Impact of business relationship functions on relationship quality and buyer's performance

Abstract

PurposeThe paper aims to present how relationship value is created and how it influences the existing buyer‐supplier relationship and the buyer's performance. It seeks to introduce the construct of business relationship function to analyze why the business relationship is valuable and to investigate the links between business relationship function, relationship quality and buyer's performance. Moreover, it aims to investigate whether the availability of alternative suppliers changes the influence of business relationship function on relationship quality.Design/methodology/approachA questionnaire survey was conducted in 239 manufacturing firms in north‐west China, and the hyphotheses were tested using a structural equation model with LISREL software.FindingsThe results indicate that business relationship function has a direct as well as an indirect effect on buyer's performance through the mediating effect of relationship quality. The study also finds that business relationship function has a stronger influence on relationship quality than it does on buyer's performance. Moreover, the availability of alternative suppliers will weaken the influence of business relationship function on relationship quality.Research limitations/implicationsThis study concentrates on only the direct functions of business relationships and the indirect functions are neglected. Future studies should investigate the direct function as well as the indirect function, and the dynamic nature of business relationships should be considered.Practical implicationsThe study suggests that managers should develop and maintain long‐term relationships through the fulfillment of business relationship functions. The role of function fulfillment is even more important when there is competition among alternative suppliers.Originality/valueThe study provides a sound agenda for future research on supply chain management and industrial marketing, and has important implications for practising managers, especially in the Chinese context and other similar developing countries.