The Companies We Keep: Effects of Relational Embeddedness on Organizational Performance1

Building on first‐hand qualitative and quantitative data collected from computer motherboard manufacturers, this research proposes a contingency argument for the effects of relational embeddedness on organizational performance. Results show that the effects of embeddedness vary depending on the specific dimension of embeddedness, organizational age, performance measures, and the type of supplier relations, and that the concept is far more complex than previous literature suggests. Two main conclusions are that a closer supplier relationship improves both organizational growth rate and production quality for younger organizations, while in chipset supplier relations, a highly committed supplier worsens production quality more for younger firms.