Do Firms Spend More on Suppliers That Have Environmental Expertise? An Empirical Study of U.S. Manufacturers’ Procurement Spend

Stakeholders expect focal firms to improve their environmental performance. While firms may be able to accumulate the environmental expertise needed to achieve this goal internally, doing so may require significant time and resource commitments. Alternatively, buyer firms can leverage their suppliers’ existing environmental expertise and gain access to such expertise when they purchase products and services from these suppliers. The purpose of this study was to develop and test theory regarding under what conditions suppliers’ environmental expertise influences a buying firms’ procurement spend with these suppliers. We ground our study in transaction cost economics and agency theories and empirically test our hypotheses using a unique buyer–supplier dyadic data set. We find that buyer firms are willing to increase their overall business spend with suppliers that have strong environmental expertise, particularly when the buyer firms are more profitable and have higher levels of absorptive capacity. However, we find the opposite effect when the buyer firm’s executive compensation is linked to the firm’s environmental, social, and governance (ESG) performance. Likewise, we also find that the buyer firm’s environmental concern ratings negatively moderate the relationship between the supplier’s environmental expertise and the buyer’s procurement spend with the supplier.     

Buyer/supplier partnering in British industry: The automotive and telecommunications sectors

Practitioners and academics in the fields of marketing and purchasing management share an interest in the effective management of inter‐firm buyer‐seller relationships. Buyer/supplier partnering has been advocated as an effective approach to the management of key customer or supplier relationships. Within both the automotive and telecommunications sectors of the British economy there is intense interest among major buying organisations in the development of durable partnerships with key suppliers. However, within both industries the major UK and American owned firms have to operate under the shadow of traditionally antagonistic relations with suppliers. The current state of buyer/supplier partnering within the two industries is evaluated within this historical context, and the key problem identified is the need to overcome antagonism within the inter‐organisational culture. The costs and benefits of partnering approaches to both marketing and purchasing are discussed, and implications for marketing managers seeking to develop partnerships with major customer organisations are outlined.     

Justice in triad: Revisiting supplier involvement in new product development

Recognizing the importance of involving suppliers in the new product development (NPD) process, extensive studies have examined this issue at a buyer–supplier dyadic level. However, how supplier involvement leads to better NPD performance is not clearly explained. Additionally, extending the dyadic relationships to triadic relationships and addressing how to manage the two competing suppliers with fair conduct remains unexplored. To answer these questions, this study developed a conceptual model theorizing the role of supplier involvement, information sharing, and justice in the NPD process within a buyer–supplier–supplier triadic relationship. Based on survey data collected from 200 U.S. firms, Structural Equation Modeling is used to test the hypothesis. The results first confirmed the criticality of involving both primary and secondary suppliers during NPD. Second, the positive effect of triadic supplier involvement on innovation performance is fully mediated by information sharing. Finally, this study explored the different roles of procedural justice and distributive justice; the results confirmed that procedural justice acts as a moderator for the relationship between triadic supplier involvement and information sharing, whereas distributive justice moderates the effect between information sharing and innovation performance. Our findings contribute to the literature of triadic supplier involvement-new product development and relationship management. Accordingly, these findings highlight key implications for managers and policymakers.     

The role of buyer and supplier relationships in integrating TQM through the supply chain

Many academics and practitioners have alluded to the importance of total quality management (TQM) principles and the important role the purchasing function plays in the quality process. However, the role of the buyer–supplier relationship in the TQM process has not been directly investigated to any large extent. Three hypotheses concerning the role of buyer–supplier relationships in the success of TQM implementation were tested. The results demonstrate that buyer–supplier relationships are different in firms with successful TQM programs. Hypothesis 1 suggests that those firms with successful TQM programs will have more formal mechanisms for interacting with suppliers. The second hypothesis suggests that business units with more successful TQM programs exhibit a greater degree of competitive focus and single sourcing. The third hypothesis relates to a higher level understanding of internal and external customer needs by successful TQM adopters. All hypotheses were supported. The buyer–supplier relationships in firms with successful TQM programs are different than firms with less successful TQM programs.     

