Cooperation and Knowledge Transfer within Buyer–Supplier Relationships: The Moderating Properties of Trust,Relationship Duration and Supplier Performance*

This paper examines the effect of relational factors on knowledge transfer within strategic buyer–supplier exchange. Prior research examining inter‐firm knowledge transfer has focused almost exclusively on horizontal forms of governance such as strategic alliances and joint ventures, whilst research on vertical forms, such as buyer–supplier relationships, is limited. We test the effect of four important relational properties: cooperation, trust, relationship duration and supplier performance. Quantitative data, gathered from 104 UK manufacturing firms in eight industry sectors, are used to analyse the hypothesized relationships through a moderated hierarchical regression model. Our study provides support for the importance of considering relational factors in the transfer of knowledge at the inter‐organizational level. In particular, the results indicate that knowledge transfer is positively influenced by the extent of cooperation, but that this relationship is moderated by the level of trust and the performance of the supplier firm. Managerial implications for these findings and future directions for research are then offered.     

Does a Supplier's Operational Competence Translate into Financial Performance? An Empirical Analysis of Supplier–Customer Relationships

We conduct an empirical investigation of how a supplier's operational competence, as reflected by outcomes in the areas of quality, cost, delivery, flexibility, and new product development, translates into financial gains from a key customer. In contrast to previous research directed at the firm level, this study focuses on the supplier–customer relationship level. Using survey data from 158 suppliers in the manufacturing industry, we perform structural equation modeling to map out the paths from operational competence to financial performance—via dependencies and cooperative behaviors between suppliers and their customers. This study is the first scholarly attempt to examine the link between suppliers’ operational competencies and financial performance in interorganizational relationships. It is also an early investigation into operational competence as a source of bi‐lateral dependence. Our findings show that the supplier's operational competences increase its customer's dependence by enhancing the value of its products/services. However, the resulting increase in the supplier's power is not leveraged to shape relationship behaviors or capture value from its customer. In contrast, the customer's existing power as a major buyer plays an important role in shaping cooperative behaviors and affecting the supplier's financial performance from the customer relationship.     

Sourcing Strategy,Supplier Relationships and Firm Performance: An Empirical Investigation of UK Organizations

This article conceptualizes and empirically examines buyer–supplier relationships in respect of supply sourcing strategies, relationship characteristics and firm performance. Two sourcing strategies available to organizations are examined, critical and leverage, which in turn, influence the approach to managing the supplier relationship (arms‐length or collaborative). We argue that different relationship approaches are appropriate to achieving different performance outcomes. A structural equation model, using a sample of 142 manufacturing firms based in the United Kingdom, is used to test this hypothesized model. The results indicate that a critical sourcing strategy requires collaborative supplier relationships in order to achieve higher relationship and business outcomes, while leverage sourcing strategies have a direct impact on these same performance outcomes. In addition, a leverage strategy was associated with increased levels of supplier power, though this power was found not to have a significant effect on performance. Our study provides support for the importance of aligning sourcing strategies to particular supplier relationship approaches in order to improve firm performance. Managerial implications of these findings and future directions for research are then offered.     

Coopetitive Buyer–Supplier Relationship: An Investigation of Bargaining Power,Relational Context,and Investment Strategies

This study proposes an analytical approach combined with a behavioral experiment for a joint examination of the competitive and cooperative (i.e., coopetitive) relationship between a buyer and a supplier. Specifically, the article considers the scenario in which the buyer and the supplier invest in strategic capabilities to increase their relative bargaining power. The article examines how dynamic investments in strategic assets are influenced by the locus of bargaining power and by the underlying context (synergistic vs. adversarial) of the interfirm relationship. The dynamic evolution of bargaining power is also examined. A dynamic game model is considered to examine the evolution of investment strategies in critical resources and to investigate the issues of bargaining power in a buyer–supplier dyad. Equilibrium expressions for the investment strategies of the buyer and the supplier are presented and their implications for buyer–supplier relationships are examined. The behavioral experiment complements the analytical model and examines the correspondence between optimal behavior suggested by the analytical model and the boundedly rational behavior of decision makers in an experimental context. The results from the model and behavioral experiments suggest that the strategies are a function of the risk‐adjusted returns obtained from investments. The experiment shows that, in a synergistic relational context when the buyer maintains bargaining power, the investment shifts of the buyer and the supplier accord well with theoretical predictions. In an adversarial relational context, the results of the experimental study do not correspond well with that predicted by the theoretical model. The implications of the results are discussed and directions for future research are presented.     

