Self‐protection vs opportunity seeking in business buying behavior: an experimental study

Abstract

PurposeTheories on industrial buying behavior differ fundamentally with regard to motivation and direction of industrial purchasing decisions. This becomes extremely in the case of new institutional economics, highlighting administrative aspects, and market process theory, focusing on entrepreneurial aspects of buying decisions. This paper aims to challenge these approaches by setting up an experimental design. Decisions of sales and purchasing managers were investigated with respect to their motivation of self‐protection or opportunity seeking.Design/methodology/approachThe contribution is based on an experimental design. The design is based on a prospect theory scenario. Prospect theory states that successful economic agents show a stronger tendency towards self‐protection, whereas under‐performing economic agents are willing to bear greater risks in search for opportunities.FindingsThe results suggest that indeed out‐performers show a tendency to risk avoidance and under‐performers are willing to bear more risks. The most important implication is that new institutional economics‐based approaches to buying behavior are not universally valid. However, they apply to specific situations. In that respect the contribution shows a direction for the proper application of transaction cost‐based concepts.Practical implicationsManagers are advised to take the economic performance of their customer companies into account. Outperforming companies are more responsive to measures for self‐protection. Under‐performing customers may be more tolerant towards risk if it is compensated with the expectation of better opportunities.Originality/valueThe empirical research is new in so far as it is the first to apply a prospect theory framework to a business market environment. The results show clearly that the methodology, as originally applied in prospect theory, needs refinement when transferred to a business market context.