Strategic and Operational Determinants of Relationship Outcomes With New Venture Suppliers

While the vast majority of the supplier selection and development literature has focused on relationships between mature, established firms, significantly less attention has been paid to relationships between established firms and new, entrepreneurial ventures. This study addresses this important topic and, using an interdisciplinary lens, investigates the question of how established buying firms can work with new ventures to achieve desired relationship outcomes. Drawing on the literature from the disciplines of entrepreneurship and supply chain management, we propose a theoretical model that links buying firms' strategic orientation in supplier selection (innovation and cost in strategic supplier selection) and operational approach in supplier development (direct and indirect development of new venture suppliers) with new venture‐specific relationship outcomes (purchasing volume and realized innovations). The model's predictions are tested on cross‐sectional survey data from 136 buying firms. Our results contribute to the emerging research stream at the supply chain management–entrepreneurship interface and enhance the understanding of relationships between established firms and new ventures.     

Coping With Dependence: A Logistics Strategy Based on Interorganizational Learning for Managing Buyer–Supplier Relations

The rise of outsourcing has heightened interest in the role of logistics managers in coping with dependence in buyer–supplier relations. Buying firm dependence on a supplier potentially reduces supplier performance to expectations because the buying firm cannot leverage power to capture value in the relationship. Drawing from interorganizational learning theory, we advance a logistics strategy that consists of supplier cost analysis and supplier integration as a means to create value and thereby mitigate the negative effects of dependence. By facilitating the acquisition and use of knowledge, supplier cost analysis and supplier integration enable buying firms to identify improvement opportunities while engaging in collaborative supplier relations. Using survey responses from 222 buying firms, we find that while buyer dependence decreases the buyer's perceived supplier performance, supplier integration suppresses these negative effects. Furthermore, we show that supplier cost analysis is a valuable knowledge acquisition tool that logistics managers can use to enable supplier integration as a relational form of governance. As such, we provide new insights into interorganizational learning theory and suggest to logistics managers the important role supplier cost analysis plays in managing buyer–supplier relationships.     

THE BENEFITS OF USING E‐BUSINESS TECHNOLOGY: THE SUPPLIER PERSPECTIVE

The use of e‐business technologies between supply chain organizations has primarily been examined from the viewpoint of buying firms or retailers, with little attention given to the benefits accrued to suppliers. Further, previous studies have been limited to either financial or marketing performance measures, or a narrow range of operational measures. This study builds on research in this area by testing a model of the relationship between supplier use of e‐business technologies in communication with their primary buyer, degree of buyer‐supplier coordination, and a complete set of benefits that include strategic and operational performance measures. Using data from 241 first‐tier OEM suppliers in the computer industry, the findings show that supplier use of e‐business technologies positively impacts organizational benefits both directly and indirectly by promoting buyer‐supplier coordination.     

Supply chain consortia: the rise of transcendental buyer–supplier relationships

A theoretical, cross-disciplinary model for cooperative buyer–supplier relationships is proposed which integrates information obtained from prior research on organizational culture and transaction cost analysis (TCA). The authors describe key elements of TCA and review the three types of transaction governance structures commonly used to explain relationships within an organization. The authors extend this by applying structure type to buyer–supplier relationships. The researchers propose several types of interorganizational relationships and conclude with an in-depth discussion of a successful supply chain consortium used by Boeing Aircraft Company and several key suppliers.     

The impact of retail buyer innovativeness on suppliers’ adaptive selling in Japanese buyer–supplier relationships

Abstract

We investigate the critical role of retail buyer innovativeness in Japanese buyer–supplier relationships and explore its link to suppliers’ adaptive selling, cooperative relationships, and retail competitiveness. Further, we examine how process conflict between merchandizing and store divisions moderates the relationship between retail buyer innovativeness and suppliers’ adaptive selling. This study employs a structural equation model using survey data from 246 heads of merchandizing divisions at Japanese retail companies. Our findings highlight the importance of both mitigating process conflict and facilitating suppliers’ adaptive selling in order to improve Japanese retailers’ competitiveness, especially when buyers are highly innovative.     

Why do buyers share knowledge with suppliers in new product development? current and alternative supplier antecedents

Purpose: Interfirm knowledge sharing has been well recognized to activate the performance and competitiveness improvement of the firms. Previous research has discussed the impacts of current suppliers on buyer–supplier knowledge sharing, but does not explain how this influence occurs. This study aims to disclose the mechanism by which both current and competing suppliers impact buyer–supplier knowledge sharing in buyers’ new product development activities.

Methodology/approach: This study proposed a conceptual model based on relational exchange theory and developed eight hypotheses. Questionnaire survey was used to collect empirical data from R&D staff of Taiwanese electronics firms. This study distributed 1,475 questionnaires and received 246 eligible questionnaires. Structural equation modeling was used to test and verify appropriateness of the proposed model.

