Embeddedness, Interdependence, and Opportunism in Organizational Supplier-Buyer Networks

Despite the value of Williamson’s (1975; 1985) transaction cost economics perspective to organization theorists for offering new ways of thinking about relations between organizations, its focus on supplier-buyer dyads operating on a continuum ranging from markets to hierarchies de-emphasizes the importance of cooperative network relations. In this paper; theory and hypotheses are developed explaining constraints on the emergence of opportunism when supplier-buyer relations are considered in a network context. The general thesis is that the opportunistic behavior of individual network suppliers relative to the dominant buyer; or hub firm, will decline at increasing levels of embeddedness in an interdependent supplier-buyer network, despite conditions of high asset specificity and small numbers bargaining.