Management practices and transaction relationships

We leverage a unique database to examine the role played by management practices in the formation of transaction relationships separately and independently of productivity. We find that management scores are positively associated with the number of transaction partners even after the level of productivity is controlled for. Better management practices also lead to more frequent additions and drops of transaction partners, to transacting with larger and better-managed firms, while they also mitigate the negative effect of transaction-related uncertainty. Structured management enables firms to build growth-oriented transaction networks by ensuring flexible, smooth, and stable transactions.