Determinants of Perceived Interfirm Dependence in Industrial Supplier Relations

Abstract

Studies of industrial buyer-supplier relations mostly focus on structural characteristics of the transactions between parties, and assume a direct relation between these factors and characteristics of the relationships. This paper focuses on the psychological dimension of transaction relations, reflected in perceptions of dependence, from the perspective of an industrial supplier. In the first step of the analysis, three groups of structural determinants of perceived supplier dependence are explored: factors related to goal mediation, factors related to relation-specific assets, and factors related to network embeddedness. After that, the influence of these structural factors and of perceived supplier dependence on the ordering of buyer-supplier relations is investigated. Data come from a study of the micro-electronics assembly industry in the Netherlands. The findings show that sales to a particular buyer as a percentage of the total sales of the supplier and the growth of sales to a particular buyer (two forms of goal mediation) are important determinants of perceived supplier dependence. Human asset specificity is also related to perceived supplier dependence. Network embeddedness variables play only a minor role in explaining perceived supplier and buyer dependence in this study. The data further show that perceived dependence has an effect on the degree of ordering in the relationship, next to structural factors like the extendedness of the relationship beyond the focal transaction and physical asset specificity. The effects of human asset specificity and dedicated assets on ordering are contrary to what was expected on the basis of the literature.