Perspectives on joint competitive advantages in buyer–supplier relationships

Abstract

A critical outcome of competitive strategy is the attainment of competitive advantages. Recently, there has been a growing recognition that such advantages may reside in the boundaries of a firm—via its relationships with outside organizations. However, there is little understanding regarding how such advantages are created, eroded, and preserved in such relationships. In this paper, I summarize the findings around competitive advantages from three studies, all of which involve longitudinal empirical tests of over 200 industrial buyers and their suppliers in a variety of industries. The collective results indicate that specialized investments facilitate the attainment of joint competitive advantages and these advantages are positively correlated with economic outcomes, organizational behavior, and expectations of continuity. Competitive advantages can also be eroded over time for buyers by suspicions of ex post opportunism that arise within the course of the relationship. However, the detrimental effects of opportunism suspicions for both firms can be mitigated via the strategic use of various governance modes such as bilateral investments, goal congruence, and interpersonal trust.