reagans & McEvily, 2003). In contrast, weak ties,
characterized by loose and infrequent contacts, allow for exposure to novel or nonredundant
resources via the partners (Granovetter, 1973). These two types of ties are proposed to facili-
tate different interfirm value creation mechanisms. In the present study, we frame these two
types of ties as consisting of two opposite ends of the tie-strength continuum—from weak to
strong.
For value creation, there have been scholars who argue for strong ties (e.g., Krackhardt,
1992) and others who promote weak ties (e.g., Levin & Cross, 2004). In general, the highly
congruent and integrated interfirm interfaces typical of strong ties are instrumental in the
transfer and integration of complex resources between firms and, thus, effective joint research
and development activities (Hansen, 1999). In a buyer-supplier context, positive effects have
been reported on productivity and innovation from long-term, close relationships (Paulraj,
Lado, & Chen, 2008). At the same time, the “loose” and “occasional” nature of weak ties has
also been argued to facilitate value creation (Granovetter, 1973). Weak ties between firms
can channel original and potentially useful resources by bridging otherwise disjointed groups
of firms (Powell, Koput, & Smith-Doerr, 1996). In the buyer-supplier context, Tangpong,
Kim, Choi / Buyer-Supplier Relationship 1031
Michalisin, and Melcher (2008) demonstrate that weak buyer-supplier ties are superior in
terms of product innovation for buying firms.
Receiving much less attention in the literature are the ties of intermediate strength (hence-
forth, intermediate ties) in value creation. There are some studies on intermediate ties at the
individual level (i.e., individuals in groups; Borgatti & Everett, 2000) and at the collective
level (i.e., villages; Barkey & Rossem, 1997), but to the best of our knowledge, there are
none at the interfirm level. This finding is surprising because in the buyer-supplier context,
intermediate ties are presumed to be the most common type of tie. Strong ties (e.g., “deep”
buyer-supplier relationships between Toyota and its key suppliers) are considered an accom-
plishment, and weak ties from which a buying firm can gain information on new market
trends and technologies occur occasionally (Choi & Linton, 2011). In contrast, intermediate
ties involve the bulk of the suppliers that provide most of the goods and services the buying
firm takes in from its base of suppliers. These relationships are established through com-
monly executed competitive biddings and are characterized by short- to medium-term agree-
ments (Handfield, 1993).
One plausible interpretation of this omission of intermediate tie scholarship is that these
ties are not conducive (or are conducive only to a lesser degree) to value creation. Scholars
may have seen little theoretical or empirical reason to study such ties at the interfirm level.
This lack of scholarship implies that the underlying dynamics involving intermediate ties are
such that these ties, in fact, lack the distinctive properties that facilitate value creation (rather
than having a combination of some advantages of both polar tie types; Borgatti & Everett,
2000). A large buying firm (e.g., Deere or Honda) typically carries a few thousand suppliers
with intermediate ties; in contrast, the so-called core suppliers with whom the buyer has
strong ties are only a small fraction of the supply base, typically in the order of a few hundred
(Dyer, Cho, & Chu, 1998; Liker & Choi, 2004), and the other “standby” suppliers with weak
ties that the buyer monitors for technology advancements are even rarer (Yan, Choi, Kim, &
Yang, 2015). The sample of suppliers in our study further attests to this observation. When
we line up the entire buyer-supplier ties in terms of tie strength, the majority of them fall
within the midrange—about 82% when using plus or minus 2 SE from the sample mean of
tie strength as the thresholds or about 65% when using 1 SE. In general, the suppliers with
intermediate ties are considered indistinct since they can easily be switched depending on the
buying firm’s operational needs. Therefore, as far as value creation in the buyer-supplier
context is concerned, we posit that intermediate ties do not fare as well as either weak or
strong ties, pointing to a U-shaped pattern.
Furthermore, we explore a possible moderating role of dependence asymmetry. Between
pairs of interdependent firms, relative dependencies are mostly at different levels. This
assumption is a particularly critical consideration in buyer-supplier ties since these ties are
often characterized by interfirm asymmetry in information and resource position (Gulati &
Sytch, 2007). Asymmetric buyer-supplier ties are associated with lower resource comple-
mentarity (Sarkar, Echambadi, Cavusgil, & Aulakh, 2001) and poorer distributive fairness
(Gassenheimer, Houston, & Davis, 1998). Consequently, the supplier in such a tie is less
likely to be invited or willing to engage in resource exchanges with the buyer. We propose,
therefore, that the hypothesized U-shaped pattern be moderated by dependence asymmetry
in buyer-supplier ties. Our overarching theoretical model is depicted in Figure 1.
Figure 1
An Overarching Theoretical Model
Dependence
Asymmetry
–
Tie Value
Strength ∩ Creation
Theoretical Development
We first clarify how we view value creation in our research context. We then offer theo-
retical accounts of the link between interfirm tie strength and value creation. The review of
related literature provides a foundation for developing our research model, which predicts
the value creation pattern along buyer-supplier tie strength from weak to intermediate to
strong.
Value Creation
Resources and capabilities are heterogeneously dispersed across different firms; thus,
firms necessarily rely on external relations for their resource needs (Barney, 1989). Essentially,
a firm’s resources drive value creation through the development of competitive advantage.
That is, fundamental to the creation and development of value are the resources firms possess
and can access (Sirmon, Hitt, & Ireland, 2007). In this regard, value can be defined as the net
rent-earning capacity of a firm’s resources, tangible or intangible (Madhok & Tallman, 1998).
Additionally, value is created when a firm generates and uses its economic rents to exceed its
rivals’ abilities to satisfy customer needs (Amit & Schoemaker, 1993; Peteraf & Barney,
2003). In an interfirm context, value can be conceptualized in terms of the relational parties’
abilities to earn rents (via using their mutually available resources) over and above what
could have been achieved absent the partnership (Madhok & Tallman).
In the buyer-supplier setting, value creation can occur at two levels—the supplier level
and the collective level. At the supplier level, value creation equates to a buyer receiving
greater benefits from one supplier than what it would receive from other rival suppliers.
Those benefits can take the form of higher quality products, information on new technolo-
gies, or cutting-edge production methods (Benner & Tushman, 2003). At the collective level,
value creation means a buyer working closely with its supplier to engage in various interfirm
activities, from supplier development to joint product development. The outcomes involve
synergies on both firms’ mutual capabilities, such as inventory ordering and management,
problem-solving skills, and interfirm operational processes (Heide & John, 1990; Schumpeter,
1934). Ultimately, the buyer creates value via attaining or reorganizing resources at both the
supplier and collective levels and by surpassing the competition in meeting the needs of its
customers.
Interfirm Tie Strength and Value Creation

In the interfirm context, tie strength has been widely associated with value creation since
tie strength is primarily concerned with the nature of relational bond and its effect on the
flows of information or other resources between firms (Friedkin, 1982). The literature has
evolved around two polar types of ties—strong and weak. A strong tie manifests itself in
frequent and intense contacts that involve closeness and reciprocity, whereas a weak tie
appears in infrequent and loose contacts that do not necessarily involve affective content but
exhibit a more utilitarian focus (Levin & Cross, 2004). These two types of tie strength are
associated with different interfirm resource-management approaches, leading to different
value creation mechanisms.
A commonly accepted view of interfirm value creation focuses on novel deployments of
partnering firms’ existing resource stocks, such as accumulated skills, expertise, or wisdom
(Schumpeter, 1934). This view presupposes that interfirm trust and streamlined interfaces are
in place, as occurs in typical strong ties. Increasingly, however, firms engage in exploratory
searches for resources in broader domains to upgrade or revamp their resource bases (Kang,
Morris, & Snell, 2007). This emerging view emphasizes the potential of tapping into novel
resource flows across interfirm bounds (Schulz, 2001). Originating in Granovetter’s (1973)
weak-ties theory, this view focuses on the expedient capture and adoption of new ideas or
other significant changes in technologies or methods via weak ties to related, but distant,
areas. The literature as such offers general accounts for the link between tie strength and
value creation at the interfirm level.
Receiving much less coverage in the literature are references to intermediate ties. There
have been few exceptions. Largely at the network or aggregate level, scholars have tried to
look beyond strong or weak ties for interfirm ties’ value creation effect (i.e., Tiwana, 2008;
Uzzi, 1996). These studies suggest relative advantages of a moderately dense network for
firms over either a dense or a sparse network. However, these studies are not applicable to
our case since they focus on network characteristics while our study focuses on the charac-
teristics inherent in dyadic ties between firms. The following two studies are more relevant
to our case. Borgatti and Everett (2000) propose that intermediate ties tend to be situated in
the interstices between an actor’s in-group (full of its strong ties) and out-group (rich in its
weak ties), and these ties are likely to be short lived and decay easily. Similarly, in a study of
intervillage linkages, Barkey and Rossem (1997) find that ties of medium strength reflect a
transient and unstable relational state, allowing little time and security for pursuing gainful
opportunities. Therefore, we posit that intermediate ties at the firm level likely contribute less
to value creation as compared with weak or strong ties.
Buyer-Supplier Tie Strength