On the Same Page? How Asymmetric Buyer–Supplier Relationships Affect Opportunism and Performance

Research on buyer–supplier relationships (BSRs) has often focused on only one side of the relationship and, thus, has tended to overlook asymmetries. Yet, a buyer (supplier) may often deal with a bigger supplier (buyer) or one that has higher levels of trust, respect, and reciprocity. Therefore, we examined how two types of asymmetries—size and relational capital—affect perceived opportunism and performance. We used dyadic data from 106 buyers and their matched suppliers gathered from a survey and an archival database. The results demonstrate that the degree and direction of both asymmetries affect the BSR. Our results also reveal that an imbalance of relational capital in a firm's favor may have the opposite effect from that intended. In other words, the firm's counterpart perceives more, rather than less, firm opportunism. The results also suggest that a buyer observes lower benefits in the presence of size asymmetry, whereas the supplier's perception of benefits is unaffected. Thus, our research represents a significant step forward in understanding BSRs and asymmetries by (i) bringing attention to two key asymmetries inherent in BSRs and (ii) showing that these asymmetries are not unidirectional in their influence on perceived opportunism and performance.     

Managing Imbalanced Supply Chain Relationships for Sustainability: A Power Perspective

This study adopts a power perspective to investigate sustainable supply chain relationships and specifically uses resource‐dependence theory (RDT) to critically analyze buyer–supplier–supplier relationships. Empirical evidence is provided, extending the RDT model in this context. The concept of power relationships is explored through a qualitative study of a multinational company and agricultural growers in the UK food industry that work together to implement sustainable practices. We look at multiple triadic relationships involving a large buyer and its small suppliers to investigate how relative power affects the implementation of sustainable supply‐management practices. The study highlights that power as dependence is relevant to understanding compliance in sustainable supply chains and to identifying appropriate relationship‐management strategies to build more sustainable supply chains. We show the influences of power on how players manage their relationships and how it affects organizational responses to the implementation of sustainability initiatives. Power notably influences the sharing of sustainability‐related risks and value between supply chain partners. From a managerial perspective, the study contributes to developing a better understanding of how power can become an effective way to achieve sustainability goals. This article offers insights into the way in which a large organization works with small and medium size enterprises to implement sustainable practices and shows how power management—that is, the way in which power is used—can support or hinder effective cooperation around sustainability in the supply chain.     

Drivers and Performance Outcomes of Supplier Innovation Generation in Customer–Supplier Relationships: The Role of Power‐Dependence

While innovations generated by supply channel relationships, as opposed to individual partners, play an increasingly important role in the success of all supply chain partners, there has been a dearth of research in the literature on how supply chain relationships cultivate the process of such innovation generation. We explore supplier market knowledge acquisition, relationship learning, systems collaboration, and technological uncertainty as antecedents of supplier innovation generation, which is in turn hypothesized to positively affect the relationship performance of the supplier. Furthermore, supplier dependence on the buyer is investigated as a moderator of the effects of such antecedents on supplier innovation generation. Empirical tests, which used a sample of 236 Taiwanese executives, supported most of the hypotheses, and some implications of the results are discussed.     

Examining the Impact of Interorganizational Systems on Process Efficiency and Sourcing Leverage in Buyer–Supplier Dyads

Manufacturing firms are increasingly seeking cost and other competitive advantages by tightly coupling and managing their relationship with suppliers. Among other mechanisms, interorganizational systems (IOS) that facilitate boundary‐spanning activities of a firm enable them to effectively manage different types of buyer–supplier relationships. This study integrates literature from the operations and information systems fields to create a joint perspective in understanding the linkages between the nature of the IOS, buyer–supplier relationships, and manufacturing performance at the dyadic level. External integration, breadth, and initiation are used to capture IOS functionality, and their effect on process efficiency and sourcing leverage is examined. The study also explores the differences in how manufacturing firms use IOS when operating under varying levels of competitive intensity and product standardization. In order to test the research models and related hypothesis, empirical data on buyer–supplier dyads is collected from manufacturing firms. The results show that only higher levels of external integration that go beyond simple procurement systems, as well as who initiates the IOS, allow manufacturing firms to enhance process efficiency. In contrast, IOS breadth and IOS initiation enable manufacturing firms to enhance sourcing leverage over their suppliers. In addition, firms making standardized products in highly competitive environments tend to achieve higher process efficiencies and have higher levels of external integration. The study shows how specific IOS decisions allow manufacturing firms to better manage their dependence on the supplier for resources and thereby select system functionalities that are consistent with their own operating environments and the desired supply chain design.     

