Buyer Firms Research Articles

Shareholder value implications of service failures in triads: The case of customer information security breaches

The rise in front-end service outsourcing in recent years, despite its advantages, has also exposed buyer firms to unique challenges. One of the most salient risks for buyer firms in service triads is service failure due to the service provider. Indeed such service failures may be more costly for firms due to the greater relational and operational costs that may arise from the presence of the third-party provider. Yet, neither the services literature nor extant operations literature on service triads has paid much attention to the financial consequences to the buyer firm – i.e., service risks – of such service failures in triads. To fill this gap, we investigate the financial penalty of service failures due to the service provider using the event study methodology and a sample of 146 customer information security breaches as our empirical context. Analysis of the abnormal returns reveals that service failures due to the front-end service provider lead to greater shareholder losses than such failures due to the buyer firm. This provides important new insight into the financial risks arising from outsourcing front-end services. Further, we investigate the ability of the buyer firm's employee and financial resources to temper these shareholder losses. We find that buyer firm employee productivity can moderate the greater financial penalty associated with such triadic service failures but that buyer firm leverage tends to not have such a mitigating effect. This provides new guidance for theory and practice regarding how buyer firms can position themselves to buffer the financial risks arising from service failures due to front-end service providers.

The Effects of Opportunism and Trust on Buyer-Supplier Relationship: Do Commitment Types Matter?

Based on the notion that relational motives have some complicated and multi-directional interactions, this study aims to investigate direct and indirect influences among the main drivers of buyer-supplier relationship strength (RS). Data were collected from 104 buyer firms via e-mail survey. Results show that, in addition to direct effect of opportunism on trust and RS; honesty and benevolence dimensions of trust mediate the opportunism-RS relation. With the notion that different commitment types may have different buffering effects against opportunistic behavior, the study also proposes the moderating roles of affective and calculative commitment. Results reveal that while affective commitment has a moderating effect between opportunism and trust relationship; calculative commitment does not have a significant affect. The business-to-business relationship literature is advanced by a joint investigation of moderated role of two types of commitment and the mediation effects of honesty and benevolence for RS context.

How does technological diversity in supplier network drive buyer innovation? Relational process and contingencies

External networks provide important knowledge sources of innovation for firms. Drawing on social network theory, this study examines how technological diversity in supplier network influences a focal buyer firm's innovation. The results from a survey of 202 Chinese manufacturing firms and their supplier networks reveal that novel information sharing partially mediates the effect of technological diversity in supplier network on buyer firms’ new product creativity. The positive effect of technological diversity is enhanced by buyer–supplier relational strength but inhibited by supplier network density; competitive intensity positively moderates this effect, and technological turbulence negatively moderates it. These findings provide novel insights into how buyer firms can use their supplier networks to enhance product innovation.

Exploration of congruence in perceptions of buyer–supplier attraction: A dyadic multiple case study

In long-term complex buyer–supplier relationships, many exchanges are non-contractual, a factor that emphasizes the social dimension of the relationship. Previous studies have shown that attraction is a fundamental aspect of the social dimension and a main driver in non-contractual exchanges. Although attraction is a determinant of a relationship, many studies have examined the relationship only from the buyer's or supplier's perspective. Our study extends this research stream by considering the dyadic aspect of attraction and poses the following questions: Does the success of a relationship require that both parties perceive it to be attractive? How important is it to understand how the company looks in the eyes of the other party? In this paper, we explore the dyadic aspect of buyer–supplier attraction by analyzing six cases, two buyer firms and six supplier firms and by conducting a total of 43 interviews. By using cross-case analyses, we develop a set of proposals for explaining how congruence in perceptions of attraction affects relationship success.

Cultivating Compliance: Governance of North Indian Organic Basmati Smallholders in a Global Value Chain

Focusing on a global value chain (GVC) for organic basmati rice, we study how farmers' practices are governed through product and process standards, organic certification protocols, and contracts with buyer firms. We analyze how farmers' entry into the GVC reconfigures their agencements (defined as heterogeneous arrangements of human and nonhuman agencies which are associated with each other). These reconfigurations entail the severance of some associations among procedural and material elements of the agencements and the formation of new associations, in order to produce cultivation practices that are accurately described by the GVC's standards and protocols. Based on ethnography of two farmers in Uttarakhand, North India, we find that the same standards were enacted differently on the two farmers' fields, producing variable degrees of (selective) compliance with the ‘official’ GVC standards. We argue that the disjuncture between the ‘official’ scripts of the standards and actual cultivation practices must be nurtured to allow farmers' agencements to align their practices with local sociotechnical relations and farm ecology. Furthermore, we find that compliance and disjuncture were facilitated by many practices and associations that were officially ungoverned by the GVC.

