Buyer Supplier Exchanges Research Articles

The Dyadic Governance: Joint Trust, Trust Asymmetry, and Exchange Performance

Whereas prior literature has long recognized the asymmetric nature of interfirm trust, under-developed is how it affects exchange performance. This study distinguishes between two aspects of interfirm trust: joint trust and trust asymmetry, and examines their performance impacts in buyer-supplier exchanges. We argue that whereas joint trust fosters exchange performance, buyer trust asymmetry (i.e., buyer trust minus supplier trust) decreases exchange performance. Moreover, we posit that with high levels of joint asset specificity, buyer asset specificity asymmetry, and supply market uncertainty, joint trust is more valuable, whereas buyer trust asymmetry becomes more negative in affecting exchange performance. The results of 235 buyer-supplier dyads over two time periods provide strong support to our propositions.

Institutional distance and knowledge acquisition in international buyer-supplier relationships: The moderating role of trust

Institutional distance can generate expanded opportunities for multinational firms to facilitate learning and responsiveness. However, such distance can also create obstacles regarding knowledge transfer and integration. A theoretical puzzle concerns the mechanisms and conditions in which international buyers and suppliers can overcome institutional distance and acquire new knowledge. We develop an integrative moderated-mediation model in which institutional distance prevents parties from accessing knowledge but, when knowledge is obtained and mutual trust is developed, it promotes cross-border knowledge acquisition in international buyer-supplier exchange, particularly between international firms and firms from the Asia Pacific region. These findings indicate that firms can overcome the challenges of regulative and cognitive distance and facilitate access to knowledge and knowledge acquisition when they are able to develop and cultivate relationships of mutual trust with foreign partners. While normative distance may create learning incentives and opportunities in international buyer-supplier relationships, its impacts on knowledge accessibility and acquisition are insignificant.

Hold Back or Held Back? The Roles of Constraint Mitigation and Exchange Diffusion on Power “Nonuse” in Buyer–Supplier Exchanges

Research on the use of power in buyer–supplier exchanges often derives insights from resource dependence theory to explain how power‐advantaged firms leverage their strength. Yet, when power‐advantaged firms should not—or cannot—use their power is less understood. To explain why firms should not use their power advantages, we put forth the concept of constraint mitigation, whereby firms relinquish power in mutually dependent contexts. To explain why firms cannot use their power advantages, we draw on insights from resource orchestration theory to put forth the concept of exchange diffusion. Exchange diffusion occurs when firms have not effectively structured and bundled a resource—in this case power. Thus, we theorize that exchange diffusion in power‐advantaged firms will limit their ability to use their power. Furthermore, and perhaps less intuitively, we argue that diffusion in weaker firms will also limit the ability of the stronger firm to use its power. In other words, we theorize that exchange diffusion “disarms” the stronger firm—regardless of whether self‐ or partner‐inflicted. Our key contribution is to offer theorizing centered on power nonuse. We also advance a theory of exchange diffusion, which could significantly augment our understanding of buyer–supplier exchanges.

Benevolent dictatorship and buyer-supplier exchange

In this research, we identify and advance the concept of benevolence as a key social exchange mechanism in buyer-supplier exchange. Specifically, we (1) advance a theoretical model of benevolence to include affective, calculative, and normative dimensions, (2) highlight specific actions and resources that a focal firm uses to promote the perception of benevolence, including concessions, idiosyncratic investments, and reputation, and (3) identify how these perceptions, mediated by its own rising commitment to the exchange, impact the focal firm's economic response (i.e., concessions and idiosyncratic investments). In particular, we explore the possibility of “benevolent dictators” in exchanges marked by power asymmetry. Our model and conclusions are drawn from the confidential reports of over 500 informants at the boundaries of firms across multiple industries. Our results demonstrate the differential effects of a partner firm's actions and reputation on the three forms of benevolence and find evidence for how powerful partner firms can signal their benevolence to weaker firms through the use of concessions, dedicated investments and marketplace reputation. Moreover, we show that the responses of the partner firm to the focal firm's benevolence are not simply a reciprocation of the focal firm's actions, but are instead mediated through the enhanced commitment of the focal firm with implications for theory and management practice.