In the domain of buyer-supplier ties, typical examples of strong ties are strategic supplier
alliances (Monczka, Petersen, Handfield, & Ragatz, 1998) and purchasing partnerships
(Dyer et al., 1998), where the buyer and supplier are highly integrated and mutually available
and accommodating. The research also points out how some buyers have identified a supplier
with whom they occasionally interact (i.e., weak tie) as a critical supplier (Yan et al., 2015).
For instance, Toyota keeps a close watch on a second-tier supplier for its technological devel-
opments (P. Hausmann, personal interview, May 19, 2009). The firm’s filming technology,
called “hydrographics,” is applied to cars’ interior parts, such as trims, armrest bases, and
dashboards. While influencing product appearance and durability, the technology is periph-
eral to the primary functions of a car. However, noting that the technology can be applied to
virtually all kinds of materials (i.e., metal, plastic, glass, and hardwood), Toyota believes that
the weakly tied supplier can be a source of innovation on car aesthetics and functionality.
As argued before, the two polar types of supplier ties—strong and weak—constitute a
relatively small portion of a typical buying firm’s supply base, and the bulk of supplier ties
are of intermediate strength. In general, buying firms exercise aggressive sourcing strategies,
such as competitive bidding, multiple sourcing, or dual sourcing, to meet external resource
needs (Ganesan, 1994). The supplier contracts feature finite-term agreements, which do not
require strong commitment or specific investments but focus more on steady flowing of
goods or materials from these suppliers (Richardson, 1993). Such “intermediate” buyer-sup-
plier ties are prevalent and kept in a buying firm’s supply base, even if they are not being
actively used, because they provide alternative solutions for the buying firm.
The literature also identifies two underlying dimensions to tie strength—structural and
relational (Krackhardt, 1992). Structural dimension refers to how frequently and intensely
two firms interact and the diversity in interaction domains. It affects the efficiency with
which interfirm activities take place (Hansen, 1999). Relational dimension refers to the
extent to which two firms are mutually trusting, supportive, and reciprocating (Ibarra, 1992).
It regulates each firm’s motivation to transfer useful resources and to assist its partner in
resource assimilation (Hansen). Typically, strong ties are high on both the structural and
relational dimensions, while weak ties are low on both dimensions. Building on the literature,
we conceptualize a buyer-supplier tie in these two dimensions and define its strength as the
extent to which two parties are structurally and relationally tied with each other in their
exchange relationship.
Buyer-Supplier Tie Strength and Value Creation

In the buyer-supplier context, both weak and strong ties trigger value creation via their
unique interfirm mechanisms. In contrast, intermediate ties lack distinct properties that facil-
itate value creation. Comparatively, these ties are more inconsistent in partner attitudes and
unstable in interfirm systems (Martin, 2007). We note that the general arguments for strong
ties focus on relational aspects (i.e., social support), and those for weak ties emphasize struc-
tural aspects (i.e., a bridge to extended ties). In our study, we examine the value creation
pattern along the three levels of buyer-supplier tie strength in its two underlying dimensions
separately. The structural and relational dimensions may play different but complementary
roles in value creation.
Structural dimension. In strong buyer-supplier ties, parties’ mutual engagement in novel

allocations/combinations of their resources (existing technologies, skills, know-how, etc.)
creates value. Frequent formalized joint programs offer more such opportunities, and inter-
firm structural mechanisms assist in the requisite processes. The well-established routines
and interface systems across multiple functions between two parties facilitate the transfer and
interpretation of socially complex, tacit resources and ultimately the extraction of latent values
embedded in new combinations of those resources (Eisenhardt & Schoonhoven, 1996). The
highly integrated and multiplex-exchange structure also helps reduce ambiguity and boost
efficiency in interfirm communications (Gadde & Snehota, 2000). Under such conditions, two
firms are more likely to identify and exploit the potentially valuable yet underutilized resources
held in the relationship (Uzzi, 1996). The literature has documented that supplier partnerships
usually entail specialized operational interfaces and resource-management systems between
firms (e.g., material requirements planning/enterprise resource planning), which facilitate
joint resource planning, control, and development (Gunasekaran, Lai, & Chang, 2008).
Weak ties in the buyer-supplier domain are also viewed as boundary-spanning linkages,
where the buyer and supplier can often channel alternative methods, approaches, or tech-
niques from related but distinct areas. Such activities can translate into new value for the
parties either immediately or through initiating new ways of doing things. Some recent pub-
lications offer evidence that weakly tied suppliers can serve as a bridge for their buyers to
new information or valuable resources. For instance, LG Electronics has a weak-tie relation-
ship with Taiwan Semiconductor Manufacturing Company (TSMC), a second-tier supplier
that has extended ties to a variety of industries (Choi & Linton, 2011). Through this tie, LG
Electronics was able to get the first glimpse that the recession was coming to an end. This
information prompted the firm to lock in purchase prices with many of its suppliers, leading
to a savings of billions of dollars. Weak buyer-supplier ties, given their intrinsic structural
advantage (i.e., a bridge), can increase the exposure to novel resources and the potential for
value creation.
In comparison, intermediate ties encourage underdefined interfirm systems. In the buyer-
supplier context, intermediate ties emphasize isolated, mechanical flows of materials and
services and do not necessitate closely coupled, multiplex interfaces in place. For instance, a
supplier may be required to maintain a certain level of finished goods inventories, rather than
invest in an expensive just-in-time system. Such less integrated systems are not as conducive
to readily transferring complex resources (e.g., new technologies). Underspecified interfaces
and shared schema (i.e., operational language) between firms in intermediate ties have been
found to increase cognitive burdens and coordination costs, impeding information exchanges
and discouraging intense interfirm activities (Ghosh, 2001).
Intermediate ties also fall short of their potential to be a structural bridge between buyers
and suppliers. A typical weak tie serves as the sole alternate path between two parties, through
which their extended contacts are joined (Friedkin, 1982). However, in the case of intermedi-
ate ties, there are likely to be other paths between two parties connecting their extended net-
works (Perry-Smith & Shalley, 2003). This situation increases the likelihood of interfirm
resources being redundant and decreases the newness of acquired resources. For instance,
Gulati and Sytch (2007) indicate an intermediate tie in the buyer-supplier context where non-
preferred suppliers increase redundancy between their own networks and the buyer’s network.
Given these findings, we predict a U-shaped relation between the structural strength of buyer-
supplier ties, moving from weak to intermediate to strong, and the level of value creation.
Hypothesis 1a: There is a U-shaped relationship between the structural strength of buyer-supplier
ties and value creation.
Relational dimension. The relational dimension in strong buyer-supplier ties reflects the

moral support and acceptance expected from each partner. It promotes parties to pursue creative
experiments with mutually available resources. The mutual ease and high comfort level foster
repeated and intense contacts, increasing the chances for generating unique combinations of
any underutilized resources of potentially great utility (McEvily & Marcus, 2005). The buyer-
supplier literature suggests that in this type of highly supportive atmosphere, both parties feel
less vulnerable to partner exploitation and engage in more collaboration (Kumar, Scheer, &
Steenkamp, 1995).
The relational aspects of weak ties also contribute to value creation. In general, two firms
in a weak-tie relationship tend to define themselves apart from each other (Coser, 1975); the
firms’ psychological bond is sufficiently weak to avoid conformity and social pressure
(Ibarra, 1992). Each firm is thus less mindful of how the other would react to unilateral deci-
sions and is less calculated in making entrepreneurial acts. Such conditions foster risk taking
with diverging ideas and unrelated resources without psychological constraint of breaking
any relational norms. Also note that, given the nature and intensity of relationship, value
creation in weak ties typically stems from explicit, yet novel, resources. Parties would feel
less sensitive about passing on such resources to their weak contacts, since any adverse con-
sequences would likely be immaterial. Shah (1998) finds that, in general, social actors tend
to freely share public (e.g., job-related) information with weak contacts. Bouty (2000) also
argues that, for instrumental purposes, information shared between high-tech firms does not
require the trust pertaining to partnershiplike strong ties.
In the case of intermediate ties, there is neither the social support shown in strong ties nor
the freedom from social pressure in weak ties. With intermediate ties, both firms are not fully
open to exchanging resources and are more guarded when experimenting with new ideas.
Since this type of tie rests on “untenable” trust, the parties are more intent on being cautious
and risk averse (so as not to harm their relationship) than they are on actively engaging in
interactions, and this approach is not conductive to creating value (Covin & Slevin, 1991).
As explained by Martin (2007), at a personal level, ties of moderate strength tend to induce
false expectations and misinterpretations of partner intents. As a result, these ties are per-
ceived as ambiguous and as having a greater potential for opportunism. In the supply chain
context, Hoffman and Mehra (1999) claim that “tepid” commitment of chain partners is typi-
cally accompanied by a lack of responsibility and is potentially “fatal” to the productivity of
a focal firm and its entire supply chain. Thus, we posit that value creation is lower under
intermediate ties, compared with weak or strong ties. The hypothesized curvilinear relation
between tie strength (for both dimensions) and value creation is graphically presented in
Figure 2.
Hypothesis 1b: There is a U-shaped relationship between the relational strength of buyer-supplier
ties and value creation.
Dependence Asymmetry as Moderator

We distinguish between tie strength and dependence asymmetry. Tie strength, as noted,
measures the level of dyadic bond and reflects interfirm cohesion (Reagans & McEvily,
2003). Dependence asymmetry, in contrast, measures the extent to which interfirm relative
dependencies are balanced or imbalanced (Casciaro & Piskorski, 2005). It occurs as a result
of the discrepancies in resource endowments and/or accessibility (Emerson, 1962) and
reflects relative power between parties (Lawler & Yoon, 1996). Thus, for a given tie-strength
level, different distributions of relative dependencies are possible. Therefore, the concepts of
tie strength and dependence asymmetry address different interfirm aspects (Gulati & Sytch,
Figure 2
A Relationship Between Tie Strength and Value Creation
Supplier/Joint Value Creation
Weak Intermediate Strong

