Supplier relationship portfolio management: A social exchange perspective

Despite the importance of relationship portfolios, it's unclear how a buying firm's differential investment in its suppliers affects the distribution of its supplier relationships and the supplier-provided benefits that result. Drawing from social exchange theory (SET), we assess the sequential linkages among supply management practices, supplier relationship sets that vary in closeness, and relational benefits. Empirically, we adopt a multi-methodological approach that combines abductive case-based and deductive survey-based research. In our case-based approach, interview responses from 34 professionals within a global Tier 1 automotive manufacturer (MFGR) and four of its suppliers, open-ended survey responses from 56 buyers and 86 engineers within MFGR, documentary evidence, and direct observations facilitate the operationalization of supply management practices and relationship closeness constructs. The survey-based study integrates case-based findings and uses response data from sales managers within 292 suppliers to MFGR and matched supplier performance data from MFGR to test a theoretical model of social exchange. In a multi-step process, we apply cluster analysis, multinomial logistic regression, ANOVA, and multiple regression to this aggregated dataset to (1) identify three distinct sets of supplier relationships that are distributed along a relationship closeness continuum, (2) show how specific supply management practices affect the composition of supplier relationship sets that comprise a buying firm's portfolio, and (3) demonstrate how supplier-provided benefits differ across supplier relationship sets. Our results validate the utility of SET as applied to supplier portfolio management and provide insights into buyers' actions that drive closer relationships, minimize risk, and maximize benefits across a supplier portfolio.     

Flow Signals: Evidence from Patent and Alliance Portfolios in the US Biopharmaceutical Industry

Integrating signalling theory and the portfolio diversity literature, we theorize that diversity in a firm's patent and alliance portfolios sends contrasting flow signals impacting its market value in a nuanced way. Diversity in an alliance portfolio mediates the patent portfolio diversity – market value relationship by suppressing the negative effect of patent portfolio diversity creating an overall positive effect. We test our mediation model on a longitudinal set of 225 US biopharmaceutical firms that were awarded 17,078 patents and participated in 37,744 alliances between 1990 and 2006. Our theory and findings contribute three novel insights. First, we demonstrate the value of a temporal lens in explaining why diversity in a firm's patent and alliance portfolios send flow signals that establish expectations among market observers and have performance implications. Second, establishing that patent and alliance portfolio diversity are temporally sequenced provides compelling evidence for the value of studying multiple types of portfolios, their temporal relationships and effects on firm outcomes. Third, since diversity in a firm's portfolios can send contrasting flow signals conditioned on the cognitive demands and proximity involved in interpreting the signals, firms that do not maintain a ‘signalling fit’ with market observers increase the probability of unintentional negative signalling effects.     

Financial benefits and risks of dependency in triadic supply chain relationships

The economic consequences of interdependent relationships with suppliers and customers have long been of interest to supply chain managers and academics alike. Whereas previous studies have focused on the benefits or risks of embedded relationships that accrue to buying firms, this study simultaneously investigates the effects of a supplier's and a customer's embeddedness, arising from resource dependency, on a focal firm's financial performance in triadic supply chain relationships. Using 1,144 unique focal firm-years for U.S. firms from Compustat, we find that a supplier's and a customer's dependency both increase the focal firm's performance in terms of return on assets (ROA) and return on sales (ROS) by increasing asset turnover (ATO). As levels of supplier and customer dependency on the focal firm increase, however, the economic benefits of customer dependency diminish beyond a certain point, while those of supplier dependency continue to increase above that threshold. Thus, our findings show the paradoxically differing risks of the supplier's versus the customer's dependency, while establishing the unequivocal economic benefits of supplier and customer relations for focal firms in the middle of concentrated triadic relationships.     

Alliance portfolio diversity,radical and incremental innovation: The moderating role of technology management

In this paper we test whether the use of a set of technology management tools (TM-tools), a specification of alliance portfolio capability, influences the relationship between alliance portfolio diversity and a firm's innovation outcomes. With this model, we add to the theoretical literature on the performance effects of alliance portfolio diversity and specific contingencies allowing to appropriate benefits from this diversity. Based on a sample of South African firms, we first confirm the inverted U-shaped relation between alliance portfolio diversity and a firm's innovation outcomes found by earlier research. We also show that the shape of this inverted-U differs for incremental and radical innovation outcomes. Subsequently, we test the moderating effect of the use of TM-tools on this relationship, for which find a strong positive moderating effect. In particular, for firms intensively using TM-tools, the negative effect of high levels of alliance portfolio diversity on innovation outcomes turns into a positive effect. This suggests that the use of formal technology management practices is beneficial to manage highly diverse alliance portfolios.     