Relationship Learning in Buyer-supplier Exchanges: A Conceptual Model for Complex Environments

Abstract The purpose of this study is to propose a conceptual model that reflects interfirm exchanges can work well even under complex and tough conditions. Despite the general notion implying the negative impacts of environmental volatility and contextual distance between firms on interfirm relationships; this paper attempts to point out how that effect might be positive in buyer-supplier exchanges. Departing from the perspectives favoring diversity, the model proposes that dissimilarities between organizations create learning potential, which would be realized by intense communication between firms along with their motivation and transparency to do so. The model actually speculates on the antecedents and facilitators of learning in business-to-business exchanges. This study is expected to make a conceptual contribution, especially to the debate on inter-organizational distance through the contingency view.

Untangling the trust–control nexus in international buyer–supplier exchange relationships: An investigation of the changing world regarding relationship length

Control and trust are the primary governance mechanisms buying organizations rely upon to organize and maintain their collaborative exchange relationships with foreign suppliers. But the question of how control and trust interrelate and should be pursued seems entangled and practical advice remains largely elusive. Based on empirical data on 212 recently- and long-established buyer-supplier exchange relationships in the textile industry, we test the relationship between three practices of interorganizational control (output, process, and normative controls), two dimensions of interorganizational trust (competence and goodwill trust), and relationship performance. Using structural equation modelling, we demonstrate the value of controls for building and validating trust to depend as much on the specific control practice deployed and dimension of trust observed, as on the temporal stage of the exchange relationship. Moreover, we reveal distinct performance effects of the different control practices and dimensions of trust. Herewith, this study allows for a comprehensive understanding of the trust-control nexus in collaborative exchange relationships between buyers and their foreign suppliers. Addressing managers, we reveal how normative controls can be used to build trust and promote performance at the start of the relationship, whereas output controls need time to reach their full potential. Process controls, in turn, are found to have adverse effects.

Outcome attributability in performance-based contracting: Roles and activities of the buying organization

In buyer-supplier exchanges that feature services or service elements, performance-based contracts have gained increasing popularity. One key problem in such contracts is the possible lack of attributability of performance outcomes to supplier inputs and efforts; suppliers are reluctant to be penalized for performance shortfalls that they are not responsible for. Prior literature has indeed argued that in case of low performance attributability (or: high outcome uncertainty), performance-based contracts are less effective, but has studied this uncertainty mainly in relation to external factors. Attributability of performance has not been studied in terms of the responsibilities of the supplier and the buying organization in service design and production. In addition, there has been little literature on how buyer activities during contract execution can help address some of the problems. This paper aims to fill this gap by developing a conceptual model on how outcome attributability relates to the roles of the buying organization in the service exchange, and how contract management activities can attenuate the effects of (low) outcome attributability on the level of supplier inputs and effort, which directly affects actual performance. We engage in theory elaboration to formulate a conceptual model based on two cases of performance-based contracting of cleaning services.

Factors that influence interorganizational use of information and communications technology in relationship-based supply chains: evidence from the Macedonian and American wine industries

PurposeThe purpose of this paper is to better understand how interorganizational relationships influence information and communications technology (ICT)-enabled supply chain (SC) interactions of small- and medium-sized enterprises (SMEs) in developed versus developing economies through the theoretical lens of transaction cost economics and social exchange theory.Design/methodology/approachThe paper uses case study data to examine SMEs operating in both a developing economy, the Republic of Macedonia, and a developed economy, the USA.FindingsInsights reveal that the institutional context (i.e. environmental uncertainty) has significant indirect influence on ICT use by SMEs from rule-based and relationship-based SCs in the wine industry through contractual and relational mechanisms (i.e. contracts and social bonds).Research limitations/implicationsThis study contributes to the body of SC knowledge by providing a comparative qualitative analysis of interorganizational factors (i.e. information sharing, collaboration, trust, contractual governance, relational governance and environmental uncertainty) that influence ICT use by SMEs in upstream wine SCs from developing and developed economies.Practical implicationsThis paper provides valuable implications for the SC participants (e.g. grape suppliers, wineries and other suppliers) and industries (e.g. Macedonian and American wine industries) related to ICT use and non-use.Originality/valueThis study makes a novel contribution by being the first to qualitatively explore ICT use by SMEs from the wine industry and to identify the importance of legal institutional environment in buyer–supplier exchanges from developed versus developing economies.

