Supplier relationship strategies and outcome dualities: An empirical study of embeddedness perspective

Abstract

In buyer-supplier settings, paradoxical (or dualistic) outcomes are often observed. In this paper, we seek to demystify why such puzzling phenomena occur and discourse how firms can better manage their supplier relationships. We argue that any set of dualistic outcomes is basically two manifestations of the same thing—what we refer to as a supplier's learned behavioral pattern. Depending on the buyer's specific relationship strategy, the supplier would learn to behave in a certain way, as it faces two separate—and often competing—business environments: the focal dyad and its extended ties. Adopting the embeddedness lens, we theorize buyer-supplier dyadic embeddedness (BSE) to ascertain the primary (intended) and incidental (unintended) outcomes of buyer strategies toward suppliers. We conceptualize BSE in social and economic dimensions and develop four basic BSE states, dividing each dimension into low and high. Then, we identify four archetypal supplier relationship strategies that correspond with the four basic BSE states and the outcome duality for each strategy type: stability strategy (high social-high economic BSE) inducing relational stability and supplier rigidity, exploitation strategy (low social-high economic) inducing lack of synergy and supplier opportunism, leverage strategy (low social-low economic) inducing relational ambiguity and supplier flexibility, and laissez-faire strategy (high social-low economic) inducing lack of control and supplier innovation. We model each outcome duality mechanism on seemingly unrelated regression (SUR). The empirics come from the survey data collected from a major global automaker and its North American supply base.