Supplier Firm Performance Research Articles

Successful Organizational Business Communication and its Impact on Business Performance: An Intra- and Inter-Organizational Perspective

Intra-firm communication is critical for building synergy amongst the internal business units of a firm, enabling employees from various functional departments and ranks to incorporate their decision-making, understanding of organizational objectives, and common norms and culture to achieve increased organizational effectiveness. This study builds on and assesses a framework of the causes and consequences of effective communication in business interactions between customer and supplier firms, as well as the path for efficient communication within a firm. The proposed study’s structural equation modeling (SEM) analysis based on 352 responses collected from firm representatives in different job positions, ranging from marketing to logistics operations, revealed that in terms of intra-organizational communication, organization characteristics and shared values, top management support and style of leadership, and information technology were all significantly related to communication effectiveness. Furthermore, the frequency and variety of interactions enhanced communication outcomes, thus improving company performance. The results revealed that cultural factors were significantly related to communication effectiveness, as well as shared beliefs and goals. The organizational factors of leadership style, top management support, and information technology were significant determinants of effective communication. Among the contextual factors, interaction frequency and diversity were found to be significant. The study also tested the relationship between supplier and supplier firm performance in the context of communication effectiveness and found that they were closely related when trust and commitment were built between business partners.

Customer identification: The missing link between relationship quality and supplier performance

Maintaining good relationship quality (RQ) with customers is crucial for supplier firms to remain competitive. Yet, empirical evidence linking RQ with supplier-firm performance remains inexplicably vague. Drawing on social identity theory and the relationship marketing literature, this study therefore examines the role of customer identification—a customer firm's sense of shared connection with a supplier organization—in bridging the gap between RQ and outcomes beneficial to the supplier firm. A study involving 389 CEOs and directors of Australian firms finds that customer identification mediates the effects of affective RQ-dimensions (i.e., benevolent trust and affective commitment) on customers' willingness-to-pay premium price (WTP) and positive word-of-mouth (WOM) behaviors. Further, the mediating effect of customer identification is moderated by organizational distance and supplier's relationship-specific investments (RSI), such that the indirect effects are stronger when the organizational distance between the supplier and customer firm is low and supplier's RSIs are high. Moreover, while cognitive RQ has direct effects on WTP, its influence on WOM is mediated by customer identification. By identifying the role of customer identification in facilitating the link between RQ and supplier-firm performance, our findings provide valuable insights for supplier firms to optimize their relationship marketing efforts.

Firm Unionization and Disruptions in Customer Relationships*

ABSTRACTRelationships with major customers may be advantageous to suppliers due to economies of scale and reputational benefits. In this study, we investigate whether unionization leads to disruptions in a firm's relationships with its customers. Our goal is to provide insights regarding the impact unionization has on a firm's sales relationships with its major customers. We predict that major customers will shift purchases away from suppliers that unionize to avoid potential disruptions. Using a difference‐in‐differences research design, our results show a negative association between supplier unionization and sales to major customers. Our findings are robust to addressing endogeneity concerns through a propensity score matched analysis and regression discontinuity research design. In addition, we find that supplier firm performance declines subsequent to unionization. We also find that suppliers experience significant increases in their cost of goods sold and the number of employees after supplier unionization, suggestive of higher input prices driving the disruption with major customers. Finally, we provide evidence that higher switching costs mitigate the decline in sales to major customers. Overall, our findings suggest that employee unionization can adversely affect a firm's relationships with their major customers.

Why CEO option compensation can be a bad option for shareholders: Evidence from major customer relationships

We study how the existence of important production contracts affects the choice of chief executive officer (CEO) compensation contracts. We hypothesize that having major customers raises the costs associated with CEO risk-taking incentives and leads to lower option-based compensation. Using industry-level import tariff reductions as exogenous shocks to customer relationships, we find that firms with major customers subsequently reduce CEO option-based compensation significantly. We also show that continued high option compensation following tariff cuts is associated with significant declines in these relationships and supplier firm performance. Our study provides new insights into how important stakeholders shape executive compensation decisions.

The moderating effect of buyer purchasing strategy on the relationship between supplier transaction-specific investment and supplier firm performance

This study examines whether the type of buyer relational strategy (competitive or cooperative strategy) moderates the relationship between supplier transaction specific investments (TSIs) and buyer commitment, and whether the type of buyer cost reduction strategy (purchase price-based strategy or total cost-based strategy) moderates the relationship between buyer commitment and supplier performance outcomes.Data were collected through a survey of purchasing managers at 248 buying firms in Korea. Results indicate that supplier TSIs positively affect supplier firm performance through buyer trust and commitment. The influence of supplier TSIs on buyer commitment depends on which relational strategy buyers use and the influence of buyer commitment on supplier firm performance depends on which buyer cost reduction strategy is used.