How to enhance supplier performance in China: An integrative view of partner selection and partner control

Whereas effective supplier management necessarily involves both partner selection and partner control, extant literature considers each issue separately. With an integrative perspective, this study instead examines the joint effects of two selection mechanisms (i.e., public and social) and two control mechanisms (i.e., contractual and relational) on supplier performance. The results of an investigation of 208 buyer–supplier exchanges in China provide novel insights into how to adopt formal and informal approaches of partner selection and control to improve supplier performance. We find that mixed approaches (i.e., public selection and relational control, social selection and contractual control) enhance supplier performance. In contrast, relying on combinations of either formal (i.e., public selection and contractual control) or informal (i.e., social selection and relational control) means impairs supplier performance.

Exploring supplier performance risk and the buyer's role using chance-constrained data envelopment analysis

Current sourcing paradigms are described by greater complexity in managing suppliers' performance in purchasing cycle execution, product quality and logistics competence. When we combine the stages of the order fulfillment cycle with the buyer's information sharing factors, a more complete view of the buyer-supplier exchange becomes useful for performance evaluation of both the suppliers and the buyers. Using operational data obtained from a large telecommunications firm, which placed strategic importance on measuring the performance in the purchase order fulfillment cycle stages, this study offers a new context for supplier evaluation. This context also conceptualizes several on-time delivery disruption scenarios as supplier delivery performance risk, and investigates the sensitivity of both the buyer's information sharing and the suppliers’ performance capabilities to on-time delivery disruptions. We evaluate supplier performance and segment suppliers through recourse to chance-constrained data envelopment analysis at high and low discriminatory power levels. Our results show that there are statistically significant relationships between the dimensions of information sharing by the buying firm and the classification of supplier firms at varying levels of on-time delivery performance risk. We also identify robust suppliers demonstrating the capability to remain efficient across disruption levels despite poor buyer performance on information sharing factors, and provide managerial insights on buyer-supplier exchange.

Partnerships: The role that power plays in shaping collaborative buyer–supplier exchanges

The role that power plays in collaborative buyer–supplier exchanges or partnerships is explored in this study. The paper argues that research into business-to-business relationships, although rich, largely marginalises the impact that power differentials have on the formation and long-term success of partnerships. To address this, five cases are presented, drawn from the UK food industry, that show how power dynamics shape partnerships. In addition, the research contends that partnering is more likely to succeed when there are equal power resources, or interdependence, between collaborating parties and this leads us to a more robust definition of partnerships.

Are relational ties always good for knowledge acquisition? Buyer–supplier exchanges in China

Relational ties between manufacturers and their suppliers serve as an important strategic resource for value creation and realization. However, conflicting evidence exists regarding their role in the acquisition of specific knowledge. This study proposes that relational ties have a nonlinear effect on specific knowledge acquisition and that this nonlinear relationship is conditional on contract specificity and competitive intensity. Results from a sample of 385 manufacturer–supplier exchanges in China demonstrate that a buyer's relational ties with its major supplier have an inverted U-shaped effect on specific knowledge acquisition from this supplier; this inverted U-shaped relationship is stronger (steeper) when contract specificity is high and competition is more intense. These findings suggest that managers should understand the benefits and downsides of relational ties in acquiring specific knowledge and avoid building highly embedded ties when they draft detailed contracts or competition is highly intensive.

"When Can You Trust “Trust”?Calculative Trust, Relational Trust, and Supplier Performance"

Despite the many studies showing the positive association of trust and buyer-supplier exchange outcomes, extant research has not empirically assessed two distinct bases for trust: calculative trust, in which incentives align goals, and relational trust, in which a shared identity aligns goals. Our findings from 211 buyer–supplier relationships demonstrate that both relational trust and calculative trust simultaneously and positively influence supplier performance, yet calculative trust has a stronger relationship with performance than relational trust does. Our empirical results further show important differences exist in when to trust “trust”. When the buyer invests in supplier-specific assets, only relational trust is associated with higher supplier performance. Yet, when behavioral uncertainty is high, calculative trust is associated with higher levels of supplier performance, but relational trust is not. Finally, when market uncertainty exists, both relational trust and calculative trust are positively associated with supplier performance.

