Examining supplier switching behavior: an empirical analysis of the Japanese automotive industry

This paper introduces an index that directly measures how much of a buyer’s existing supplier base is replaced from one period to the next. We construct this “fraction of supplier share dropped” measure using data on 229 automotive parts, 693 suppliers, and 12 Japanese automakers from 1996 to 2016. Our findings indicate that Toyota, known for stable ties with its affiliates, exhibits the lowest switching rate among those in-group suppliers; however, it shows one of the highest switching rates when the suppliers are not within its affiliate network. Other automakers exhibit less dramatic shifts in switching behavior across affiliated and non-affiliated suppliers. By capturing the identity-specific nature of supplier turnover, our index advances the literature on buyer–supplier dynamics and offers managers a more precise tool for assessing the trade-offs between stable, in-group relationships and the strategic benefits of reevaluating out-group suppliers.