Social Capital, Institutional Structure and the Stability of Interfirm Trading Relationships in China’s Automobile Industry

The aim of this study is to examine the factors that affect the stability of interfirm ties in China’s transition economy. In particular, this study explores whether the propensity to engage in repeat transactions with past partners is attributable to rational choice based on expectations for the benefits of social capital or an outcome of institutional pressure that binds firms sharing similar positions within the institutional structure bequeathed from China’s socialist past. The results from the analysis of supplier relations in China’s automotive industry suggest that both the consideration of social capital benefits and similarity in institutional position affects the likelihood of continued relationship.