Managing contracts for fairness in buyer–supplier exchanges

Despite the centrality of fairness in the moral and social fabric of governance, few studies relate fairness to contracting research. This paper assesses whether fairness accounts for the effects of contractual complexity and contractual recurrence on exchange performance. Based on a sample of 283 buyer–supplier dyads, we find that procedural fairness partially mediates the effect of contractual complexity, whereas distributive fairness partially mediates the effect of contractual recurrence in fostering exchange performance. Moreover, monitoring better supports the use of contractual complexity, whereas socializing better supports the use of contractual recurrence in enhancing fairness perceptions. These results suggest that contractual design must go beyond its safeguarding function to establish a fair frame of reference, and managers should complement contracts with appropriate practices (e.g., monitoring or socializing). Copyright © 2013 John Wiley & Sons, Ltd.

Interpersonal attraction in buyer–supplier relationships: A cyclical model rooted in social psychology

The concept of attraction is not reserved for the study of interpersonal relationships between husband and wife, family members, or lifelong friends. On the contrary, it contains much potential as a variable describing interpersonal business exchange relationships. This potential has been noted by well-known industrial marketing scholars in the past, and recent theoretical advances have incorporated attraction to describe buyer–supplier exchange, although primarily at the interorganizational level of analysis. The in-depth understanding of interpersonal attraction between boundary spanners representing buying and supply companies has yet to be developed. By drawing on social psychology and social exchange literature, this paper attempts to fill some of this gap. It contributes by uncovering the elements and process of interpersonal attraction. Furthermore, propositions are formulated to guide future research efforts on interpersonal attraction in the buyer–supplier context. Finally, the managerial value and challenges of applying attraction to buyer–supplier exchange relationships are discussed.

The interplay of drivers and deterrents of opportunism in buyer–supplier relationships

Fostering and maintaining buyer–supplier relationships is a fundamental premise of many channel initiatives. Indeed, these relationships may culminate in significant performance enhancements and competitive advantage. Yet these relationships may also result in competitively harmful events such as partner opportunism. Despite this potential competitive erosion, there is a lack of studies examining the interplay between the drivers and deterrents of opportunism. By building on transaction cost economics and social capital theory, we examine, via a sample of 400 manufacturing firms in China, how the interplay between drivers (relationship-specific investments and behavioral uncertainty) and deterrents (inter-firm social capital) of opportunism affect partner opportunism in buyer–supplier exchanges. The significance of this interplay between the drivers and deterrents sheds new light on how a firm can leverage social capital to curb the harmful effects of opportunism.

Are Relational Ties Always Good for Knowledge Acquisition? Buyer-supplier exchanges in China

Close relational ties between manufacturers and their suppliers serve as an important strategic resource for value creation and realization. However, conflicting views persist regarding whether relational ties are beneficial for knowledge acquisition in supply chain relationships. Building on a relational view, this study proposes that relational ties have a nonlinear effect on interfirm knowledge acquisition and that this nonlinear relationship is conditional on contract specificity and competitive intensity. Results from a sample of 392 manufacturer¨Csupplier exchanges in China demonstrate that relational ties have an inverted U-shaped relationship with knowledge acquisition. Furthermore, contract specificity and competitive intensity strengthen the positive effect of relational ties on knowledge acquisition.

Governance mechanisms and buyer supplier relationship in Tunisian exporting SMEs

This study seeks to understand the effect of transactional and relational governance mechanisms on opportunism induced by the buyer supplier exchange’s ties. Using panel data of 386 Tunisian export companies between 2003 and 2008, the analysis shows that transactional as well as relational governance mechanisms are negatively related to the opportunistic behaviour of the customer. In order to focus on internal corporate characteristics, the level of debt and the size of the buyer are controlled. The findings support the role of contracts as formal governance tool in reducing inter-firm opportunism which corroborates transaction cost economics. They also confirm some main notions in social exchange theory. The role of trust as relational mechanism in governing the buyer-supplier relationship has been verified. Finally, the results of this paper sustain the complementarity view toward relational and transactional governance mechanisms.

Focus on Authors

Focus on Authors

Firm Embeddedness: Exploitation and Exploration in Buyer-Supplier Exchange

Firm Embeddedness: Exploitation and Exploration in Buyer-Supplier Exchange