Coopetition and framework contracts in industrial customer-supplier relationships

Abstract

Purpose– The paper aims to investigate how business-to-business key accounts deal with the consequent tension between cooperation and competition, and how they can resolve that relational paradox, using framework contracts.Design/methodology/approach– The paper argues that the role played by framework contracts can be ambivalent: as a tool to define cooperation with suppliers while simultaneously organising competition within suppliers, but by formalising such ambivalence, it does help to ease the tensions that may arise. To clarify such a conceptual and counter-intuitive ambivalence, the paper uses a case study that shows how framework contracts are used to solve the inherent tensions between cooperation with “preferred suppliers” and their price competition with invited “challengers”, in a competitive bidding situation.Findings– This study is a first step in an investigation of the role of framework contracts in a customer-supplier relationship, aiming to explain their use as they highlight the “coopetitive” nature of the relationship, turning it into something tangible and psychologically acceptable.Research limitations/implications– Because of the complexity of vertical “coopetition” and the research method adopted, the findings may not be generally applicable.Practical implications– This research offers an enlarged perspective for suppliers as well as customers to think over their own relationships (in an industrial setting).Originality/value– Little research has been conducted to date on vertical coopetition and the role and effects of framework contracts in the context of such complex customer-supplier relationships. This case study offers insights for practising managers and academics into the effective use of framework contracts.