The co-evolution of supplier relationship quality and product quality in the U.S. auto industry: A cultural perspective

Abstract

Strategic buyer-supplier relationships have been credited with vital outcomes such as lower costs, faster lead times, and better product quality. As such, by the 1990s, U.S. automakers have been moving away from traditional arm's length relationships—and towards strategic relationships—with their suppliers. Despite such shifts, perceptions persist that U.S. automakers consistently produce lower quality vehicles than their Japanese counterparts. Thus, an unanswered question is the extent to which better supplier relationships lead to better product performance. Using a longitudinal approach with secondary data, we explore the co-evolution of relationship quality and product quality among six major automakers (the U.S. and Japanese Big Three). Our results point to previously unidentified boundary conditions on the association between strategic supplier relationships and product quality. For example, strategic supplier relations precede product quality only when relationship quality meets or exceeds a given threshold. Moreover, for Japanese automakers, high relationship quality tends to precede high product quality whereas for U.S. automakers, only those who improve supplier relationships faster than competitors appear to benefit from strategic supplier relationships. Implications and suggestions for future research are discussed.