Structural/Relational Tie Strength
2007), pointing to different roles in determining the resource management and flows in
buyer-supplier ties.
Considering dependence asymmetry is particularly critical in the buyer-supplier context.
In such a principal-agent arrangement, perceived dependence asymmetry is inevitable
(Camuffo, Furlan, & Rettore, 2007). Typically, setup costs (i.e., relation-specific investment)
are higher for suppliers than buyers, adding to the asymmetry of dependence and commit-
ment (Corbett & Groote, 2000). Moreover, being in inherently different resource positions
along the supply chain equates to information asymmetry. Generally, a buyer is better
informed of the downstream demand market, while a supplier has more information on its
products and the related upstream supply markets (Pavlou, Liang, & Xue, 2007). With per-
ceived hidden information and suspected ulterior motives of a partner with diverging inter-
ests, uncertainty increases (Eisenhardt, 1989).
Dependence asymmetry has a significant bearing on resource complementarity (Sarkar
et al., 2001) and distributive fairness perceived by both firms in a relationship (Gassenheimer
et al., 1998). On the basis of their assumed relative dependencies, each firm judges a priori if
there are any synergies and fair distribution of the payoffs, which would affect the extent to
which the firms transfer or combine resources. Here, the focus is on the magnitude of asym-
metry. Much of the literature suggests that dependence asymmetry, regardless of its direction,
tends to undermine relational quality and prevent interfirm activities (Kumar et al., 1995).
Below, we offer a more detailed discussion of the moderation effect separately involving
structural tie strength and relational tie strength. A pictorial rendition of the effect is shown
in Figure 3.
Moderation effect in structural strength. Buyer-supplier partnerships, much as a typical

interfirm alliance, are formed largely on the basis of the value creation potential of pooled
resources (Das & Teng, 2000). Symmetrically dependent firms are more likely to collaborate
and exchange resources; there is perceived equity in the amount and quality of resource inputs
from the partner firm (Sarkar et al., 2001). There is high complementarity of the existing
Figure 3
Moderating Effect of Dependence Asymmetry on the U-Shaped Curve
Symmetric
Supplier/Joint Value Creation
Asymmetric
Structural/Relational Tie Strength
Note: The vertical dotted line in the center is longer than those on both ends, indicating greater value creation gap
in the case of intermediate tie strength.
resource stocks and high compatibility in the resource domains pursued by two symmetri-
cally dependent firms (Mitsuhashi & Greve, 2009). In contrast, when a partnership is highly
asymmetric, parties are more likely to feel tension and a sense of inequity. The resource-
wise superior party (usually the buyer) anticipates it will receive less useful resources from
the other, resulting in relatively fewer payoffs from exchanging resources. The resource-wise
inferior party (usually the supplier) presumes the risk of appropriation and exploitation. For
example, one buying firm from the auto industry, guarding closely its engineering expertise,
forced a group of suppliers to engage in new product development. Only when the design was
approaching the final stage did the buying firm select one supplier and start to share with this
supplier its own expertise (Wu & Choi, 2005). The suppliers that were not chosen were simply
notified that they missed their opportunity.
Even if ties are strong, asymmetrically paired firms are hesitant to actively exchange
resources because of the perceived poor resource complementarity; as a result, the well-
aligned interfirm operational processes and interfaces are underused. For the resource-rich
partner, goodwill toward its asymmetric partner does not preclude the loss prospect and con-
cerns over possible resource spillovers. In contrast, the resource-poor partner may eagerly
seek resource exchanges, taking advantage of the infrastructure, and attempt to restructure its
dependency and attain “power parity” (Casciaro & Piskorski, 2005). However, such acts only
exacerbate the resource-rich partner’s concern. Consequently, the usage of the interfirm
infrastructure would be confined to ongoing operations and its systems-level efficiency
underutilized.
At the same time, two firms in a weak-tie relationship, when under high asymmetry, would
see diminished value of the partner firm as a structural bridge. These asymmetrical partners
would invariably observe high discrepancies in the primary areas of expertise and requisite
resources (Mitsuhashi & Greve, 2009). In this case, any newly tapped resource from the
partner is less likely to be appreciated, by either firm, as instantly useful or potentially valu-
able. Given the occasional contacts, parties hold little comparable understandings and com-
mon interests across multiple resource domains.
The moderating effect is particularly pronounced for intermediate buyer-supplier ties

since their structural disadvantages relative to both strong and weak ties are brought together
and negatively reinforced by dependence asymmetry. The routine-based interfirm procedures
and interfaces, when coupled with high asymmetry, are incapable of transferring and assimi-
lating complex resources between parties. The high discrepancies in understandings across
resource domains impede communications. The buyer-supplier literature suggests that highly
incongruent knowledge systems and domains of expertise between a buyer and supplier, their
business volume apart, tend to hamper their interactions and operational efficiency (Zirpoli
& Caputo, 2002). Under highly asymmetric intermediate ties, partnering firms are faced with
mutual lack of discernibility of the useful resources from the partner, and diminution of both
resource combination opportunities and essential “newness” of any resources accessible
from the partner. These conditions exacerbate the value creation potential. Therefore, we
propose:
Hypothesis 2a: Dependence asymmetry moderates the U-shaped effect of the structural strength of
buyer-supplier ties, such that higher dependence asymmetry exhibits lower value creation, which
is more pronounced in the case of intermediate structural strength.
Moderation effect in relational strength. Dependence asymmetry is also reflected in part-

nered firms’ perceived fairness in the relationship, which affects their behavioral motives
(Gassenheimer et al., 1998). Fairness refers to firms’ perceptions that a decision, procedure,
or outcome in the relationship is commensurable (Sheppard, Lewicki, & Minton, 1992), and
the understanding of fairness is determined by the firm with perceived power in the relation-
ship (Casciaro & Piskorski, 2005). Fairness is different from other affective aspects in buyer-
supplier ties, such as trust, which drive relational tie strength. Trust represents the mutual
expectations of a partner’s positive motives (Das & Teng, 2001).
In general, unequal dependencies cause power imbalance. The consequent information
asymmetry in both the content and processing capability affect negatively the less powerful
partner (Stolte & Emerson, 1976). In buyer-supplier ties, the supplier typically functions as
the weaker partner and often feels undercompensated or shortchanged (Kumar et al., 1995).
As a result, the supplier remains sensitive about whether it is being fairly remunerated. The
dominant partner, typically the buyer, is concerned about how to get the most out of the rela-
tionship, thus trying to avoid overinvestment and overreward to prevent the erosion of its
power advantage.
Even in strong ties, a supplier faced with severe asymmetry lacks the ability to precisely
assess fairness, which causes the supplier to feel frustrated and develop misgivings toward
the buyer (Das & Teng, 2001). On one hand, the high information asymmetry renders the less
powerful partner unaware of the more powerful partner’s deviating from relational obliga-
tions of fiduciary acts and reciprocity. On the other hand, the more powerful partner could try
to use the asymmetry to its advantage and to guard against power decay (Faems, Janssens,
Madhok, & Van Looy, 2008). Aside from high relational strength, high asymmetry tends to
work against motives for resource exchanges.
In weak ties, as noted, both parties tend to be indifferent to or not very sensitive about
passing on their resources (Uzzi & Lancaster, 2003). When coupled with severe asymmetry,
however, weak ties offer both partners reduced incentives for resource exchanges. In inter-
firm settings, virtually no firm would give away what it owns to a partner without a tangible
quid pro quo (Parkhe, 1993). Namely, partner firms’ expectations of fair and commensurate
reciprocity matter in their resource transfer decisions. Weak ties typically involve high uncer-
tainty about partnerships and payoff structure on both sides. This uncertainty is amplified
when paired with severe information asymmetry. Nevertheless, the resource-poor partner,
while taking a cautious stance, can still have incentives for resource exchanges. In contrast,
the resource-rich partner, given its little quid pro quo prospect, is less likely to be proactive
in its actions beyond what the contract requires.
The moderating effect in relational tie strength is posited to be especially pronounced for
intermediate strength. When two firms are under lukewarm commitment and high asymme-
try, each firm is less motivated for resource exchanges. In intermediate ties, as noted before,
both parties are more likely to be risk averse and cautious in their actions, and high asym-
metry intensifies this attitude. For the power-advantaged party, a lingering suspicion about
the weaker partner’s ulterior intent becomes more acute and further impedes engagement in
productive interfirm activities. The less endowed partner, in turn, becomes more doubtful
about fair dealing and becomes concerned about whether any mistakenly transferred resources
advantage only the partner firm, deepening the sense of the power gap. Therefore, we posit
the following:
Hypothesis 2b: Dependence asymmetry moderates the U-shaped effect of the relational strength of
buyer-supplier ties, such that higher dependence asymmetry exhibits lower value creation, which
is more pronounced in the case of intermediate relational strength.
Research Method
The data come from a major automaker and its supplier base in North America. Using a
questionnaire method, we surveyed the focal buyer and its 241 direct-parts suppliers. This
automaker is known as a leader in the industry, and many companies flock to benchmark its
supplier-management practices. The buying firm uses a comprehensive approach to its sup-
plier management, where suppliers are managed in various interfirm arrangements (i.e., lead-
ing to different tie strengths) depending on supplies. For instance, the buyer applies a
multisourcing or spot-market competition approach to commodity-type parts. Their short-
term and contingent nature entails intermediate or weak supplier ties. Also, the buyer is well
known for its strong-tie approach to key suppliers, which enables just-in-time practices and
joint product development.
Sample and Data Collection