The Effectiveness of Portfolio Risk Diversification: An Additive Approach by Project Replication

This article proposes a probabilistic approach to project operational risk and project portfolio risk diversification. The analysis rests on a fundamental distinction between a fractional and an additive approach for constructing portfolios. Since the additive approach excludes variance as a measure of risk, the project's operational risk is defined by its probability of loss. Paradoxically, the effectiveness of any firm's portfolio risk diversification process will be negatively related to the operational risk of its representative project. We also present the conditions under which risk management and efficiency management can contribute to the firm's strategic imperative of lowering its operational risk.     

A contingency-configurational view of purchasing operations: The mediating role between supplier relationship and firm performance

The literature has considered purchasing and supply management activities from a strategic perspective, but the tactical role of purchasing operations has yet to be explored. Purchasing operations represent the internal modus operandi for transactions with suppliers, comprising three main activities – purchasing transactions, purchasing document management, and purchasing assessment – and supportive activities like purchasing knowledge management. Following the contingency theory, we hypothesize that these internal activities mediate between external supplier relationship management and firm performance (financial, customer and delivery performance). Complementarily, we adopt the configurational theory to hypothesize that this link between external and internal activities can be combined to increase firm performance. To test this contingency-configurational view of purchasing operations, we conducted a quantitative survey with 234 companies. The regression results of the contingency analysis show that purchasing operations activities have a full mediation role in most relationships between supplier relationship management and firm performance, while knowledge management positively moderates the association between purchasing assessment and customer performance. Moreover, the cluster analysis for the configurational analysis shows that supplier relationship management and purchasing operations follow maturity levels of joint implementation of internal and external activities. Our findings shed light on the purchasing operations by defining the activities representing this concept and showing their role in supply management. We also contribute to practice by proposing an integrative system that helps managers organize the firm's purchasing and supply management activities.     

Providing Managerial Accounting Information in the Presence of a Supplier

Abstract

This paper identifies a novel effect which is crucial for the design of a management accounting information system. In contrast to prior literature, we explicitly model the firm's relationship to a supplier. We show that in addition to the previously identified trade-off – benefits of more information versus indirect or direct (agency) costs of information acquisition – another effect occurs: the input price effect. This effect influences the optimal design of the management accounting information system and changes the regimes where information acquisition is optimal for the principal. Also, in case of endogenous input prices we demonstrate that – perhaps surprisingly – paying an information rent to the agent can be beneficial because it works as a commitment towards an over-charging supplier to exploit the input price effect.     

The more the merrier? Network portfolio size and innovation performance in Nigerian firms

A positive relationship between firms' networking activities and innovativeness has been consistently established in the literature on innovation. However, studies considering different innovation types, and on developing countries are scarce. This paper addresses questions concerning the relationship between networking strategies and innovativeness of firms, using innovation survey data on Nigerian firms. Quantile regression is applied to trace the link between portfolio size and innovation at different levels of innovative success. The results show a positive relationship between a firm's innovation performance and the size of its networking portfolio. This relationship varies across different innovation types and with increasing innovation performance. The findings suggest that the widely accepted portfolio approach to external search for knowledge is not necessarily always the best—its utility depends on the firm's current level of innovative success. This poses a challenge for open innovation.     

Knowledge sharing in supply chain networks: Effects of collaborative innovation activities and capability on innovation performance

Building on knowledge management and innovation capability theories, this paper aims to reveal the mechanisms of collaborative innovation processes by investigating the complex relationships among critical factors influencing firm's innovation performance in supply chain networks. Using hierarchical Multiple Regression (MR) and Moderated Multiple Regression (MMR) methods, results from a survey of 236 firms in China indicated that there are significant positive relationships between collaborative innovation activities, knowledge sharing, collaborative innovation capability, and firm's innovation performance. Moreover, it is expected that knowledge sharing plays a partial mediating role in the relationships between collaborative innovation activities and firm's innovation performance. Collaborative innovation capability exhibited a moderating effect on collaborative innovation activities - innovation performance relationship. These results contribute to collaborative innovation process management by offering a nuanced conceptualization of the collaborative innovation - performance relationship in supply chain networks.     

