Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in China
Based on a new institutional economy framework, this study examines the formation and economic consequences of social networks (guanxi) from the perspective of key suppliers and customers in China. Results show that commercial activities which depend on networks are determined by the institutional e...
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Online Access: | http://www.sciencedirect.com/science/article/pii/S1755309111000165 |
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doaj-8ad9a26d74bd49c790bb4219c2b889852020-11-24T20:50:55ZengElsevierChina Journal of Accounting Research1755-30912011-09-014312113310.1016/j.cjar.2011.06.003Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in ChinaXiang KongBased on a new institutional economy framework, this study examines the formation and economic consequences of social networks (guanxi) from the perspective of key suppliers and customers in China. Results show that commercial activities which depend on networks are determined by the institutional environment. For example, companies that have lower accumulated social capital (less trust among people) and are subject to more government invention depend more on social network transactions than on the market. In addition, this study shows that network transactions can provide benefits to firms, especially in weak institutional environments. Networks can reduce transaction costs by reducing information asymmetry, i.e., increased network dependence is associated with lower credit costs and lower advertising and sales costs. Networks can also reduce the effect of industry shocks, especially negative shocks, by creating a bonding mechanism. This study contributes to our understanding of social networks in emerging markets by providing evidence on network transactions with key suppliers and customers and their influence on firms’ accounting behavior.http://www.sciencedirect.com/science/article/pii/S1755309111000165Social networkSocial capitalTransaction costsIndustry shocks |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Xiang Kong |
spellingShingle |
Xiang Kong Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in China China Journal of Accounting Research Social network Social capital Transaction costs Industry shocks |
author_facet |
Xiang Kong |
author_sort |
Xiang Kong |
title |
Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in China |
title_short |
Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in China |
title_full |
Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in China |
title_fullStr |
Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in China |
title_full_unstemmed |
Why are social network transactions important? Evidence based on the concentration of key suppliers and customers in China |
title_sort |
why are social network transactions important? evidence based on the concentration of key suppliers and customers in china |
publisher |
Elsevier |
series |
China Journal of Accounting Research |
issn |
1755-3091 |
publishDate |
2011-09-01 |
description |
Based on a new institutional economy framework, this study examines the formation and economic consequences of social networks (guanxi) from the perspective of key suppliers and customers in China. Results show that commercial activities which depend on networks are determined by the institutional environment. For example, companies that have lower accumulated social capital (less trust among people) and are subject to more government invention depend more on social network transactions than on the market. In addition, this study shows that network transactions can provide benefits to firms, especially in weak institutional environments. Networks can reduce transaction costs by reducing information asymmetry, i.e., increased network dependence is associated with lower credit costs and lower advertising and sales costs. Networks can also reduce the effect of industry shocks, especially negative shocks, by creating a bonding mechanism. This study contributes to our understanding of social networks in emerging markets by providing evidence on network transactions with key suppliers and customers and their influence on firms’ accounting behavior. |
topic |
Social network Social capital Transaction costs Industry shocks |
url |
http://www.sciencedirect.com/science/article/pii/S1755309111000165 |
work_keys_str_mv |
AT xiangkong whyaresocialnetworktransactionsimportantevidencebasedontheconcentrationofkeysuppliersandcustomersinchina |
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1716803230355161088 |