The data are collected from both the buying firm and its suppliers. The unit of analysis is
the buyer-supplier dyads, and we assess value creation at two levels—the suppliers and the
links between the buyer and suppliers. From each supplier, the respondent was a single, key
informant who was in a position familiar with the firm’s operational and strategic relation-
ship with the buyer (i.e., CEO, director, or general manager). At the buying firm, 8 purchas-
ing managers served as the respondents; these managers collectively are responsible for
managing all 241 suppliers. We were constrained by the automaker not allowing us to survey
the managers for all suppliers—it would have been overwhelming for the 8 managers to fill
out 241 questionnaires. Our only option was to use the surveys on the supplier side as the
primary data for the analysis and cross-validate them against sample surveys from the buyer.
We collected the data on 32 matching suppliers from the 8 purchasing managers.
Initially, we received a list of all 241 suppliers. A questionnaire was sent to all suppliers,
and 166 eventually responded. Of those, 163 responses were identified as useful—3 had too
many missing values. This gave us a response rate of 67.6%. Table 1 reports the respondent
demographics, which reflect sufficient diversity in our sample. When administering survey
questionnaires, we strictly followed the prescriptions of Dillman (2007). We took extra steps
to obtain a high response rate, such as having senior management at the automaker endorse
the research project (which was specified in the cover letter of each questionnaire) and con-
ducting multiple follow-ups (e.g., calls and reminder cards) with nonrespondents.
Potential biases due to the chosen methods were examined. Nonresponse bias was first
assessed by comparing early with late responses and then the first third with the last third of
the responses on several key variables using t tests (Armstrong & Overton, 1977). The
respondent and nonrespondent firms were also compared on several demographics, such as
firm size, total annual revenue, and relational duration. No significant differences were
found. Common method bias, a potential issue in survey-based research (Flynn, Sakakibara,
Schroeder, Bates, & Flynn, 1990), was checked using Harman’s (1967) single-factor test. A
clear multifactor solution was generated with the most influential common factor explaining
less than 20% of variation in the data. This finding is far below the recommended 50%
threshold (Podsakoff & Organ, 1986) and strongly indicates no significant common method
bias present in the data set.
Measures
The measurement scale, unless otherwise indicated, was a 6-point scale ranging from 1
(strongly disagree) to 6 (strongly agree). Even though some psychometric scholars (Dixon,
Bobo, & Stevick, 1984; Wyatt & Meyers, 1987) have reported no systematic differences
between data based on a 6-point scale and those based on more a conventional Likert type,
such as a 5- or 7-point scale, we chose the 6-point scale to eliminate neutral responses and
improve face validity of measures (Saris & Gallhofer, 2007). To ensure initial reliability and
content validity (Cook & Campbell, 1979), we carefully developed all measures on the basis
of our analysis of the related literature and thoroughly pretested using both practitioners and
academics.
To validate the use of suppliers’ responses as the primary data source for buyer-supplier
dyads, we conducted a comparative analysis of a subsample of 20% (32 observations) of the
supplier surveys against the matching surveys done by the buying firm’s 8 purchasing man-
agers. For every variable included in our models, we conducted the Wilcoxon two-sample t
test, and the results showed no significant difference in the means of each variable between
the two sets of responses, demonstrating high validity of the primary data used in the
analysis.
Value creation. Value creation in the buyer-supplier context occurs at two levels: each
supplier and the collective dyad. Building on prior research (Hitt, Hoskisson, Johnson, &
Moesel, 1996; Tsai & Ghoshal, 1998), we focus on two sets of indicators—the supplier’s
value creation and the collective’s joint value creation. The former, labeled “supplier value
creation,” benefits the buyer by improving its products and processes, while the latter, labeled
Table 1
Supplier Demographics
Demographics Frequency Percentage
Total annual revenue ($US)

Less than 50 million 46 28.2
50 – 100 million 22 13.5
101 – 250 million 28 17.2
251 – 500 million 23 14.1
Over 500 million 42 25.8
Not reported 2 1.2
Total 163 100
Number of employees
Less than 200 35 21.5
200 – 500 40 24.5
501 – 1,000 27 16.6
1,001 – 2,500 18 11.0
2,501 – 5,000 8 4.9
5,001 – 10,000 9 5.5
Over 10,000 24 14.7
Not reported 2 1.2
Total 163 100
Length of relationship (years)
Less than 5 17 10.4
5 – 10 39 23.9
11 – 15 40 24.5
16 – 20 32 19.6
21 – 30 28 17.2
Over 30 2 1.2
Not reported 5 3.1
Total 163 100
Reliance on the focal buyer business (%)
Less than 5 28 17.2
5 – 10 29 17.8
11 – 20 29 17.8
21 – 40 27 16.6
41 – 60 23 14.1
61 – 100 25 15.3
Not reported 2 1.2
Total 163 100
Industry groupings (based on NAICS)
Textile (or leather) product manufacturing 4 2.5
Chemical (plastics and rubber) products manufacturing 37 22.7
Primary metal manufacturing 9 5.5
Transportation equipment manufacturing 94 57.7
Merchant wholesalers, durable goods 8 4.9
Motor vehicle and parts dealers 8 4.9
Transit and ground passenger transportation 1 0.6
Automotive repair and maintenance 2 1.2
Total 163 100
Note: NAICS = North American Industry Classification System.

Table 2
Exploratory Factor Analysis Loadings for Supplier and Joint Value
Creation Constructs
Survey item Factor 1 Factor 2
1. When it comes to product innovation for the buyer, how is your .71 .04
company compared to your leading competitors?
2. Our company often develops new materials or technologies to .83 .09
improve our products for the buyer.
3. Our company has provided the buyer with many cost-cutting ideas. .62 .25
4. Our company and the buyer can accomplish a lot more by working .21 .67
together as opposed to working independently.
5. Differing views between our firm and this buyer have often led to .08 .73
discovering better ways to solving problems.
6. Our company and the buyer complement each other well in terms .16 .76
of capabilities.
7. Working with this buyer has allowed both parties to overcome some −.02 .67
problems each could not solve alone.
Eigenvalue 1.13 2.23
Proportion of variance explained by eigenvector .42 .58
Note: All items are standardized; a varimax-rotation procedure was used for reported results. All items except Item
1 were measured using a 6-point Likert scale with options ranging from 1 (strongly disagree) to 6 (strongly agree).
Item 1 was rated on a 7-point scale ranging from 1 (significantly worse) to 7 (significantly better).
“joint value creation” benefits the buyer’s end customers by improving the capabilities, pro-
cesses, and joint problem-solving skills of both the buyer and supplier. Supplier value cre-
ation was measured by three items: the degree of product innovation relative to the leading
rivals (Item 1), improvements on product technologies or materials for the buyer (Item 2),
and the extent to which the supplier helps the buyer increase production efficiency (Item 3),
as shown in Table 2. Note that for Item 1, we used a 7-point scale, since this question should
allow a neutral response. These three items were standardized to eliminate differences in
variance due to scaling. To construct the joint value creation scale, we developed four items
to collectively measure surplus value created by firms working together in various interfirm
domains: task achievement (Item 4), problem-solving in better ways (Item 5) or in new ways
(Item 7), and operational capabilities (Item 6), as shown in Table 2.
To ensure the discriminant validity of the two sets of value creation measures, we con-
ducted exploratory factor analysis (EFA), which is an accepted statistical technique for iden-
tifying unobservable theoretical constructs with reflective indicators (Kim & Mueller, 1978).
EFA followed by varimax rotation returned a clear two-factor solution (see Table 2). The first
three items that loaded on Factor 1 were averaged to make the supplier value creation scale
(Cronbach’s α = .91), and the other four items loading on Factor 2 were averaged for a com-
posite measure of joint value creation (Cronbach’s α = .82).
Strength of buyer-supplier ties. We analyzed the value creation effects of tie strength
in two separate dimensions—structural and relational strengths. The structural strength
of buyer-supplier ties was measured using conventional tie-strength measures: frequency,
closeness, and multiplexity (Burt, 1992; Marsden & Campbell, 1984). Interaction frequency
Table 3
Exploratory Factor Analysis Loadings for the Strength of Buyer-Supplier
Tie Construct
1. Frequency of face-to-face communication: How often does your firm .72 .14
interact with the buyer as compared with other customers?
2. Frequency of telephone communication: How often does your firm .87 −.02
interact with the buyer as compared with other customers?
3. Frequency of written communication: How often does your firm interact .72 −.03
with the buyer as compared with other customers?
4. Frequency of delivery: How often does your firm deliver your products or .48 −.06
components to the buyer as compared with other customers?
5. All in all, how often does your firm interact with the buyer (on average .80 −.16
over the past 3–5 years)?
6. How close has the working relationship been between your firm and the .61 .21
buyer (over the past 3 years)?
7. My company is extensively engaged in joint projects with the buyer. .58 .23
8. Our company trusts this buyer to keep its promises. −.05 .82
9. The buyer puts confidence in what our company says. .07 .79
10. The buyer has always been fair in its negotiations with our firm. −.03 .81
11. The buyer trusts that our company would not take advantage of our .12 .78
relationship and try to profit at their expense.
12. The buyer always reciprocates the favors we do for them. −.00 .76
13. The buyer is a trustworthy company. .07 .82
Note: For Items 1 through 4, the contact frequency was rated on a 6-point Likert scale ranging from 1 (rarely) to 6
(very often). The points and scale anchors for Item 5 are 1 (once per year or less), 2 (2–4 times per year), 3 (5–10
times per year), 4 (1–3 times per month), 5 (1–4 times per week), and 6 (once per day or more). Items 6 and 7 denote
work-related closeness and multiplexity, respectively. The scale for Item 6 ranges from 1 (distant, like an arm’s-
length delivery) to 6 (very close, practically like being in the same work group). Items 7 through 13 were measured
using a 6-point Likert scale with options ranging from 1 (strongly disagree) to 6 (strongly agree).
was measured in various domains via which buyer-supplier communications occur (Items
1–5; see Table 3). For closeness, we used a work-related aspect of closeness (Hansen, 1999;
Moran, 2005). Multiplexity was measured in a single item inquiring about an extensive-
ness of linkages between two firms (Marsden & Campbell). For relational tie strength, we
developed a six-item scale adapted from Ganesan (1994), Johnson, Cullen, Sakano, and Tak-
enouchi (1996), and Zaheer, McEvily, and Perrone (1998; see Table 3). The scale proxies the
perception or expectancy held by each firm regarding the partner firm’s reliability, integrity,
trustworthiness, and reciprocity.
To ensure that the individual items reflect the intended constructs, we used EFA followed
by varimax rotation, which rendered a clear two-factor solution (shown in Table 3). It should
be noted here that, in this study, we used factor loadings of .300 and higher for classifying
items across factors. This approach is consistent with the general guidelines for scale con-
struction (Kim & Mueller, 1978) and some prior empirical research (Dess & Beard, 1984;
Gulati & Sytch, 2007). The loading of .300 is generally thought to reflect the lowest
acceptable level of correlation between an item and the latent variable, unless the item has
high cross-factor loadings. Items that loaded on Factor 1 were averaged to measure the struc-
tural strength of buyer-supplier ties (Cronbach’s α = .81). The other six items loading on
Factor 2 were averaged to form a composite indicator of the relational strength of buyer-
supplier ties (Cronbach’s α = .88).
Dependence asymmetry. For the moderator, as noted, we focused on the magnitude, rather
than the direction, of dependence asymmetry in buyer-supplier ties. We operationalized this
variable on the basis of two firms’ relative dependencies, which are a function of resource
criticality and availability of alternate sources (Burt, 1982; Pfeffer & Salancik, 1978). The
level of dependence asymmetry decreases as the relative dependencies between a buyer and
supplier become similar in terms of the levels of both resource criticality and availability.
We developed the set of 12 items to capture different dependence aspects between a buyer
and supplier. These items represent the dependence resulting from the criticality of the
exchange (in terms of resources/products; El-Ansary & Stern, 1972; Pfeffer & Salancik,
1978), the exchange concentration measured as a fraction of the firm’s total business (Burt,
1982), the availability of alternative sources as indicated by the level of replaceability of the
incumbent partner (Kumar, Scheer, & Steenkamp, 1998), and the degree of relation-specific
investment (Heide & John, 1988). When we cross-validated using 32 matching surveys for
the suppliers’ assessments of buyer dependence on the suppliers, a paired t test of two sum-
mative scales showed no significant difference and exhibited high correspondence (t = −1.59,
n.s.; Pearson correlation = .91). According to the equity theory, perceptual dependence levels
are better predictors than the objective reality of dependence for how partners actually behave
and respond in their relationships (Astley & Zajac, 1990).
We conducted an EFA with varimax rotation, which yielded a two-factor solution, with
Factor 1 reflecting a supplier’s dependence (DS) and Factor 2 reflecting the buyer’s depen-
dence (DB) scales. These factors combined explain 73% of the variance in the data. As shown
in Table 4, all but three items (4, 11, and 12) loaded uniquely and unequivocally on either of
the two factors. We dropped these three items from further scale construction. The remaining
items were averaged to construct supplier (Cronbach’s α = .73) and buyer (Cronbach’s α =
.67) relative dependence. Although the latter reliability falls short of the commonly accepted
level of .70 (Nunnally, 1978), more recent research on reliability measures explicitly states
that this level should not be considered a benchmark for every scale (John & Benet-Martinez,
2000). Contingent on the validity of the construct’s conceptualization, reliabilities of as low
as .50 can be viewed as acceptable. Furthermore, the two purified scales had a correlation
coefficient of .146 (p < .01), which adds to their discriminant validity. To create a measure of
dependence asymmetry, we calculated the values of |DS – DB| as the absolute difference
between supplier and buyer relative dependencies, which ranges from 0 (lowest) to 6 (high-
est) asymmetry.
Controls. To minimize possible spurious effects of firm- or industry-specific differences

