The contingent impacts of market and nonmarket ties on the exchange relationship formation Chinese automotive industry

Abstract

Purpose - This paper aims to present inter-firm networks in China by examining the impacts of previous market ties, nonmarket ties, and more importantly their interaction on the formation of exchange relationships. Design/methodology/approach - The authors test their hypotheses using inter-firm exchange relationships between 19 automakers and 312 suppliers in China. The authors conducted empirical tests with multilevel logit model. Findings - The authors find that both previous nonmarket ties and market ties have positive impacts on the formation of the next exchange relationships, while market ties and nonmarket ties are substitutes in the exchange relationships formation. Originality/value - This paper provides unique theoretical framework on how firms in emerging markets promote the knowledge exchange with help of market and nonmarket ties. Especially, our findings on the substitute effects between networks have important practical implications to understand the historical development of exchange relationship in transition economies, such as in China.