How to manage a long-term buyer-supplier relationship successfully? The impact of network information on long-term buyer-supplier relationships in the Dutch potted plant and flower industry

Abstract

Abstract Recently, scholars have suggested that to understand fully the nature of a dyadic relationship, greater attention must be directed to the network context. In this study we drew on emerging perspectives on inter-firm governance and networks to develop a theoretical framework to understand the successful governance of long-term buyer-supplier relationships. In order to test the research framework, we conducted a survey among 174 merchant distributors (buyers) and 67 growers (suppliers) in the Dutch potted plant and flower industry. In the estimated models, we found several positive impacts of the information obtained from the business network on the dimensions of relationship management, and ultimately performance, both in terms of operations as well as finance. The results of this study support our rationale that the business network compensates for the information asymmetry assumed in transaction cost economics. Although there are several similarities in our findings, buyers and suppliers use clearly different information strategies to achieve success. While the most successful distributors tend to take the ‘hard’, tangible approach using transaction-specific investments and fostering joint action, the successful growers take the ‘soft’, social approach by putting emphasis on norms of flexibility in the relationship. Managers may use these findings to check the adequacy of their business networks and their approach to relationship management.