in the sample, we included several controls. First, we controlled for effects of supplier firm
size, operationalizing it as the logarithm of the total number of employees. Large suppliers
potentially have more slack resources and have accumulated more technical or operational
know-how to build greater absorptive capacity (Mowery & Oxley, 1996). We controlled for
Table 4
Exploratory Factor Analysis of Buyer and Supplier Relative-Dependence Measures
1. Magnitude of exchange for the buyer (“Any change in our firm’s production −.04 .48
will have a significant impact on the buyer’s day-to-day operations.”)
2. Availability of potential suppliers (“It will be easy for the buyer to .24 .70
substitute another supplier for the components our company provides.”
[reverse-coded])
3. Criticality of exchange for the buyer (“The buyer is highly dependent on the .14 .79
products we supply.”)
4. Number of the buyer’s models that are supported by the suppliera .21 .09
5. Percentage of supplier’s total sales accounted for by the buyerb .79 .20
6. Availability of potential buyers (“My company can easily find other .45 −.10
customers for the product we supply to the buyer.”)
7. Buyer’s withdrawal cost for supplier (“If we should lose contract with the .80 −.05
buyer, we would be forced to make significant internal changes.”)
8. Supplier’s transaction-specific investments I (“There are technologies we .48 .03
have invested for this buyer that cannot be used for other customers.”)
9. Supplier’s transaction-specific investments II (“Our company has .59 −.00
extensively invested in production equipment to do work for the buyer.”)
10. Our company has committed significant time and resources to train and .53 .04
develop our personnel for this buyer.
11. Our production system is designed to accommodate the specific products .32 .13
we make for the buyer.
12. Our firm has made significant adjustments to comply with the buyer’s .08 .06
technological standards and norms.
Note: All items are standardized; a varimax-rotation procedure was used for reported results. All items except Items
4 and 5 were rated on a 6-point Likert scale with options ranging from 1 (strongly disagree) to 6 (strongly agree).
aThis item was measured as a total number of the buying firm’s product models that are supported by each supplier.
bThis item was measured as a categorical variable comprising six categories: less than 5% (1), 5–10% (2), 10–20%
(3), 20–40% (4), 40–60% (5), and more than 60% (6).
the potential positive firm-size effect on value creation. Given prior research establishing the
effects of relational duration on partners’ trust, joint action, information sharing, and per-
formance (e.g., Uzzi, 1999), we also controlled for this factor. To address the endogeneity of
the suppliers’ performance, we included in the analysis each supplier’s self-assessed overall
performance (averaged from seven different domains: cost, quality, delivery, product inno-
vation, responsiveness to change requests, sales/technical support, and total value received).
To further address firm-specific endogeneity, we controlled for each supplier’s two firm-
level strategic orientations—innovation focus and long-range view of external ties, which
we believe intervene in the associations between the predictors and value creation. Finally,
different levels of value creation emphasis are possible across industries (Dess, Ireland, &
Hitt, 1990). Thus, we included seven dummy variables to account for eight different industry
groups classified on the North American Industry Classification System (see Table 1 for the
specific industry categories).
Data Analysis
Given all the continuous predictors, we conducted the moderated hierarchical regression
analysis involving quadratic-by-linear interaction effects on value creation in buyer-supplier
ties (cf. Aiken & West, 1991; J. Cohen & Cohen, 1983). There are two predictors (X): struc-
tural and relational tie strength. For each predictor, the following regression equation was
used to test its curvilinear effect on value creation (Y) and interaction with dependence asym-
metry (Z): Y = β1X + β2X2 + β3Z + β4XZ + β5X2Z + c0.
All of the predictor variables were mean centered prior to the creation of squared terms to
minimize potential multicollinearity that could inflate the significance of the relations among
the variables (Aiken & West, 1991). The predictors were entered into the regression model in
six successive steps. In the first step, controls were entered to control for possible confound-
ing effects. In the second and third steps, the linear (X) and quadratic (X2) terms of each
dimension of the strength of ties were successively added to detect the linear and quadratic
main effects. In the fourth and fifth steps, dependence asymmetry as a linear predictor (Z)
and as a moderator via its simple interaction with tie strength (XZ) was entered. In the sixth
and final step, the quadratic-by-linear term (X2Z) was added to test whether the U-shaped
relation between the buyer-supplier tie strength and value creation varies as a function of the
level of dependence asymmetry. When we tested for multicollinearity in each model, we
found no evidence since the variance inflation factors for the predictor variables were all less
than 4, well below the standard cutoff of 10.
Results
Table 5 reports the means, standard deviations, and zero-order Pearson correlations of the
variables in the model. Most of the controls, including firm size, overall performance, inno-
vation focus, long-range view, and industry dummies, are significantly correlated with either
or both of the value creation measures, justifying the need for controlling for these confound-
ing factors. As expected, both predictors—structural and relational strength—did not show a
significant linear association with dependence asymmetry. Furthermore, prior to including
various controls, the two predictors showed positive correlations with both measures of value
creation, while neither was significantly correlated with dependence asymmetry. Overall, all
of the correlations point in the directions as predicted by the model. The descriptive results
also provide evidence that the two predictors capture different facets of dyadic relations.
Firm size was found to correlate with relational tie strength but not with structural strength.
Relational duration was significantly associated with structural strength but not with rela-
tional strength. Supplier overall performance showed a significant correlation with relational
strength but not with structural strength.
Tables 6 and 7 present the results of the moderated hierarchical regression analysis used to
test our hypotheses involving the quadratic-by-linear interactions. All regressions met the key
model assumptions—no serious violations were found in the plots of standardized residuals as
compared to the predicted values and in the normal probability plots of standardized residuals.
Supplier Value Creation

