INNOVATION IN LOGISTICS OUTSOURCING RELATIONSHIPS: PROACTIVE IMPROVEMENT BY LOGISTICS SERVICE PROVIDERS AS A DRIVER OF CUSTOMER LOYALTY

Abstract

Flint, Larsson, Gammelgaard and Mentzer (2005) and Wagner (2008) emphasize that innovativeness may help logistics service providers (LSPs) differentiate themselves from their competitors. Within the domain of innovation, relationship‐specific proactive improvement by LSPs may play a vital role because in logistics outsourcing relationships, the problem of ex post adaptation exists (Rindfleisch and Heide 1997). So far, however, it remains unclear to what extent LSPs may utilize their proactive improvement to create customer loyalty and whether a focus on either cost or performance improvements is preferable. The present study analyzes 298 logistics outsourcing relationships using a survey method and structural equation modeling to assess the effect that proactive cost improvement and proactive performance improvement have on customer loyalty. Additionally, the moderating effects of “service complexity” and “length of contracting period” on the base effects are analyzed. The results reveal that proactive cost improvement and proactive performance improvement are both strong drivers of all core dimensions of loyalty (retention, extension, and referrals). However, this finding is a composition of two different patterns. Cost improvement, and thus efficiency is the main driver of customer loyalty when the outsourced services are simple and the contracting period relatively short. A clear shift of importance is observable when services increase in complexity and the contracting period lengthens. In such settings, customer loyalty is primarily driven by proactive performance improvement and thus, effectiveness, while cost improvement plays a subordinate role.