Exploring the performance effects of key‐supplier collaboration

Abstract

PurposeTo examine the conditions under which the proposed benefits of collaboration between a firm and its suppliers will occur.Design/methodology/approachThis paper examines buyer‐supplier relationships from the point of view of the buying firm. The paper is based on a Swiss sample of OEM‐supplier relationships. The research question is empirically tested employing a sample of 135 Swiss buyer‐supplier relationships and using structured equation modelling as well as multi‐group comparison to test for quasi‐moderation effects. In this paper it is investigated under which condition collaboration with key suppliers is beneficial for buyers. By linking collaboration with key performance measures and contrasting its effects with relational constructs like trust and dependence it is hoped to add to the growing literature on inter‐organizational relationships in supply chain contexts.FindingsThe results demonstrate that supplier collaboration has a positive effect on buyer performance both in terms of innovative capability and financial results. As expected, trust and dependence play an important role in supplier relationships.Research limitations/implicationsThis research is based on a single country (Switzerland) multi‐industry study. Generalizability to other industries or countries may be limited.Practical implicationsSupplier relationships need governance modes that balance control and relational elements. Relationship controlling is an important element in building successful supplier relationships. In order to be able to reap the benefits of collaboration for the entire company, the purchasing department needs incentives that support relationship building. Managers leading a purchasing department can learn what structural elements and processes are necessary to obtain optimal benefits from their supply base.Originality/valueFrom a manager's viewpoint, this paper will provide additional insight into when and how collaboration can improve financial performance, enhance innovation, and reduce transaction costs..