Table 6 shows the results of the analysis involving supplier value creation. After entering the
controls in Step 1, the main linear effects of both dimensions of buyer-supplier tie strength were
1048
Table 5
Correlations, Means, and Standard Deviations
Variable 1 2 3 4 5 6 7 8 9 10 11 M SD
1. Firm size 2.92 0.93

2. Relational durationa .32** 13.9 0.31
3. Overall performance −.21* −.13 4.64 0.69
4. Innovation focus .07 −.14 .19* 4.49 0.65
5. Long-range view −.08 .07 .26** .12 4.36 0.83
6. Industry −.11 −.14 .14 −.05 .04 2.94 0.91
7. Structural strength .04 .32** −.03 .05 .12 .01 4.23 0.76
8. Relational strength −.18* −.08 .26** −.12 .15 .14 .17* 4.48 0.68
9. Dependence asymmetry −.04 .01 .01 .08 .00 −.01 −.13 −.09 2.23 0.57
10. Supplier value creation .25** .15 .28** .18* .24** .03 .13 .29** .03 4.33 0.74
11. Joint value creation .03 .03 .27** .15* .28** .21** .23** .49** −.02 .27** 4.18 0.82
Note: N = 163.
aAllvalues are based on the logarithm of the number of years of relationship except for the mean (which is based on the actual number of years).
*p < .05 (two-tailed).
**p < .01 (two-tailed).
Table 6
Results of Moderated Hierarchical Regression Analyses Predicting Supplier Value Creation
Model 1: Structural Strength Model 2: Relational Strength
Independent Variables Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
Size −0.04* −0.12* −0.15* 0.18 0.16 −0.31* −0.04* −0.08* −0.09* 0.20 0.17 −0.34*
(0.02) (0.05) (0.06) (0.15) (0.16) (0.12) (0.01) (0.03) (0.03) (0.13) (0.17) (0.13)
Relational duration −0.02 −0.13 0.11 0.26 0.32 −0.22 −0.02 −0.09 0.15 0.31 0.27 −0.19
(0.02) (0.11) (0.12) (0.22) (0.30) (0.19) (0.02) (0.11) (0.12) (0.34) (0.30) (0.17)
Performance 0.44*** 0.30* 0.42* 0.08 0.11 0.31 0.44*** 0.25† 0.34 0.11 0.14 0.28
(0.12) (0.11) (0.17) (0.10) (0.10) (0.35) (0.07) (0.14) (0.29) (0.15) (0.18) (0.26)
Innovation focus 0.12* 0.31 0.25 0.15 −0.24 0.29 0.12* 0.42 0.31 0.27 0.43 0.33
(0.05) (0.28) (0.32) (0.27) (0.25) (0.41) (0.05) (0.43) (0.30) (0.39) (0.39) (0.34)
Long-range view 0.17† −0.26* 0.18 0.19 0.09 0.22 0.17* −0.48* 0.37* −0.22 0.16 −0.23*
(0.10) (0.10) (0.23) (0.24) (0.12) (0.29) (0.07) (0.19) (0.14) (0.30) (0.14) (0.09)
Industry 0.07 0.12 0.13 0.07 0.17 0.10 0.07 0.06 0.09 0.16 0.12 0.15
(0.09) (0.15) (0.15) (0.11) (0.21) (0.14) (0.14) (0.10) (0.12) (0.14) (0.11) (0.12)
Structural strength −0.10* −0.08* −0.11 −0.09 −0.12
(0.04) (0.03) (0.10) (0.08) (0.12)
Structural strength2 0.28* 0.25† 0.31 0.29
(0.11) (0.14) (0.45) (0.31)
Relational strength −0.13 −0.11† −0.09 −0.17 −0.13
(0.12) (0.06) (0.11) (0.19) (0.18)
Relational strength2 0.43*** 0.38† 0.35 0.27
(0.04) (0.22) (0.37) (0.35)
Dependence −0.02 −0.03 −0.05 −0.17 −0.15 −0.22
asymmetry (DA) (0.05) (0.05) (0.07) (0.15) (0.16) (0.21)
Structural Strength −0.38 −0.26
× DA (0.51) (0.29)
Structural Strength2 −0.21
× DA (0.22)
(continued)
1049
1050
Table 6 (continued)
Relational Strength −0.18 −0.25

× DA (0.20) (0.26)
Relational Strength2 −0.34**
× DA (0.11)
R2 .11 .15 .19 .19 .21 .21 .11 .19 .25 .26 .26 .35
Adjusted R2 .10 .13 .17 .17 .20 .20 .10 .17 .22 .23 .23 .27
ΔR2 .11 .04 .04 .00 .02 .00 .11 .08 .06 .01 .00 .09
ΔF 10.39 2.02*** 0.54*** 1.14 0.82 0.68* 10.39 0.56 0.92*** 0.39 0.41 0.37***
F 3.78*** 4.49***
Note: N = 163 after listwise deletion. Standardized regression coefficients are reported for the steps indicated, with standard errors in parentheses.
†p < .10.
*p < .05.
**p < .01.
***p < .001.
Table 7
Results of Moderated Hierarchical Regression Analyses Predicting Joint Value Creation
Size 0.14 0.22 0.27 0.19 0.17 0.16 0.14 0.12 0.11 0.15 0.14 0.11
(0.18) (0.25) (0.30) (0.27) (0.20) (0.28) (0.18) (0.15) (0.16) (0.19) (0.21) (0.23)
Relational duration −0.02 −0.10 0.09 0.15 0.13 0.11 −0.02 −0.23 0.17 0.11 0.10 0.07
(0.02) (0.14) (0.17) (0.22) (0.32) (0.30) (0.05) (0.30) (0.22) (0.10) (0.22) (0.08)
Performance 0.24** 0.21* 0.22* 0.30 0.26 0.22 0.24** 0.29* 0.29** 0.21 0.16 0.13*
(0.06) (0.08) (0.09) (0.28) (0.33) (0.26) (0.06) (0.12) (0.08) (0.25) (0.18) (0.05)
Innovation focus 0.11* 0.27 0.19* 0.22 0.32 0.25 0.11* 0.33* 0.31* 0.40 0.38 0.33
(0.04) (0.38) (0.07) (0.23) (0.48) (0.43) (0.04) (0.14) (0.12) (0.52) (0.39) (0.31)
Long-range view 0.26** −0.30 −0.17 0.26 0.15 0.10 0.26** 0.51* 0.43* 0.26 0.23 0.22
(0.08) (0.40) (0.23) (0.44) (0.19) (0.28) (0.07) (0.19) (0.17) (0.32) (0.41) (0.27)
Industry −0.13* 0.25 −.31 0.19 0.21 0.25 −0.13* 0.32 −0.37 0.25 0.20 0.19
(0.05) (0.23) (0.45) (0.38) (0.32) (0.51) (0.05) (0.41) (0.45) (0.27) (0.29) (0.25)
Structural strength −0.20* −0.15† −0.13 −0.10 −0.12
(0.08) (0.09) (0.26) (0.17) (0.19)
Structural strength2 0.29** 0.27 0.22 0.18
(0.10) (0.41) (0.22) (0.27)
Relational strength −0.28* −0.17* −0.20 −0.19 −0.18
(0.11) (0.07) (0.20) (0.18) (0.19)
Relational strength2 0.36** 0.31 0.28 0.20
(0.09) (0.43) (0.33) (0.17)
Dependence −0.02 −0.07 −0.05 −0.10 −0.14 −0.13
asymmetry (DA) (0.03) (0.09) (0.08) (0.12) (0.17) (0.15)
Structural Strength −0.36† −0.28
× DA (0.21) (0.27)
Structural Strength2 −0.31
× DA (0.33)
(continued)
1051
1052
Table 7 (continued)
Relational Strength −0.32† −0.30

