Pressure or Pamper? The Effects of Power and Trust Dimensions on Supplier Resource Allocation

Abstract

Leveraging the supply chain for competitive resources remains a key challenge for supply chain management. Drawing on social exchange theory, this study examines SCM practices that help firms to acquire better supplier resources than rival firms that source from the same supplier. We provide a clearer picture of coercive and competence power, and goodwill and competence trust as key mechanisms to improve supplier resource allocation of physical and innovation resources. We analyze survey data of 185 supplying firms using structural equation modeling. Our analyses yield several interesting findings. First, contrary to other studies, we find that coercive tactics do not necessarily affect supplier resource allocation negatively and goodwill trust does not inherently affect supplier resource allocation positively. Second, the results of a multigroup analysis indicate that the dependence of a supplier on the buying firm—in terms of share in turnover—affects the relationship between the trust dimensions and supplier resource allocation more than it does the power dimensions. Third, goodwill trust only affects supplier resource allocation when the buyer has a large share in the supplier's turnover, while competence trust is more effective if buyers account for a small share in the supplier's turnover. The contributions of our study for the supply chain management and social exchange theory literature are discussed.