Labor Unions and Firm Performance: The Case of Major Customers

Relationships with major customers may be advantageous to suppliers due to economies of scale and reputational benefits. In this study, we investigate whether unionization leads to disruptions in a firm’s relationships with its customers. Our goal is to provide insights regarding the impact unionization has on a firm’s sales relationships with its major customers. We predict that major customers will shift purchases away from suppliers that unionize to avoid potential disruptions. Using a difference-in-differences research design, our results show a negative association between supplier unionization and sales to major customers. Our findings are robust to addressing endogeneity concerns through a propensity score matched analysis and regression discontinuity research design. Additionally, we find that supplier firm performance declines subsequent to unionization. We also find that suppliers experience significant increases in their cost of goods sold and the number of employees after supplier unionization, suggestive of higher input prices driving the disruption with major customers. Finally, we provide evidence that higher switching costs mitigate the decline in sales to major customers. Overall, our findings suggest that employee unionization can adversely affect a firm’s relationships with their major customers.

Customer-Base Concentration: Implications for Firm Performance and Capital Markets

ABSTRACT This study investigates whether and how customer-base concentration affects supplier firm fundamentals and stock market valuation. I compile a comprehensive sample of supply chain relationships and develop a measure (CC) to capture the extent to which a supplier's customer base is concentrated. In contrast to the conventional view of customer-base concentration as an impediment to supplier firm performance, I document a positive contemporaneous association between CC and accounting rates of return, suggesting that efficiencies accrue to suppliers with concentrated customer bases. Consistent with a cause-and-effect link between customer-base concentration and supplier firm performance, analysis of intertemporal changes demonstrates that CC increases predict efficiency gains in the form of reduced operating expenses per dollar of sales and enhanced asset utilization. Using stock returns tests, I find that investors underreact to the implications of changes in customer-base concentration for future firm fundamentals when setting stock prices. A trading strategy that exploits investors' underreaction yields abnormal stock returns over the 30-year period studied. JEL Classifications: M41; L25; G14. Data Availability: Data are available from the sources indicated in the text.

The impact of buyer firm information connectivity enablers on supplier firm performance

PurposeThe purpose of this paper is to explore the impact of buyer investment in interorganizational, information‐related connectivity enablers on supplier firm performance within the context of buyer‐seller matched dyads.Design/methodology/approachData for this study were obtained from a field survey. A mail questionnaire was constructed that contained items measuring the five key constructs of interest. Based on the supply chain information literature and the relational view, two competing models linking the focal constructs using structural equation modeling were evaluated.FindingsThe results of the study indicate that buyer‐to‐supplier information sharing, buyer‐to‐supplier performance feedback, and buyer investment in inter‐organizational information technology are key enablers of buyer‐to‐supplier communication openness. However, only buyer‐to‐supplier communication openness plays the direct and critical role in achieving significant performance improvement.Research limitations/implicationsIn this study performance is only examined from the supplier's perspective. It would be valuable to reevaluate and compare the performance outcomes from a buyer's perspective as well, or even more significantly, to compare these findings in a dyadic study where paired buyer and supplier data are collected over time to establish a pattern governing these efforts.Practical implicationsThe fact that investments in the buyer‐side information resources engender supplier‐side competitiveness provides an incentive for suppliers to assist buyers in their investments in buyer‐side information resources. The study provides validation for the positive impact of such investments on supplier performance, therefore reassuring suppliers that their contribution to the dyad will pay off.Originality/valueWhile information connectivity between buyers and suppliers has long been considered a critical enabler of buyer‐supplier integration, research had yet to explore the relationship between buyer investments in interorganizational information initiatives and supplier performance. The paper has addressed this gap.

The effect of keiretsu affiliation and resource dependencies on supplier firm performance in the Japanese automobile industry

Resource dependence theory was used to develop hypotheses on whether keiretsu affiliation, mutual dependence between the automaker core and supplier firms, and internationalization level of the affiliate firm have an effect on its performance. The hypotheses were tested on archival data from the entire population of 470 first-tier automobile components suppliers in Japan.