× DA (0.18) (0.33)
Relational Strength2 −0.22**
× DA (0.07)
R2 .15 .20 .23 .23 .25 .26 .15 .35 .37 .37 .40 .42
Adjusted R2 .12 .16 .19 .18 .21 .20 .12 .32 .34 .34 .37 .38
ΔR2 .15 .05 .03 .00 .02 .01 .15 .20 .02 .00 .03 .02
ΔF 4.95** 0.99** 0.12* 0.78 0.06† 0.50 4.95** 4.90** 2.43* 2.79 0.45 0.26***
F 4.82*** 5.05**
Note: N = 163 after listwise deletion. Standardized regression coefficients are reported for the steps indicated, with standard errors in parentheses.
†p < .10.
*p < .05.
**p < .01.
***p < .001.
Figure 4
Curvilinear Relations Between Buyer-Supplier Tie Strength and Value Creation
Note: Relations shown are between (a) structural tie strength and supplier value creation, (b) relational tie strength
and supplier value creation, (c) structural tie strength and joint value creation, and (d) relational tie strength and
joint value creation.
entered in Step 2. Consistent with our earlier discussion that structurally weaker ties are more
conducive to value creation, results showed that structural strength was predictive for supplier
value creation (β = −0.10, p < .05 in Model 1). In Step 3, quadratic terms of the two tie-strength
dimensions were entered. Both nonlinear terms were significantly predictive for supplier value
creation (β = 0.28, p < .05 for structural strength; β = 0.43, p < .001 for relational strength),
which lent support for Hypotheses 1a and 1b in the case of supplier value creation. Figures 4a
and 4b show graphs of the quadratic relations. Dependence asymmetry and its linear interac-
tions with the two tie-strength dimensions were entered in Steps 4 and 5, but these two blocks
were not predictive for supplier value creation. In particular, no main effects of the moderator
indicate that dependence asymmetry alone does not determine the value creation; dependence
asymmetry takes effect only when coupled with tie strength. The results were encouraging,
Figure 5
Curvilinear Interaction of Relational Strength of Buyer-Supplier Ties and
Dependence Asymmetry for Value Creation (Supplier/Joint)
(a)
6
5.5
Supplier Value Creaon
5
4.5
Symmetric
4
3.5 Asymmetric
3
2.5
2
–4 –2 0 2 4
Relaonal Strength of Buyer–Supplier Ties
6
(b)
5.5
5
Joint Value Creaon
4.5
4 Symmetric
3.5 Asymmetric
3
2.5
2
–4 –2 0 2 4
Relaonal Strength of Buyer–Supplier Ties
since they supported the predicted moderating role of dependence asymmetry and the argument
for the quadratic-by-linear effects. Finally, in Step 6, the quadratic-by-linear interaction terms
were entered. The effect was not significant for structural strength (β = −0.21, n.s. in Model 1),
but highly significant for relational strength (β = −0.34, p < .01 in Model 2). This finding sup-
ports Hypothesis 2b but not Hypothesis 2a in the case of supplier value creation.
To corroborate the moderation effect in the case of relational tie strength, we plotted the
quadratic-by-linear interaction separating asymmetric and symmetric dependencies. As
shown in Figure 5a, different quadratic patterns were found. The gap between the two curves
was larger in the midrange of the tie strength compared to either end. To affirm whether our
visual observation was valid, we conducted simple slope tests, as suggested by Aiken and
West (1991). We estimated simple slopes at the three levels of relational strength of buyer-
supplier ties: low (1 SD below the minimum of the regression curve), intermediate (the mini-
mum of the curve), and high (1 SD above the minimum of the curve). The results showed that
when dependence asymmetry was high, the simple slopes of the curve had a significant,
negative value at low levels of tie strength (b = −1.18, t = −3.25, p < .01); did not differ sig-
nificantly from 0 at the intermediate levels of tie strength (b = −0.03, t = −0.61, n.s.); and had
a significant, positive value for supplier value creation at high levels of tie strength (b = 1.44,
t = 2.95, p < .05). When dependence asymmetry was low (i.e., symmetric dependence), the
simple slopes of the curve did not significantly differ from 0 at all three levels of relational
tie strength. These findings support our visual observations.
Joint Value Creation

Steps 2 and 3 in Table 7 show that the two dimensions of buyer-supplier tie strength have
both main and quadratic effects on joint value creation (see Models 3 and 4). Thus, both
Hypotheses 1a and 1b are supported in the case of joint value creation. Figures 4c and 4d
graphically illustrate the quadratic relations. Also, consistent with our theorization, results
showed that dependence asymmetry alone was not predictive for joint value creation, nor
was its linear interaction with both dimensions of tie strength. When the quadratic-by-linear
interaction was added, the quadratic term of structural strength did not interact with the
dependence asymmetry (β = −0.31, n.s. in Model 3), whereas the relational strength’s qua-
dratic-by-linear interaction with the dependence asymmetry was significant (β = −0.22, p <
.01 in Model 4). This finding supports Hypothesis 2b (moderation effect for relational
strength) but not Hypothesis 2a (moderation for structural strength).
For the joint value creation, we also plotted the moderation patterns and found different
curvatures between symmetric versus asymmetric dependence (shown in Figure 5b), and we
proceeded to conduct simple slope tests. In the case of high levels of dependence asymmetry,
the simple slopes of the regression curve had a significant negative value at low levels of
relational tie strength for joint value creation (b = −1.21, t = −3.58, p < .01) and did not sig-
nificantly differ from 0 at the intermediate levels of tie strength (b = −0.10, t = −0.82, n.s.).
And at high levels of tie strength, the curve rises at a significant rate (b = 1.47, t = 3.95, p <
.01). When dependence asymmetry was low (i.e., when dependence was symmetric), the
simple slopes of the curve did not differ significantly from 0 at all three levels of relational
strength. Again, a significant gap in joint value creation was found at the intermediate levels
of tie strength, which offers the basis for additional insights on the value creation mecha-
nisms in the buyer-supplier context.
Discussion
This study presents a theoretical synthesis of the interfirm tie-strength effects on value
creation. It makes a theoretical argument that weak and strong ties are fundamentally two
sides of the same coin—both of these two types of buyer-supplier ties contribute to value
creation via distinctively different interfirm resource-management mechanisms. Different
groups of scholars advancing either type of tie have largely treated each as a monolithic con-
struct when studying performance effects. In this paper, we conceptualize the strength of
buyer-supplier ties in two underlying dimensions (structural and relational), and, when theo-
rizing about the tie-strength effects on value creation, we consider the roles of structural and
relational strengths separately. Furthermore, by combining two predominant types of ties
(strong and weak) in a single model, we bring salience to the intermediate ties and empiri-
cally prove that these ties, by comparison, lack value creation potential.
We also incorporate dependence asymmetry into the model to study its interactive effect
with tie strength on value creation. Despite wide recognition of the conceptual distinction
between tie strength and dependence asymmetry, much of the past research has focused on
these two dyadic notions’ respective main effects. For instance, in reformulating resource
dependence theory, Casciaro and Piskorski (2005) separate the roles of power imbalance and
mutual dependence in affecting relational partners’ abilities to manage external resource con-
straints stemming from dependence. Gulati and Sytch (2007), in a procurement relationship
setting, frame dependence asymmetry and joint dependence using different logics—power
and embeddedness, respectively—and contrast the main effects of the two dependence-
related constructs on a manufacturer’s performance. Extending the research to the next level,
we consider both the main and interactive effects of the two orthogonal aspects of dyadic
relations (see Figure 1). Our model integrates buyer-supplier interdependence (tie strength)
and relative dependence (dependence asymmetry) in the context of value creation.
U-Shaped Pattern
The overall results of this study demonstrate that the relation between the strength of
buyer-supplier ties, ranging from weak to intermediate to strong, and value creation follows
a U-shaped pattern. It seems likely that, when it comes to value creation at the buyer-supplier
dyadic level, both weak and strong ties fare better than intermediate ties. At the network
level, the literature has suggested an inverted U-shaped relationship between the collective
strength of ties and value creation. According to Uzzi (1996, 1999) and Soda, Usai, and
Zaheer (2004), the mixture of arm’s-length ties and embedded ties in a firm’s network may
provide an optimal setting for firm performance and innovation. The focus of these studies is
on the overall density of a firm’s network, ranging from sparse to moderate to dense, and the
performance effects of varying density. Their basic argument is that moderate density is more
advantageous to firms than either sparse or high density. Our study, in contrast, focuses on
the strength of ties at the dyadic (buyer-supplier) level where the underlying interfirm dynam-
ics are quite different from those at the network level. The results support our theoretical
reasoning that the intermediate buyer-supplier ties lack value-creating properties that define
weak or strong ties (see Figure 2).
The results of this study also support a moderation role of dependence asymmetry in rela-
tional tie strength (see Figure 3). We identify from the sample two groups of ties that are
highly symmetric (i.e., 1 SE below the mean asymmetry level) and highly asymmetric (i.e.,
1 SE above the mean). The latter group shows a clear U-shaped curve for the relation of the
tie strength with both supplier and joint value creation (see Figures 5a and 5b), indicating
overall greater value creation when relative dependencies in buyer-supplier ties are symmet-
ric as opposed to asymmetric.
Moderation Effect: Relational Versus Structural

Our results show that in the buyer-supplier context, a moderation effect is significant only
for relational strength of ties and not for structural strength of ties. Interestingly, this is con-
sistent for both supplier and joint value creation (see Tables 6 and 7). The results tell us that
the value creation mechanism based on structural tie strength is not regulated by dependence
asymmetry. In other words, the structural properties (i.e., interaction frequency and intensity)
seem to exert a decisive impact on the value creation by determining the level and amount of
the resources to be transferred or exchanged in a given relationship. For instance, between
two firms with a strong tie, their asymmetry level aside, the highly integrated and streamlined
interfirm systems create communication routines and enable continuous resource flows,
increasing both partners’ access to and exploitation of resources held in the relationship. In
the case of weak ties, the inherent high propensity to be a structural bridge is unlikely to be
susceptible to the partner firms’ perceived dependence asymmetry level. In sum, in the case
of structural tie strength, there seems to be only the main effect in affecting value creation,
with no intervention by dependence asymmetry. This finding points to the importance of
considering, in the interfirm context, how to design, build, and develop the operational infra-
structure. A physical system, once in place, might have a decisive impact on the way rela-
tional resources are managed.
The significant moderation effect for relational strength seems to support our reasoning
that dependence asymmetry, through its bearing on partnering firms’ fairness perceptions,
moderates the link from tie strength to value creation. That is, when firms make decisions
regarding resource investments in a relationship, firms do not base such decisions solely on
their sentiment (goodwill) toward their partner or partner trustworthiness; they also draw on
their rationality (i.e., calculations of their anticipated gains). Conventional wisdom says that
the fundamental concern of firms is securing and maximizing their own interests (Morris &
Snell, 2007), and the economic actors are in general more rational and less emotional, com-
pared to individuals (Izquierdo & Cillán, 2004). Our overall results demonstrate that when
making strategic decisions, such as how to manage resources in relationships, firms behave
prudently; they would weigh both affective factors (i.e., relational tie strength) and calcula-
tive factors (i.e., resource complementarity and fair payoff distribution), and neither type of
factor would play a decisive role in the process. Our additional analysis corroborates that the
moderation effect for relational tie strength is especially pronounced for intermediate strength
of ties.
Intermediate Ties
Our model studies intermediate ties, about which the existing literature is largely silent.
The results involving the link between relational strength of buyer-supplier ties and value
creation help us understand more about this type of tie. As shown in Figures 5a and 5b, the
gap between the two U-shaped curves becomes larger as we move toward the middle. The
moderation effect in the case of relational strength is most pronounced at intermediate
strength. This observation actually reinforces our theorization regarding intermediate ties.
We have argued that such ties suffer from a lack of the distinctive properties that benefit
either weak or strong ties. Empirical evidence supports this argument. In intermediate ties,
the unfavorable conditions seem to be twofold—intermediate ties lack the trust pertaining to
strong ties and lack the freedom from social pressure associated with weak ties. In either
polar tie type, there is only one positive main effect to be negatively moderated (i.e., weak-
ened) by dependence asymmetry. In the case of intermediate ties, however, either main effect
(based on strong trust or freedom from social pressure) is diminished, which is further mod-
erated (i.e., reinforced) by asymmetry. This finding explains how the moderation effect of
dependence asymmetry intensifies, moving toward the intermediate range of buyer-supplier