Does Familiarity Foster Innovation? The Impact of Alliance Partner Repeatedness on Breakthrough Innovations

Does familiarity with alliance partners promote breakthrough innovations? This study draws on the literature of interorganizational routines to examine the impact of repeated R&D collaborations within a firm's alliance portfolio on its breakthrough innovations. Specifically, we contend that the benefits and liabilities of interorganizational routines, arising from alliance partner repeatedness at a firm's alliance portfolio level, lead to an inverted U‐shaped relationship between alliance partner repeatedness and breakthrough innovations. Further, we build on the recent theoretical development of interorganizational routines to propose that technological dynamism will make the inverted U‐shaped relationship steeper. Analyses of approximately 230 firms in the US biopharmaceutical industry from 1983 to 2002 support our hypotheses. Our findings provide important implications for research on alliance portfolio and management of firm innovation.     

Examining supply chain relationships: Do buyer and supplier perspectives on collaborative relationships differ?

Firms are building collaborative relationships with their supply chain partners in order to achieve efficiencies, flexibility, and sustainable competitive advantage. However, it is unclear if collaborative relationships provide benefits that compensate for the additional expense associated with such relationships. Further, it is unclear what factors promote successful collaborations. This research examines collaborative relationships in two separate studies using structural equation modeling: one study examines buyers’ perceptions and the second study examines suppliers’ perceptions. The two studies are then compared using invariance testing in order to determine economic and relational factors that drive satisfaction and performance from each party's perspective. Results show that collaborative activities, such as information sharing, joint relationship effort, and dedicated investments lead to trust and commitment. Trust and commitment, in turn, lead to improved satisfaction and performance. Results from the two independent studies exhibit similarities and differences; while the conceptual model is highly similar, certain paths vary in their significance and/or their importance across buyer and supplier firms such that buyers focus more on relationship outcomes while suppliers look to safeguard their transaction specific investments through information sharing and joint relationship effort. Managerial and theoretical implications of the findings are discussed.     

Are internal manufacturing and external supply chain flexibilities complementary capabilities?

Manufacturing flexibility is often viewed as a strategic capability that enables firms to more effectively meet heterogeneous market demands arising, in part, from increased product proliferation. However, recent studies suggest that the operational challenges associated with meeting this objective may be heavily dependent not only upon a firm's internal modification, mix, and new product flexibilities, but also upon the flexibility of its inbound and outbound supply chain partners. Drawing upon the theory of Complementarity, we examine if simultaneous utilization of both internal and external flexibilities does in fact create synergies that can improve a firm's delivery performance. Based on a sample of 158 U.S. manufacturing plants, we find that the extent to which performance enhancing synergies are generated is primarily dependent upon the type of internal flexibility that is paired with supply chain flexibilities. Additionally, we find that when synergies do exist, external supplier and logistics flexibilities generally tend to enhance the scope of flexible response, while internal flexibilities generally tend to enhance the achievability of a flexible response. Taken together, our findings suggest that the ability of firms to actually reap the synergistic benefits of an integrated system of supply chain flexibility is much more complex and nuanced than previously believed or expected.     

Relationship portfolios and capability development: Cases from the moulds industry

A number of authors within business marketing and purchasing, have stressed that the heterogeneity of relationships in customer and supplier portfolios are a source of managerial problems and opportunities. This paper looks at the use and development of firms’ capabilities in the context of relationship portfolios. Two case studies about producers of moulds are used to illustrate how their contrasting trajectories in terms of degree of specialisation can be related to the variety found and sought in their portfolios of relationships. Our study suggests that portfolio interdependencies are best understood in the context of the development of idiosyncratic capabilities, which include interpretations and experiences in using and influencing that variety.     

Partnering relationships in construction: A literature review

There is no unified view as to what partnering relationships are in the construction industry. The purpose of this paper is to examine the literature in order to identify the main assumptions about partnering relationships in construction research and practice. The literature is compared to the Construction Industry Institute’s (CII, 1991) frequently cited definition of partnering as a long-term commitment between two or more parties in which shared understanding and trust develop for the benefits of improving construction. The literature review reveals a tendency to focus on project partnering in dyads between clients and contractors and there is also an emphasis on formal tools to develop these relationships, even if social aspects and relationship dynamics are recognised. The paper discusses these findings and suggests that, in order to increase the understanding of the substance and function of partnering relationships, it could be useful to incorporate knowledge from theoretical perspectives that are more in line with the CII definition. Two perspectives that seem particularly interesting in this respect are Supply Chain Management (SCM) and the Industrial Network Approach (INA), both of which focus on long-term relationships between actors beyond the dyad. INA also emphasises the informal aspects of relationship development. Incorporating these dimensions of partnering relationships requires processual and longitudinal studies, which are relatively rare in the contemporary partnering literature.     