Supplier integration,operational capability and firm performance: an investigation in an emerging economy environment

Abstract

The literature on supplier integration’s (SI) impact on firm performance is intertwined with mixed findings in terms of definitional differences, study context, specific integration components, and the types of relationships examined. This study contributes to the supplier integration and firm performance (SI-FP) literature by investigating how and when supplier integration influences firm performance. Drawing on the relational view, the resource-based view, and the Dynamics Capability theories, we suggest that improvements in firm performance from the supplier integration perspective are dependent on gains in operational capabilities. We test this dependency with survey data from firms in Ghana, a developing economy. The results show positive significant relationships between supplier integration and competitive operational capabilities and between supplier integration and firm performance. Our results highlight the importance for managers in developing economies and elsewhere to improve their firms’ operational capabilities and competitiveness by investing in supplier integration. We also discuss implications of these findings for research.     

Governance Choice,Sourcing Relationship Characteristics,and Relationship Performance

Past work on exchange relationships has debated the efficacy of partnership versus arm's‐length governance on performance of a buyer–supplier relationship. However, how these governance approaches leverage key supplier specific relationship characteristics has not been examined. In this study, we examine the moderating role of governance choice (arm's‐length versus partnership governance) in leveraging key supplier specific characteristics to achieve superior performance for the buyer in a relationship. Specifically, drawing from residual rights theory, we argue that the governance choice buyers make moderates the impact of supplier flexibility, supplier human capital and relationship dependency on performance. Our findings suggest that, for a buyer, the benefits of supplier flexibility and relationship dependency are better realized in partnership governance as opposed to arm's‐length governance. Further, our findings suggest that although buyers choose a specific governance approach consistent with their outsourcing motivation, the choice of governance is critical to leveraging the impact of supplier characteristics due to the moderation effects studied. We elaborate on these effects and discuss the implications of our findings.     

The Many Faces of Asset Specificity: A Critical Review of Key Theoretical Perspectives

This paper presents a review of the concept of asset specificity and of the impact which asset specificity is expected to exert on the performance of buyer–supplier relationships. The paper begins by unpacking the complex definitional features of asset specificity and how its multifaceted nature is reflected in an inconsistent and rather ad hoc operationalization of the construct in the extant empirical literature. Following a comprehensive examination of the many dimensions of asset specificity, the review then focuses on the expected role of asset specificity in inter‐firm relationships according to three different theoretical perspectives: transaction costs economics, the resource‐based view and relational exchange theory. Considerable ambiguities and inconsistencies are highlighted by reviewing hypotheses typically developed within their respective theoretical framework. The paper concludes by identifying key challenges and new directions in order to derive maximum benefit from future research.     

A Structural Analysis of the Effectiveness of Buying Firms' Strategies to Improve Supplier Performance

Many manufacturing firms have increased the amount of component parts and services they outsource, while refocusing on their core capabilities. Outsourcing parts and services to independent, external suppliers means that suppliers' performance is increasingly critical to the long‐term success of these buying firms. Buying firms are increasingly using disparate supplier development strategies to improve supplier performance including supplier assessment, providing incentives for improved performance, instigating competition among suppliers, and direct involvement of the buying firm's personnel with suppliers through activities such as training of suppliers' personnel. Using resource‐based theory, internalization theory, and structural equation modeling, we examine the impact of these supplier development strategies on performance. We conclude that direct involvement activities, where the buying firm internalizes a significant amount of the supplier development effort, play a critical role in performance improvement.     

Supplier Opportunism in Buyer–Supplier New Product Development: A China‐U.S. Study of Antecedents,Consequences, and Cultural/Institutional Contexts

Collaborating with a supplier in a buying firm's new product development (NPD) project is commonly advocated and adopted, but does not always improve project performance. Some pre‐existing collaboration contexts, such as buyer–supplier NPD projects, are especially exposed to supplier opportunism due to the uncertain nature of the collaboration process. Adopting agency theory and transaction cost theory perspectives, we examine: (i) contextual antecedents and project consequences of supplier opportunism and (ii) if these causal influences vary in different cultural and institutional contexts. Using a survey sample of 214 United States (U.S.) and 212 Chinese buying firms’ responses about buyer–supplier NPD projects, we find that supplier opportunism is significantly influenced by the task and relational contexts. We also show that supplier opportunism damages both design quality and efficiency, two aspects of project performance. When comparing U.S. to China, we find that task and relational contexts have a greater impact on supplier opportunism in the U.S., but design efficiency is less hurt by supplier opportunism there. Finally, we show challenges of preventing supplier opportunism in certain NPD collaboration contexts, and offer solutions for overcoming these challenges.     

