The Paradox of Spatial and Relational Embeddedness: Tie Reinitiation after a Trust Violation

Abstract

How does embeddedness—spatial and relational—influence interfirm tie reinitiation when trust is violated? The taken-for-granted relationship between prior ties and repeat tie formation becomes complex when trust violations are introduced. Two divergent schools of thought emerge: an “embeddedness as a buffer” logic, wherein embedded partners may be more forgiving, versus an “et tu Brute” logic, wherein embedded partners feel betrayed. We tackle this theoretical tension by examining brokerage relationships. When spatially or relationally embedded, focal firm–broker ties further enhance trust but the ensuing higher expectations also make embedded trust more brittle due to the broker’s divided loyalties, resulting in a steeper decline in trust after a violation. Our central hypotheses thus highlight a paradox of embeddedness: while spatial and relational trust foster repeat ties under normal circumstances, it takes proportionately longer for such embedded ties to be reinitiated when trust is violated. We use a unique hand-collected data set in the global dry cargo shipping industry with voyage-level data on 3,618 exchanges between a Copenhagen-based shipowner–operator (the focal firm) and 235 shipbrokers from 2011 to 2018 and a Weibull hazard rate estimator. We find support for the paradox of embeddedness when trust is violated in brokerage relationships.