A theory of supplier network-based innovation value

To understand how a supplier helps a buying company create value through innovations, studies have focused on a supplier's internal resources or its relationship with a buying company. Building upon this body of literature, we develop a theory of supplier network-based innovation value in this conceptual paper. This theory explains how a supplier's upstream and downstream value network can be a source of competitive advantage for a buying company. Specifically, it proposes that the levels and types of supplier innovation value is contingent on the configuration of a dual-ego value network, characterized by the locus and degree of buyer-supplier structural equivalence. This theory also explains how a supplier's ties with a buying firm's competitors can pose both opportunity and risk to buying company innovation. This theory contributes to the literature by showing when “seemingly undesirable” suppliers, due to a lack of technical capability or strong relationship with a buying company, might still be valuable to a buying company's innovation.     

Endogenous product substitutability strategy under duopoly

This article develops endogenous product substitutability theory. With game theory approach, the effects of endogenous product substitutability are characterized. First, equilibrium under endogenous product substitutability is achieved. Second, product substitutability strategy promotes price, total outputs, and social welfare. Outputs under high‐efficiency firm's product substitutability are compared with those under low‐efficiency firm's product substitutability. Third, compared with the other cases, joint product substitutability improves price difference. Finally, the outputs of all firms under endogenous product substitutability are shown to be lower than the social optimality level. The policy implication is to encourage firms investing product substitutability.     

An analysis of environmental corporate social responsibility

This article investigates corporate social responsibility (CSR) practices while taking into account their product substitutability and environmental responsibility. CSR firms, integrating environmental and social concerns into its business operations, are introduced. The effects of the firms' social concerns, environmental responsibility, and product substitutability are all captured. First, firms' social concerns improve both outputs and CSR firms' objective function value, while reducing the profit maximization firm's profits. Second, environmental responsibility has the contrary effects. Both the outputs and the objective function values of both firms decrease with their product substitutability. Finally, social concern effects on CSR firms' performance are uncertain.     

Exploring the performance effects of visible attribute diversity: the moderating role of span of control and organizational life cycle

Research on how cultural diversity – especially visible attributes such as race and gender – impacts organizational performance remains practically nonexistent. We examine the effect of racial diversity and gender diversity on firm performance utilizing a contingency framework. Empirical findings from a field study support the hypothesized contingent effects of an organization's structure, specifically managerial span of control, on both racial and gender diversity's pre-assumed benefits. In addition, the study highlights the role of life-cycle stage when modelling the diversity–performance relationship. Future research directions and managerial implications are discussed.     

How a Firm's Domestic Footprint and Domestic Environmental Uncertainties Jointly Shape Added Cultural Distances: The Roles of Resource Dependence and Headquarters Attention

Even though many firms conduct most of their business domestically, international management research has remained remarkably silent on the role of a firm's domestic footprint in its internationalization strategy. We shed light on that role by exploring how the size of a firm's domestic footprint influences the cultural distance that the firm adds to its country portfolio when expanding internationally. Integrating resource dependence theory and the attention‐based view, we hypothesize that a firm's domestic footprint has a negative relationship with added cultural distance (ACD), and that domestic policy uncertainty strengthens this relationship whereas domestic demand uncertainty weakens it. We find robust support for our hypotheses in a sample of the world's largest retailers covering the period 2000–07, indicating that a firm's domestic footprint and domestic environmental uncertainties jointly shape cross‐cultural expansion strategies. Our findings suggest that ACDs reflect headquarters executives' desire to avoid ineffective foreign expansions, hinting at possible biases in studies of the performance effects of distance.     

The economic benefits of market timing the style allocation of characteristic-based portfolios

Many exchange traded funds track simple characteristic-based equity portfolios such as the market capitalization, the fundamental value or the inverse volatility portfolio. This paper provides theoretical and empirical evidence for the economic benefits in exploiting the timing-gains that result from the time-varying relative performance of these characteristic-based portfolios. Under a factor model for expected returns, we show that this dynamic portfolio allocation can be efficient across the low-dimensional set of characteristic-based portfolios. We assess the out-of-sample performance on the S&P 100 universe over the period 1990–2013 and show gains in stability and significant positive risk-adjusted returns for the dynamic style portfolio. We conduct several robustness tests and extensions confirming the benefits of dynamic style allocation across characteristic-based portfolios.