The Role of Revenue‐Focused Managerial Performance Measures in Supply Chain Coordination

Many firms employ revenue‐focused managerial performance measures (RF‐MPMs) that cause managers to worry more about revenues than about costs. Although this can seemingly misalign the interests of a manager, we show that the use of such measures can help supply chain partners to overcome hold‐up issues with respect to capacity and promotion investments. We develop a game theoretic model in which two supply chain partners engage in repeated interactions in which the supplier invests in capacity and the buyer invests in demand promotion. Following the realization of demand in each period, the two firms negotiate over the output quantity and wholesale price. The novelty of our model is that we allow the owners of each firm to delegate decision‐making power and negotiating responsibility to a free‐agent manager. We characterize the conditions under which the owners of both firms employ RF‐MPMs in equilibrium and benefit from doing so. For a special case of our model, we show that for the owners of the buyer, an RF‐MPM is equivalent to a price only relational contract, and that it complements a price and quantity relational contract as a mechanism for mitigating hold‐up issues.     

Buyer–Supplier Performance: The Role of Asset Specificity,Reciprocal Investments and Relational Exchange

This paper argues that the extent and balance of transaction specific assets, and the presence of relational norms in a buyer–supplier relationship are important factors affecting partnership performance. Hypotheses were tested using data from 393 manufacturing firms. Results revealed that while specific investments by one participant in the relationship negatively impacted the indicators of performance, offsetting investments by the other party effectively increased performance. Relational-exchange elements were positively related to performance.     

The Effect of Socialization Mechanisms and Performance Measurement on Supplier Integration in New Product Development

This article examines the effect of socialization mechanisms and supplier performance measurement on the level of supplier integration in new product development and subsequent firm performance outcomes. Prior research has found socialization mechanisms and performance measures to be effective in managing supplier relationships, though research examining their impact within a product development context has been limited. Socialization mechanisms, such as supplier conferences and on‐site visits, help establish communication and information‐sharing routines necessary to achieve supplier integration in the product development process. Using performance measures to evaluate a supplier helps focus managerial attention on areas such as innovation and communication that are important to integration success. A structural equation model, using a sample of 142 manufacturing firms based in the United Kingdom, indicates that the level of supplier integration in new product development is positively influenced by socialization mechanisms and innovation‐focused measures of supplier performance, but not significantly associated with the use of communication measures. In turn, increased levels of supplier integration led to improvements in both collaboration outcomes and business performance. Socialization mechanisms were also found to have a direct effect on collaboration outcomes achieved by the firm. Managerial implications and future research directions are discussed.     

Managing Engineering Design for Competitive Sourcing in Closed‐Loop Supply Chains

We examine the strategic interplay between a buyer's design decision and the ensuing competition between suppliers in a three‐tier closed‐loop supply chain setting with significant recycling considerations. The nature of the engineering design decision in our research entails choice of integral versus modular design that has direct implications for the input raw material waste and ensuing competition between suppliers (i.e., incumbent and new). Whereas the integral design requires a large blank and generates excessive material scrap, the modular design reduces the generated scrap, and enhances cut‐to‐fit modularity, but incurs joining cost and yield loss. The incumbent supplier who supports the status quo choice of integral design can effectively recycle excessive material waste, as it is strategically located close to the source of material. The engineering design team at our study firm is currently exploring the option to source from alternative suppliers that can support either integral or modular designs, but have significantly lower effectiveness in recycling scrap material. We characterize the buyer's price sensitivity levels, component characteristics, supply chain configurations, and virgin and scrap specialty material prices that yield various design and sourcing policy alternatives. The buyer's optimal policy choice, the ensuing price–demand dynamics, and the resulting recycling implications demonstrate that the buyer can benefit from strategically tailoring his design decisions to affect the suppliers' material requirements and costs. We show that utilizing an alternative supply option is particularly valuable for components made from a material with a low price differential in virgin and scrap forms in supply chains wherein the new supplier base can recycle effectively. In such cases, the buyer induces severe price competition by dual sourcing the integral design, and competition may negate the seemingly obvious benefits of operational improvements (e.g., higher scrap material return rate).      

Drivers and Enablers That Foster Environmental Management Capabilities in Small‐ and Medium‐Sized Suppliers in Supply Chains

The limited capabilities and resources available within many small‐ and medium‐sized enterprises frequently hamper an effective response to environmental pressures, which in turn hurts large buying firms (i.e., customers). Using a case study method with multiple suppliers of two large buying firms, we mapped factors that initiated and improved environmental capabilities in small‐ and medium‐sized enterprises over time. Through several specific mechanisms, buyers' green supply chain management initiated and then enabled the improvement of suppliers' environmental capabilities. Independent of buyers, internal championing of environmental concerns also provided an impetus for small‐ and medium‐sized enterprise suppliers to acquire resources outside the supply chain. Thus, synergistic linkages emerged in supportive buyer‐supplier relationships, resource acquisition, and capability development. When these findings are combined with earlier research on larger suppliers, an integrative framework emerges that provides direction for suppliers, buyers, and public agencies seeking to improve environmental performance.