The Effects of the Economic Downturn on Interdependent Buyer–Supplier Relationships

Abstract

The management of strategic buyer–supplier relationships is a critical concern for sourcing managers. The selection of key suppliers and how relationships with these suppliers are managed and incentivized can dramatically affect the buying company's performance. While the extant literature focusing on industrial buyer–supplier relationships is significant, the severe economic downturn beginning in 2008 tested buyer–supplier relationships in unprecedented ways, yielding new insights. The research presented in this paper uses dyadic cases to investigate transformations within industrial relationships during the economic downturn. Propositions are formulated that focus on why and how firms responded to the downturn. Three primary types of relationships are identified. The results indicate variation in the ways buying companies managed their key supplier relationships during the downturn: some firms behaved more cooperatively and found ways to jointly confront the effects of the downturn, while others responded by behaving competitively to maximize their individual outcomes. The results further suggest that researchers need to revisit existing models of relationship development and dissolution to understand how these relationships evolve or devolve. The research also raises questions about the value of physical and human asset specificity, and social investments in curtailing opportunistic behavior in times of severe economic stress.