Lock‐in situations in supply chains: A social exchange theoretic study of sourcing arrangements in buyer–supplier relationships

Abstract

Abstract Social exchange theory is used to gain a better understanding of the relationship between a buyer and a supplier that is characterized by lock‐in situations. We begin by reviewing the theoretical foundations of social exchange theory. Next, we use an illustrative multinational business example from a Danish Business Group to demonstrate the complexities of the lock‐in situation. Conjectures related to lock‐in behaviors are initially developed and then examined by means of a game‐theoretic model. The analysis provides a basis for the development of propositions which are examined employing a behavioral experiment. The results indicate that the optimal pricing strategy of the supplier is to lower the price with increasing demand and the optimal investment intensity of the buyer decreases with increasing demand. The paper concludes by presenting directions for future research.

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