Supplier-Buyer Networks and Buyer's Innovation

We examine the effects of supplier network structure on the innovation performance of buyer firms. We analyze these effects from both positional and relational perspectives - focusing on two specific dimensions of the supplier’s network a) the supplier’s centrality in its network of buyers and suppliers and b) the strength of the tie between suppliers and buyers. We theorized and found two main effects regarding the impact of the supplier's network centrality on the buyer's innovation output: a supplier’s centrality in the network of suppliers enhances the focal buyer’s innovation but a supplier’s centrality in the network of buyers diminishes the focal buyer’s innovation. We also found that these two main effects are moderated by the strength of the ties in the direct relationships. Specifically, we found that strong ties between the focal buyer and its suppliers reduce the innovative benefits of supplier centrality in the network of suppliers and higher relative strength in the ties between a buyer and its suppliers diminishes the negative effect of the supplier’s centrality in the network of buyers. These arguments and findings have several implications for the social network and buyer-supplier relationships literature that we identify.

Managing indirect supplier relations: The implementation of sustainability in extended supply chains

Buying firms have to put increased attention on sustainability issues in supply chains, as they are hold responsible for any non-sustainable actions in their supply chains by stakeholders. Yet, fir...

The effect of buyer behaviors on preferred customer status and access to supplier technological innovation: An empirical study of supplier perceptions

Buying firms are increasingly looking to suppliers for technological innovations that enhance the competitive position of their new products. However, extant research provides limited guidance on how buying firms may gain access to suppliers' innovative technologies. To address this gap in the literature, we draw from social exchange theory to posit sequential relationships among buyer behaviors, preferred customer status, and supplier's willingness to share technological innovations. We test our assertions by applying structural equation modeling statistical analyses to survey response data from 233 sales personnel of production good suppliers in the U.S. automotive industry. Whereas our results show that two buyer behaviors – early supplier involvement and relational reliability – positively affect preferred customer status, a third behavior – share of sales – has no effect. In turn, we find that preferred customer status is positively associated with supplier's willingness to share new technology with the buyer. Further, our findings indicate that preferred customer status fully mediates the benefits exchanged within a buyer–supplier relationship. Hence, our study highlights why buyers seeking innovations should take care that their behavior is appropriate for managing suppliers' perceptions. Accordingly, our results provide specific guidance to buyers as to how they may increase their access to suppliers' new technologies.

Seeking to maintain the integrity of the fair trade model: a case study of Trade Aid importers

PurposeThe movement of profit‐orientated corporations into the fair trade value chain has caused some socially orientated fair trade organizations to question the direction the movement is taking. One organization at the forefront of the debate is Trade Aid (NZ), Inc. (hereafter Trade Aid), a New Zealand based socially orientated fair trade organization actively engaged in fair trade since the 1970s. This paper seeks to evaluate how Trade Aid is seeking to reformulate fair trade's vision of empowerment and partnership constructively.Design/methodology/approachA single case study approach is undertaken to examine how a socially orientated organization is adhering to and seeking to advance fair trade values. This research draws from the global value chain literature, which analyses how industries are governed. The relational co‐ordination or governance mode, which is characteristic of mutual dependency between supplier and buyer firms, is used as a framework for investigating the fair trade industry. Distinction is made between the corporate and social economy variants of the relational governance mode.FindingsTrade Aid's commitment to producer groups is demonstrated through various initiatives the organization is undertaking as they work both with producer groups and corporate actors to expand the fair trade market. Trade Aid is part of a worldwide socially orientated movement seeking to reformulate the vision of fair trade.Originality/valueTo date the fair trade literature has largely focused on socially orientated fair trade organizations in the Northern hemisphere. This research contributes to a gap in the literature in that it examines Trade Aid and the way this organization is addressing mainstreaming.