Findings: The findings show that current supplier asset specificity positively and directly influences buyer–supplier knowledge sharing in new product development. The current supplier asset specificity also has indirect positive influence on buyer–supplier knowledge sharing in new product development via the mediating effects of buyer trust, satisfaction, and commitment. However, the attractiveness of alternative suppliers only indirectly and negatively affects buyer–supplier knowledge sharing via the mediating effects of buyer trust, satisfaction, and commitment.

Research limitations/implications: This study surveyed the firms in Taiwanese electronics industry. Nevertheless, new product development activities are executed by electronics firms in numerous countries and firms in various industries. For validating the generalization of this study’s results, future research can investigate firms in other industries and countries to verify the proposed model and hypotheses.

Practical implications: Current suppliers’ asset specificity is found to exert more influence on buyer–supplier knowledge sharing than alternative attractiveness. The findings imply that current suppliers should focus on investing specific assets for buyers other than stress the attractiveness and threat of competing suppliers.

Originality/value/contribution: This study initiates to approach the antecedents and influence mechanism of current buyer–supplier knowledge sharing via both perspectives of current and competing suppliers.     

Information Asymmetries as Antecedents of Opportunism in Buyer-Supplier Relationships: Testing Principal-Agent Theory

ABSTRACT

Purpose: A severe problem in supplier selection refers to moral hazard: suppliers not behaving in the expected way once contracted. Principal-agent theory could provide insights on how to reduce this problem. Because buyer–supplier relationships can be interpreted as principal-agent situations, the application of agency theory should facilitate improved supplier selection. Although theoretically compelling, empirical tests verifying this assumption are not prevalent. Regarding the advancement of theory, this paper tests whether both ex ante and ex post information asymmetries influence moral hazard. In particular, in the context of a globalizing economy with a subsequent increase in information asymmetries as a problem in supplier selection, this conceptual approach may be contributive.

Design/methodology/approach: The authors use a set of 87 buyer–supplier relationships to conduct a test, applying a partial least squares model with latent variables. A particularity of the data set is that it contains information on ongoing as well as on discontinued relationships.

Findings: The analysis indicated that both ex ante information asymmetries (operationalized by a reputation variable) and ex post asymmetries (operationalized by a monitoring variable) have shown to be significant and strong antecedents explaining the occurrence of moral hazard. Interestingly, and opposed to the common assumption, the length of a relationship and the amount of direct meetings have not revealed any explanatory significance. Buyer dependency hardly showed influence on supplier opportunism.

Research limitations/implications: Data were collected from a multitude of buyer–supplier relationships from a single firm in the chemical-pharmaceutical industry. Generalizations to other industries still need to be tested. Socially desirable answering behavior cannot fully be excluded because relationship discontinuation is not a desirable situation. In terms of theory implications, this research adds to the notion that both hidden action and hidden intention can lead to moral hazard.

Practical implications: An agency-based analysis can be operationalized with the help of an agency-based supplier classification portfolio. It might be of particular value to firms to discuss those suppliers that scored high in risk of opportunism but did not (yet) reveal any signs of moral hazard. Finally, the strong explanatory power

of reputation alerts buyers to pay more attention to behavioral information on the (potential) supplier available in the market.

Originality/value: Analyzing the occurrence of moral hazard and including terminated relationships adds to the emerging stream of literature on relationship discontinuation in B2B markets. Further, the strong empirical results may encourage researchers to elaborate on principal-agent theory-based assumptions, adding another layer of explanation to buyer–supplier relationships. Findings show that reputation is unduly neglected as supplier selection criterion in current theory and practice.     

Interactions,innovation, and services

Although research has acknowledged the importance of supplier–buyer relationships for goods innovation, empirical evidence on the extent and nature of the effects of original equipment manufacturing (OEM) supplier–buyer relationships on service innovation remains scarce. Based on a survey of 152 suppliers in Taiwan, this study concludes that the interaction orientation of OEM suppliers is a key factor influencing the development of two competencies: joint innovation competence and cross-functional information dissemination competence. These two competencies contribute to OEM suppliers’ exploitative service innovation and explorative service innovation, respectively. In other words, applying a resource-based view, this study provides clarity regarding the linkages shown below (an organization’s strategic orientation influences its development of organizational capabilities and results in organizational performance) for the purpose of exploring the relationship between interaction orientation and service innovation.     

