Collaboration strategies in buyer-supplier relational (BSR) networks and sustainable firm performance: A trade-off story

Abstract

A buyer firm can increase collaboration in its buyer-supplier relational (BSR) network by focussing on supplier-to-supplier interconnectivity (i.e., network density) or alternatively, by enabling supplier clustering. While the extant literature has considered the effects of these two strategies on firm financial performance, it has not shown whether a focal firm's buyer-supply network collaboration strategy affects its sustainable firm performance (SFP), specifically its environmental and economic performance. This paper investigates three key questions: (a) How do collaboration strategies influence SFP? (b) Is there an optimal mix of these two network strategies for fostering collaboration in a firm's BSR network? (c) Can a manager win on both environmental and economic frontiers by pursuing either strategy? Leveraging extant research on BSR networks, ambidexterity, and network theory, we propose a model linking collaboration strategies to SFP. We construct 330 multi-tier BSR networks and find strong support for the non-linear effects of both collaboration strategies on SFP. A response function analysis identifies the combination of strategies yielding the best outcome for SFP. We also find strong evidence for trade-offs between the performance variables. The results show that managers should focus on density as a lever while developing a minimal level of supplier clustering. We discuss academic and managerial implications of our findings for managing buyer-supplier relationships and enhancing a firm's performance.