tie strength.
Implications for Future Research

Our study investigates the value creation effects of tie strength. This research can help
extend the extant literature that addresses firm-level tie strength and performance implica-
tions, such as interorganizational or buyer-supplier relationships and strategic alliances.
Past research has largely framed interfirm ties in a monolithic way; for instance, strong ties
are all viewed as homogeneous in terms of the relational properties and performance effects.
Future studies should consider how the two tie-strength dimensions (structural and rela-
tional) might work together to affect firms’ performance. Furthermore, even if both the
structural and relational tie strengths appear to exert a positive influence on firm perfor-
mance, we suspect that there might not always be reinforcing effects, since the two do not
necessarily covary. For instance, if high structural tie strength exists with low relational tie
strength, equivalent to a “hostage” situation (Das & Teng, 2001), the two tie-strength dimen-
sions could clash and generate counterbalancing effects, leading to an overall negative
impact on firm performance.
By integrating different levels of tie strength, our study implicates a broader theoretical
tension. Previously, theoretical focus has been predominantly dichotomous: weak versus
strong. For instance, social exchange literature (e.g., Marsden & Campbell, 1984) has long
been interested in contrasting, at the personal level, strong ties (i.e., between friends) versus
weak ties (i.e., between acquaintances). At the firm level, strategic alliance literature has
classified alliance types as largely either strong ties (e.g., equity alliances and joint ventures)
or weak ties (e.g., licensing or patent agreements; Rowley, Behrens, & Krackhardt, 2000).
When we integrate the two tie types into a single framework, we bring an additional type of
ties, which we have referred to as intermediate ties. By doing so, this study brings to the fore
a need for further research on the ties in the midrange. Future studies could consider in
greater depth what happens when social ties take intermediate strength in various contexts.
Given the strategic significance of interfirm ties to value creation, we need further studies
that more precisely characterize intermediate ties. Comparatively, we believe that conceptu-
alizing intermediate ties would be less straightforward and more elusive than a pure form of
either strong or weak ties. Intermediate ties involve mediocre levels on both of the tie-strength
dimensions or mismatch between them. Typical intermediate ties show mutually mediocre or
unbalanced levels of trust or commitment between partners, as opposed to mutually strong
affection demonstrated in strong ties or mutual nonchalance evidenced in weak ties.
Structurally, intermediate ties display somewhat frequent yet largely perfunctory exchanges
with a lack of meaningful interfaces between partners. Exploratory approaches might be
helpful in better specifying and operationalizing such ties. Case-based studies would enable
direct observations of unique dyadic properties and the related business or environmental
conditions under which such ties tend to emerge or persist, as well as how these properties
affect value creation. Such undertakings would help advance the alliance literature (e.g.,
Andrevski, Brass, & Ferrier, 2016; Lavie, 2007) by adding greater variance to alliance clas-
sification (i.e., beyond strong or weak ties), potentially enriching our understanding of how
to reconfigure a firm’s alliance portfolio to facilitate value creation.
Furthermore, it would be interesting to delve deeper into value creation mechanisms at a

network level. Social network literature identifies two structural properties of a firm’s net-
work as social capital—structural hole (Burt, 1992) and network closure (Coleman, 1988).
Conceptually, the former is associated with weak ties and the latter with strong ties; our study
provides an empirical basis for expanding the roles of both types of ties in a firm’s value
creation. Future studies might integrate the two network-level structures (structural hole and
network closure) in the context of a firm’s broader networks. From a firm’s perspective, the
two structures can coexist within its networks. For instance, multiple subnetworks can be
each fully closed (i.e., all members in a subnetwork know each other) or they can be con-
nected only via the focal firm (i.e., structural holes). Future research could investigate how
one might configure these different types of substructures in a firm’s network for better firm
performance.
Lastly, this study also demonstrates the interaction effect of dependence asymmetry and
relational tie strength on value creation. This research indicates that the effect of power
dynamics in dyads can potentially be regulated by tie strength. The power-dependence litera-
ture generally views power imbalance as invariably causing tension and conflict between
partners, which impedes the flow of information and resources in interfirm relationships
(Casciaro & Piskorski, 2005). Our findings, however, suggest that the effect of power imbal-
ance on resource sharing and firm performance might be contingent on tie strength. More
research is needed to test this postulation.
Limitations
This study has a number of limitations. It is true that we collected data across dyads (i.e.,
we collected data from a buyer and its suppliers), but the buyer-side data were sampled (N =
32) and used only for cross-validation purposes. Although this approach was the only option,
given the constraints imposed by the hosting firm, this type of sampling remains a key limita-
tion. The fact that the main data used for analysis came from the supplier side (N = 163) can
pose a challenge in capturing a more complete picture of tie strength, dependence asymme-
try, and their consequences. For instance, one could cast doubt on the measurement of depen-
dence asymmetry made only by the supplier side, since the concept involves both sides. Also,
the two dependent variables (supplier and joint value creation) were measured on the basis of
the respondents’ self-reports. This approach may restrict the measurement validity as a result
of a possible common methods bias endemic to survey-based research. Although we showed
a nonsignificant confounding effect of such potential bias on the results and cross-validated
the main data using the matching sampled buyer-side surveys, our study still falls short of
fully incorporating the buyer-side perspective. Another limitation of our study is that it is
confined to the one-buyer, one-industry context. The research design may restrict the gener-
alizability of our findings to broader populations of buyer-supplier ties, even if it has enabled
us to disentangle our proposed theories from potentially much greater confounding effects
due to industry-specific (e.g., concentration-level) or firm-specific (e.g., different supplier
relationship strategies across buying firms) factors (Cook & Campbell, 1979).
In addition, there can be other possible moderators that make our model contingent. For
instance, the absorptive capacity (W. M. Cohen & Levinthal, 1990) of firms on either side of
the dyads may also moderate the tie-strength effects on value creation. We tried to control for
such effects by including firm size as a control, but we did not explicitly control for each
firm’s absorptive capacity. Future research can consider other critical intervening factors in
the effects of tie strength or power dynamics in dyads on the partners’ performance. Lastly, it
will also be worthwhile to look further into the mediating mechanisms between different
levels of tie strength and value creation. Considering different types of resources (e.g., tacit
vs. explicit knowledge) as mediators may offer additional insights into interfirm value cre-
ation dynamics.
Conclusion
We have brought together two theoretical perspectives with different epistemological ori-
gins, namely, strong- and weak-tie arguments, to examine buyer-supplier tie-strength effects
on value creation. We also brought to the foreground the role of intermediate ties in value
creation (or the lack thereof). We theoretically distinguish between tie strength and depen-
dence asymmetry and study the latter’s moderating role. Overall, we believe that our study
takes an important step toward building a deeper understanding of the link between interfirm
dyadic characteristics and value creation in buyer-supplier relationships.
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Tie Strength and Value Creation in the

Keywords: buyer-supplier relationship; tie strength; value creation; dependence asymmetry;

Interfirm Tie Strength and Value Creation

Buyer-Supplier Tie Strength

Buyer-Supplier Tie Strength and Value Creation

Structural dimension. In strong buyer-supplier ties, parties’ mutual engagement in novel

Relational dimension. The relational dimension in strong buyer-supplier ties reflects the

Dependence Asymmetry as Moderator

Supplier/Joint Value Creation

Weak Intermediate Strong

Moderation effect in structural strength. Buyer-supplier partnerships, much as a typical

Supplier/Joint Value Creation

Structural/Relational Tie Strength

The moderating effect is particularly pronounced for intermediate buyer-supplier ties

Moderation effect in relational strength. Dependence asymmetry is also reflected in part-

Sample and Data Collection

Demographics Frequency Percentage

Total annual revenue ($US)

Note: NAICS = North American Industry Classification System.

Survey item Factor 1 Factor 2

Survey item Factor 1 Factor 2

Controls. To minimize possible spurious effects of firm- or industry-specific differences

Survey item Factor 1 Factor 2

Supplier Value Creation

1. Firm size 2.92 0.93

Model 1: Structural Strength Model 2: Relational Strength

Model 1: Structural Strength Model 2: Relational Strength

Relational Strength −0.18 −0.25

Model 3: Structural Strength Model 4: Relational Strength

Relational Strength −0.32† −0.30

Joint Value Creation

Moderation Effect: Relational Versus Structural

dependence asymmetry intensifies, moving toward the intermediate range of buyer-supplier

Implications for Future Research

Furthermore, it would be interesting to delve deeper into value creation mechanisms at a

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