Robust supplier relationships: Key lessons from the economic downturn

Recent events in the economic and natural environments have tested buyer-supplier relationships like never before. Based on dyadic buyer-supplier case data from a variety of industries that were deeply affected by the 2008–2009 recession, this article explores how long-term relationships responded to an economic downturn. Prior to the downturn, these mutually dependent relationships all appeared to be very similar to each other and were characterized by significant value-added and social capital stores. However, due to varying degrees of bounded rationality, the relationships were affected differently and responded differently to the downturn. Based on the characteristics of the relationship, we develop a framework of three types of close supplier alliances. This framework can be used to assess such relationships and likely responses to adversity to reduce unpleasant surprises for the alliance partners. This article also provides a set of lessons learned for managers.     

An Empirical Study of Buyer–Supplier Relationships within Small Business Organizations

A paradox exists in small business organizations; although effective buyer–supplier relationships are essential to the success of small businesses, these organizations may not have the purchasing and selling power in terms of managerial resources to implement them. This provides us an opportunity for research to determine how well developed are buyer–supplier relationships within small business organizations. Grounded in transaction cost and resource dependence theory, this paper presents and empirically tests a model that examines the relationships between buyer and supplier specificity and long‐term buyer–supplier relationships and the latter's impact on organizational performance from the buyers' perspective. The results of this study provide insight into the development and impact of buyer–supplier relationships within small business organizations. Several managerial implications can be determined.     

Microfoundations of dynamic new venture partnering capabilities

Managing relationships with new venture suppliers require the adaptation of supplier management practices and routines. This research builds upon the dynamic capabilities perspective to explicate the ability to partner effectively with new venture suppliers as a dynamic capability. We argue that new venture partnering capability (NVPC) encompasses sensing, seizing, and transforming capabilities. Firms with sensing capabilities can interpret new ventures' value propositions and then match them to the needs of their business units. Seizing capabilities allow firms to coordinate and develop the relationship with a new venture supplier to capture value. Transforming capabilities enable firms to adapt resources and reconfigure their sensing and seizing capabilities. Our findings suggest that firms accelerate the transformation and strengthen dynamic NVPCs by applying entrepreneurial behavior through high-quality and regular interactions with new venture suppliers and embedding a dedicated new venture function. We also find that dynamic NVPCs can reside at different levels and that entrepreneurial managers can stimulate the development of organizational NVPCs. In general, we provide further empirical evidence on how buying firms can more effectively leverage the potential of new venture suppliers.     

Information Sharing in Global Supply Chain Alliances

The post–WWII economic expansion of economies such as Japan, South Korea, Hong Kong, Taiwan, Singapore, and more recently China and India was enabled to a significant degree by the increasingly complex, global supply chain networks of large Original Equipment manufacturers (OEMs) in the United States, European Union, and Japan. By linking buyers and suppliers across countries and industries, supply chain management (SCM) practices have a large impact on the economic fortunes of companies and countries throughout the world. Nowhere has the effect of this mutual interdependence been felt more strongly than between the U.S. companies and the Asia-Pacific market. Although the benefits of SCM are well documented, some evidence suggests that the reality of SCM implementation can create additional pressures for suppliers. We identify key problem areas experienced by suppliers and their link to the type of information shared by buying firms. The problem area experienced by most suppliers relates to issues of dependence in the alliance. Mere information sharing is insufficient for a successful alliance, and more information can be associated with a number of problems. For example, lack of information sharing can be associated with a supplier's perception of the buyer expecting excessive support. However, greater information sharing can be associated with a supplier's perception of the buyer passing on an excessive burden. Sharing of financial information is perceived as intrusive and controlling. These apparent contradictions uncover the complexity of the supply chain alliance. The moderating factors appear to be open communication and joint sharing of problem solving procedures—factors identified by suppliers that define a world-class buyer.     