Determinants of knowledge transfer in inter‐firm new product development projects

PurposeThe purpose of this paper is to explore the factors which determine the degree of knowledge transfer in inter‐firm new product development (NPD) projects. The authors test a theoretical model exploring how inter‐firm knowledge transfer is enabled or hindered by a buyer's learning intent, the degree of supplier protectiveness, inter‐firm knowledge ambiguity, and absorptive capacity.Design/methodology/approachA sample of 153 R&D intensive manufacturing firms in the UK automotive, aerospace, pharmaceutical, electrical, chemical, and general manufacturing industries was used to test the framework. To analyse the data, two‐step structural equation modeling in AMOS 7.0 was used.FindingsThe results indicate that a buyer's learning intent increases inter‐firm knowledge transfer, but also acts as an incentive for suppliers to protect their knowledge. Such defensive measures increase the degree of inter‐firm knowledge ambiguity, encouraging buyer firms to invest in absorptive capacity as a means to interpret supplier knowledge, but also increase the degree of knowledge transfer.Practical implicationsThe paper illustrates the effects of focusing on acquisition, rather than accessing supplier technological knowledge. The paper shows that an overt learning strategy can be detrimental to knowledge transfer between buyer‐supplier, as suppliers react by restricting the flow of information. Organisations are encouraged to consider this dynamic when engaging in multi‐organisational, NPD projects.Originality/valueThe paper examines the dynamics of knowledge transfer within inter‐firm NPD projects, showing how transfer is influenced by the buyer firm's learning intention, supplier's response, characteristics of the relationship and knowledge to be transferred.

Green supply chain management and organizational performance

PurposeThe purpose of this study is to explore green supply chain management (GSCM) practices and their relationship with organizational performance. More specifically, this research explores the effect of GSCM efforts and other organizational factors on firm performance of small and medium enterprises (SMEs) that serve as suppliers to large customer firms in the electronics industry.Design/methodology/approachThis study developed a research model relating GSCM practice and business performance through three organizational variables (employee satisfaction, operational efficiency, and relational efficiency) as moderators. Statistical analyses were based on the data collected, through survey questionnaires, from 223 SMEs in the electronics industry in Korea. Reliability, validity, and goodness‐of‐fit of the research model were tested by the widely accepted statistical tools. To test the hypotheses relating GSCM practice implementation and business performance, structural equation modeling was used.FindingsThe most anticipated finding of the study was a direct link between GSCM practice implementation and business performance. However, no statistical significance was found. Instead, significant indirect relationships were found between GSCM practice implementation and business performance through mediating variables of operational efficiency and relational efficiency. This result indicates that business performance will be improved when GSCM enhances operational efficiency and operational efficiency.Research limitations/implicationsResearch on GSCM is still at the early stage. Further refinement of the questionnaire is needed. Generalizability of the findings is also limited because of data collected from electronics firms in Korean. This study shed several important insights. The findings of this study are generally consistent with prior studies in other parts of the world. SMEs in the Korean electronics industry believe that GSCM practices help generate new opportunities to attract clients in addition to complying with the buyer firms' demand. It was also found that implementation of GSCM practices help improve operational and relational efficiencies of supplier firms.Originality/valueFew empirical studies have been done in GSCM based on the conceptual footing of resource dependence theory. Also, this study was conducted from the supplier's perspective in examining the weaknesses of SME suppliers. Thus, the authors emphasize the importance of support from large buying firms for improving SME suppliers' green management capabilities.

OPTIMAL PROCUREMENT STRATEGY UNDER SUPPLY RISK

With the rapid expansion of global business, newer suppliers with cheaper but possibly unreliable technologies have entered the marketplace to win orders from buyer firms by beating the price of their perfectly reliable (but expensive) competitors. We model the procurement problem as a Nash game where the buyer has to allocate its purchases between an expensive but reliable supplier, and a cheaper but unreliable supplier. The suppliers specify prices for different proportions of the order awarded to them. Our analysis shows that, when perfect information is available about the reliability level of the unreliable supplier, the Nash equilibrium is a sole-sourcing allocation and that the supplier selection decision depends on the reliability and cost differentials between the two suppliers. In addition, we model the case when the buyer and the reliable supplier have limited information about the reliability of the unreliable supplier. Even in such an asymmetric scenario, the buyer's equilibrium allocation is a sole-sourcing outcome, but depending on system conditions either a separating or a pooling equilibrium is possible. An interesting insight into the effect of information asymmetry is that it can result in higher or lower profits/costs for the channel partners (compared to the perfect information case). As such, the buyer may even benefit from information asymmetry regarding unreliable supplier due to its impact on the degree of competition between the two suppliers.

