Drivers of contract renewal in international B2B services: a firm-level analysis

Abstract

PurposeA key issue for B2B industrial firms is to better understand the drivers of customer value and contract renewal decisions, due to the long-term supplier-customer relationships. When the B2B firm is operating across national boundaries, there is added complexity to the renewal decision, because the drivers are also influenced by cultural considerations. The purpose of this paper is to examine the main drivers of customer value creation and contract renewal intentions, for a large B2B firm operating in both the USA and Japan and compare the two data sets.Design/methodology/approachThe company, which provided the data for the study, is a US Fortune 100 firm in the facilities management industry, operating worldwide. Data were collected using a survey questionnaire from a sample of the firm’s customers in two of its largest markets, the USA and Japan. The authors used PLS to analyze the data, and compare and contrast the drivers.FindingsThe findings highlight both similarities and differences across the two countries for the most influential drivers of customer value and contract renewal. Although no differences were found when examining the effect of relational drivers on contract renewal, differences were observed for utilitarian drivers: product quality and price.Practical implicationsThe authors expected the relational drivers of contract renewal to be stronger in the high-context culture of Japan, but found that there were no differences with the US market. While relational drivers are important in the decision-making process in both countries, it seems that managers should focus more on price considerations in Japan. In contrast, product quality is relatively more important in the USA, when negotiating contract renewals with customers.Originality/valueNoticeably absent from the B2B services literature is its application to international markets. In particular, research is lacking on the specific drivers of customer value and contract renewal intentions in the USA and Japan, despite the importance of long-term on-going contractual relationships in these markets. This study has provided additional insights into the complex world of contract renewal between international buyers and sellers of large industrial systems.