Multimarket Contact and the Use of Power in Buyer–Supplier Relationships

Buyers and suppliers often have multiple business relationships with each other across different geographical and product markets, forming a potentially complex web of connections. What happens between the firms in one geographical or product market may influence their interactions in others. Prior research in strategic management has found that similar multimarket contact in horizontal relationships between competitors has important consequences for the firms’ use of market power. However, the consequences of multimarket contact in vertical buyer–supplier relationships remain unexplored. Building on resource‐advantage theory, this study proposes that multimarket contact between buyers and suppliers is linked to their respective propensity to use three types of mediated power in their relationships (i.e., reward, coercion, and legal legitimate) and that the effects of multimarket contact differ between buyers and suppliers. A vignette study with 143 purchasing managers and 137 business‐to‐business sales managers tests the developed hypotheses. The findings show that a higher level of multimarket contact encourages suppliers to use legal legitimate power to a greater extent and encourages buyers to use reward power to a greater extent but legal legitimate power to a lesser extent.     

Relationship performance dimensions of buyer–supplier exchanges

Whilst there is much research material on buyer and supplier performance assessment and management, a relationship perspective can bring an added dimension, especially to the performance of close, mutual relationships. This article aims to bring a relationship performance understanding to the study of buyer–supplier exchange. Unfortunately, business-to-business relationships are assumed to enhance performance but what little research has been conducted is limited to a few dimensions reflecting a narrow theory or practice assumption. To remedy this we investigate a relationship performance definition that incorporates both non-financial and financial dimensions. The results are developed from seven qualitative interviews followed by a postal survey incorporating the views of 200 industrial buyer respondents in the UK. To examine the relationship among the performance variables, factor analysis was conducted on 21 dimensions of performance included in the research. On this basis, key dimensions of relationship performance are grouped and implications drawn for defining relationship performance and its measurement. The authors conclude that it is meaningful to take a relationship performance position when managing buyer–supplier interactions. However, not all the dimensions identified may be available to all types of relationships.     

The glue and the pieces: Entrepreneurship and innovation in small-firm networks

The entrepreneurial view of the firm stresses the need for a more insightful understanding of business leaders within sets of SMEs. Here, competitiveness emerges as a network-embedded capability and the coordination among firms, maximizing firm-specific competencies, represents a strategic leverage in accomplishing and maintaining a sustainable competitive advantage. When the goal is not only greater efficiency in terms of the lowest cost but innovation in terms of how to improve productive performance by changing the way in which it is undertaken, a critical issue becomes the entrepreneur's ability to create, manage, and recombine the set of relationships with external suppliers. The ability to glue external expertise and capabilities in an original and unique way is considered the key factor in pursuing innovative performance.As orchestrators of inter-firm linkages, entrepreneurs relying on personal networks and prior relationships are able to identify possible sources of knowledge. As coordinators of such innovative ties, they combine a wide set of diverse competencies not only to overcome size constraints through development cost reduction, but also to recoup ideas and creativity for the realization of more complex typologies of innovation. These elements reduce the level of uncertainty, while enhancing early cooperation between firms.Because the entrepreneur is supposed to be able to manage a higher number of “innovative poles”, which can be better managed thanks to trust and reputation developed in prior relationships, the different management topology could be associated with a different level of supplier contribution to the development of new products.This paper provides insights into the role of suppliers in the new product development process, and explores the role of the entrepreneur in promoting and managing a wide set of external, innovative ties. Attention is focused on 103 small- and medium- sized firms located within two Italian industrial networks where interdependencies are unusually large and complex.With respect to the first aim, the empirical analysis confirmed SME's structural recourse to suppliers. More important, the contribution of such resources is not necessarily limited to cost reductions and marginal improvements. Although incremental contributions certainly exist and are relevant, more complex relationships largely focused on joint design and development emerge as important patterns in buyer—supplier interaction.With respect to the second aim, an entrepreneurial explanation of SMEs' innovative performance is advanced. In a competitive environment where the actors are not atomistic, but exist within systems of actors, the relational capability could represent for entrepreneurial firms the way to gain a sustainable competitive advantage. We found entrepreneurs who, exploiting basic experiences, seek new combinations among the various inter-firm ties, relying upon such linkages as a vehicle for transferring and combining their organizationally embedded learning capability. Our findings showed that (1) when the entrepreneur is leading and managing the business, more suppliers are involved in the development of new products, and (2) the type of contribution given by suppliers differs by management typology. More precisely, the incremental type of contribution is dominant whenever professional management is present, while the relevance of architectural and radical topologies increase when the entrepreneur is present.On a broader level, the findings suggest further studies to address the question of how internally determined, rather than spontaneous, is the evolution toward a network structure in sets of SMEs similar to those studied. We showed that the number and the quality of inter-firm relationships cannot be explained merely by environment-specific factors.