The impact of individualism on buyer–supplier relationship norms, trust and market performance: An analysis of data from Brazil and the U.S.A.

This study focuses on the impact of the cultural dimension of individualism, face-to-face communication and the effect of relational norms such as supplier involvement and trust on the market performance of buyer firms. We use the culture literature and social exchange theory to test hypotheses using a sample of Brazilian and US manufacturing firms. The data were analyzed using variance-based structural equation modeling, employing nonlinear partial least squares regression. Our findings indicate that individualism is negatively related to the involvement of suppliers in the production process but is not associated with trust in suppliers. In addition face-to-face communication seems to have a positive effect on supplier involvement and trust.

Managing interaction for learning and value creation in exchange relationships

Firms create value by establishing and maintaining appropriate exchange relationships. However, beyond the generally recognized importance of trust and commitment, there is a lack of specific cues as to how such value creation can be managed. In an attempt to gain more insight this study examines the success formulas in three different types of interactions in exchange relationships. The purpose is to investigate how different types of interactions can be managed so that buyer firms make important contributions to the development of their suppliers' capabilities. The study empirically examines how inter-organizational management facilitates value creation in three different types of interactions in exchange relationships: unilateral learning, unilateral development, and bilateral learning. This study uses a partial least squares analysis (PLS) to analyze survey data from 142 exchange relationships in the seafood industry. The main contribution to the literature is the assessment of how various types of inter-organizational management promote value-creation initiatives (such as information supply and coaching), and ultimately, value creation.

Business Groups, Foreign Direct Investment, and Capital Goods Trade: The Import Behavior of Japanese Affiliates

We examine the impact of buyer-supplier relationships within business group on capital goods trade in the context of foreign direct investment by buyer firms and capital goods producers. A simple model in which cost-reducing relationship specific investments are underlying business group ties suggests that:1) foreign affiliates of business group firms have a greater propensity to import capital goods from the home country, increasing Japanese exports, 2) if the establishment of overseas affiliates by business groups firms attracts FDI by their capital goods suppliers, the ‘trade creating’ impact of business group ties may disappear or even be reversed. Empirical analysis of capital goods imports by 1790 manufacturing affiliates operated abroad by Japanese multinational firms in 1996 provides broad support for these predictions and demonstrates a sizeable impact of buyer-supplier ties in business groups on trade. Affiliates of member firms of horizontal and vertical business groups with supplier ties exhibit a greater propensity to import from Japan, but this impact is mitigated or transformed into a smaller import propensity if the groups’ capital goods producers have substantial manufacturing investments abroad.

The Relationship Between Intra-Organizational And Inter-Organizational Coordination And Its Influence On Product Quality Improvement

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; tab-stops: -.5in; mso-hyphenate: none;"><span style="font-family: Times New Roman; font-size: x-small;">A sample of 225 firms is analyzed, using structural equation modeling, to test five hypotheses.<span style="mso-spacerun: yes;">  </span>This study seeks to gain a better understanding of the practice of coordination among functional areas within the buying firm as well as between buyer firms and their key suppliers.<span style="mso-spacerun: yes;">  </span>The implications of this research suggest that it is important for firms to focus on their long-term success as they work with key suppliers.<span style="mso-spacerun: yes;">  </span>The research shows when the stakeholders of the firm support its efforts to coordination and cooperation with its key suppliers, the firm benefits.<span style="mso-spacerun: yes;">  </span>Evidence shows cross-functional coordination enhances the firm’s capability to cooperate with its key suppliers.<span style="mso-spacerun: yes;">  </span>The findings are significant to supply chain manager and to the various functional managers in charge of quality, production, R&D, and customer service and their respective counter parts in supplier firms.<span style="mso-spacerun: yes;">  </span>Finally, this study expands prior research and fills a gap in the literature by showing the importance of inter-organizational coordination between the buyer’s supply management/purchasing function and the supplier’s operations function. This study reveals that conformance to specifications, product reliability and overall product quality performance can be significantly improved when these inter-organizational functional areas coordinate their requirements.<span style="mso-spacerun: yes;">  </span>The study also shows that product quality can be significantly improved when intra-organizational and inter-organizational coordination occurs simultaneously.</span></p>

Suppliers' affective trust and trust in competency in buyers

PurposeThe purpose of this paper is to measure trust that logistics/supply chain management (SCM) managers of supplier firms perceive toward inbound SCM managers of buyer firms, and investigate the effect of trust on supply chain collaboration and logistics efficiency. In doing so, two trust forms are introduced: affective trust and trust in competency. Besides, supply chain collaboration includes the three dimensions: joint decision making, information sharing, and benefit/risk sharing.Design/methodology/approachA path analysis was used to test whether the two trust forms affect the three dimensions of supply chain collaboration, and then, the three dimensions of supply chain collaboration, in turn, affect the logistics efficiency of supplier firms. An empirical analysis was conducted with Korean firms.FindingsAffective trust has a significant influence on collaboration in information sharing and benefit/risk sharing, whereas trust in competency affects collaboration in joint decision making and benefit/risk sharing. Regarding supply chain collaboration, joint decision making and information sharing are found to affect logistics efficiency. Insignificant relationships are detected between affective trust and joint decision making, between trust in competency and information sharing, and between benefit/risk sharing and logistics efficiency.Originality/valueBy classifying trust into affective trust and trust in competency and by incorporating the three dimensions of collaboration, this paper analyzes the causal effect of suppliers' trust at the inter‐personal level on supply chain collaboration and logistics efficiency, and discusses the results compared to those focusing on buyers' trust.

Applying confirmatory factor analysis multi-trait multi-method approach in supply chain management research

Supply chain integration (SCI) is considered as one of the important critical success factors for firms. Both academic researchers and business managers have attempted to understand the impact of supply chain integration for buyer and supplier firms. To date, the answer still remains unclear and is fuelled by debates that there could be an asymmetric distribution of benefits to buyer and supplier firms. One way to assess the impact of SCI is to assess the joint capabilities of buyer-supplier dyad. It calls for data collection of joint capabilities from the stand point of both the buyer and the supplier firms. When we deal with empirical research involving multiple traits (capability factors) and multiple methods (in this case, buyer and supplier firms), confirmatory factor analysis multi-trait multi-method approach can be applied to assess the construct validity. We provide a methodological review of this approach and provide a detailed empirical illustration by examining the ‘capabilities of buyer-supplier dyad’ construct.

MANAGING BUYER-SUPPLIER RELATIONSHIPS: EMPIRICAL PATTERNS OF STRATEGY FORMULATION IN INDUSTRIAL PURCHASING

In this paper, we investigate how industrial buyers align their relationships with suppliers to the contextual characteristics of the purchase. We propose that patterns of purchasing strategy are evidenced, in part, by the alignment of three fundamental domains: the firm's strategic intent for a given purchase, the environment in which a purchase is made, and the type of relationship adopted by industrial buying firms with their selected suppliers. Using a cluster analysis on data collected from 226 buyers in a sample of U.S. industrial firms, we identified four primary types of purchases. Our results provide a partial empirical validation of the purchasing types presented in purchasing portfolio models. However, we identify a fourth type, the adversarial purchase, which cannot be mapped to existing portfolio models. We also found evidence that the dimensions of portfolio models may not be as independent as commonly assumed. We discuss the implications of our findings for practitioners and for research.

Toward an Ethical Understanding of the Controversial Technology of Online Reverse Auctions

B2B online reverse auctions technology (ORAs) emerged as a popular tool for large buying firms in the late 1990s. However, its growing use has been accompanied by a corresponding increase in unethical behaviors to a point that it has been described as the technology that has triggered more ethical concerns in the e-commerce arena than in any other segment of activity. Our findings first indicate that the establishment of formal ethical criteria based on the restrictive interpretation of ethics as honesty is not enough to resolve the ethical issues that surround the introduction of a technology because it ignores the ethical values shared by most actors in the sector in terms of fairness. We show the extent to which lobbying, rumor, technical problems, and public discourse can impact on the interpretations of the technology regarding ethics. Highlighting the importance of incorporating ORAs into the broader context of relationship management that integrates ethics as fairness and not only ethics as honesty serves to illustrate why the future of ORAs might not be as bright as predicted by a theoretical interpretation of the technology that is sometimes disconnected from the realities of the field.