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.     

Relationship Governance Structures and Performance

Managing and implementing supplier relationships is an interest shared by both academics and practitioners. A growing focus of attention is on the outcomes of these relationships since they have been shown to deliver enhanced performance. However, variations in performance across different relationship types remains less understood. To rectify this, in our study, buyer-supplier relationship outcomes are measured by a performance metric that includes both financial and non-financial elements. The results are drawn from a survey of UK buyers in the engineering, electronics and telecommunications sectors and show that differences can be found in performance outcomes for a variety of governance structures. The findings are discussed in reference to the relationship management implications of the variation in performance found, and further research avenues are described.     

Economic Ethics and Institutional Change

Our economic system, the market economy, is a part of a broader system or “society.” We frequently study the operation of the market economy as if it were autonomous, even though there are many complex and mutual relationships between society, the economic system and the other systems – political, cultural, religious, legal, etc. – that form part of society. In a market economy we may identify several components: a frame or background in which the economic activity takes place, a set of ideas and theories, the values shared by this society, the set of institutions, norms and rules that control the economic behavior of people, and the incentives or motivations of the economic agents. The play of these elements defines the operation of a market economy. Is ethics an institution, or does it belong to the set of values and ideas? In this paper I will discuss the role of institutions, norms and rules in society, with special reference to the economic system, in order to gain insight into the relationship between institutions and ethics. I study first the concept and features of social institutions and norms; second, institutional change, and third, the relationship between ethics and institutions.     

Shaping and re-shaping social capital in buyer-supplier relationships

Social capital plays an important role in explaining how value is created from firms' network relationships, but little is understood about how social capital is shaped over time and how it is re-shaped when firms consolidate their network ties. In response, this study explores the evolution of social capital in buyer-supplier relationships through a case study of a company undertaking radical product innovation, and examines the corresponding changes in the firm's network of buyer-supplier relationships. The analysis shows that social capital is built in a decidedly non-linear and non-uniform manner. The study also reveals considerable interaction among the dimensions of social capital throughout the evolution of the firm's network, and emphasizes the importance of the cognitive dimension—a feature receiving little attention thus far. The evidence shows, too, that efforts to strengthen social capital need to increase when network ties are sacrificed to prevent unintended consequences for firms' longer-term value creation.     

The Conceptualization and Measurement of Suppliers' Reputation Display in Asymmetric Marketing Relationships

In asymmetric buyer-supplier relationships, suppliers typically possess more information about the object of an exchange. To ameliorate customers' evaluation problems, suppliers use signals to promise the delivery of a certain quality level to the market. A commonly used supplier signal in asymmetric markets is the manner in which reputation is displayed to buyers. While the marketing literature recognizes the role of reputation in structuring such asymmetric buyer-supplier relationships, relatively little research effort has been directed at the conceptualization and measurement of suppliers' reputation display. To address this gap, I adopt an interdisciplinary perspective and conceptualize suppliers' reputation display as a multi-dimensional construct. Specifically, I argue that suppliers' reputation display represents a latent consisting of three distinct dimensions; (i) specific investments, (ii) advertising intensity, and (iii) certification. The preceding conceptualization implies that reputation display signals a suppliers' past and future conduct to the marketplace. For example, by displaying certification, suppliers expect the market to infer certain firm attributes based on past actions. Likewise, suppliers' investments in advertising and specific assets may provide a signal of future honest behavior to the marketplace. I empirically validate this three factor conceptualization of reputation display by utilizing the technique of Latent Variable Structural Equations Modeling (LVSE). Empirical tests conducted on data obtained from 287 automotive service managers via mail survey support the three factor model of reputation display.     

关系专用性投资的全球价值链升级功效——基于浙江本土代工企业的实证研究

本土代工企业在全球价值链嵌入中进行代工关系专用性投资,具有何种升级功效？针对主流全球价值链理论的“升级”与“伪升级”争议,文章基于跨国买供间关系治理理论与关系租金攫取视角的升级界定,采用浙江本土代工企业146个二元代工关系层面调查数据的实证研究表明,关系专用性投资通过关系建构,有助于本土代工企业的关系租金攫取,具有“升级”效应;但同时会导致权力销蚀,存在“伪升级”效应。当代工能力具有较高的专有性水平时,升级效应处于主导,反之则伪升级效应处于主导。结论表明,本土代工企业在全球价值链嵌入中进行关系专用性投资,只能锦上添花、不能雪中送炭。这一结论澄清了本土代工企业“升级”与“伪升级”争议,对代工企业升级的战略决策具有直接应用价值。     

Deception and defection from ethical norms in market relationships: a general analytic framework

Market relationships built on trust and governed by commonly accepted ethical norms are generally viewed as economically positive and beneficial to both parties; however, such relationships are occasionally the situs of a variety of unexpected and ethically questionable behaviours. This study examines the narratives provided by participants who share their experience as an exchange partner in a market relationship or as a close observer of an exchange partner in a market relationship to identify the use of short‐term deceptions and ethics defections in managing these relationships. The data demonstrate a number of instances in which one exchange partner is willing to deceive another. Situations identified include deceiving current customers, new customers, current suppliers, governmental bodies, and employees and managers for the purposes of: protecting an existing relationship, pursuing a new relationship, ensuring product or service quality, and exerting control over a relationship. This research develops a general analytic framework for the occurrence of deception and defection from ethical norms in market relationships from elements of the study participants' narrative reports. This framework can be used by future researchers to design studies that examine the specific antecedents of these behaviours.     

Channel relationship factors in cross-cultural contexts: Antecedents of satisfaction in a retail setting

Recent meta-analyses of the channels relationship literature show gaps in the research. The current study seeks to fill several of those gaps by examining the effect of cultural characteristics on relational constructs in retail buyer-supplier settings in the U.S. and Japan. The study also investigates the under-researched construct of conflict, and the role conflict plays in mediating relationship satisfaction. Results of the analysis of structural equation models indicate that for the antecedents of conflict, little differences exist between cultures. However, differences in how those antecedents affect conflict and conflict's role as a mediator are elucidated.     

The Impact of Environmental Uncertainty and Asset Specificity on the Degree of Buyer-Supplier Commitment

When manufacturers purchase products from suppliers, the types of relationships they establish may depend on many factors. These relationships can range from formalized, extensive contractual obligations to discrete individual purchases. This study investigates the potential determinants of where on this continuum of commitment the relationship lies. These determinants include uncertainty in both the supplier market and the buyer's customer market, the investment in transaction specific assets by both buyer and supplier, and the investment in product specific assets. Results indicate that market diversity, supplier concentration, investment in product specific assets, and the supplier's investment in transaction specific assets are potential reasons for higher levels of buyer-supplier commitment.     

Inter-organizational cooperation in buyer-supplier relationships: Both perspectives

Most empirical investigations of inter-organizational cooperation within channel dyads investigate the phenomenon from the perspective of only one partner. However, because investigating from both partners' perspectives is important especially when interdependencies exist between the channel partners, this study attempts to examine both perspectives in buyer-supplier relationships and explain why differences, if any, arise. The data that this study requires were collected from buyers responsible for supplier relationships in a Korean telecommunication service provider and from their partners. The results show that switching costs and inter-organizational trust are significant determinants of cooperation for buyers; technological uncertainty and the reciprocity of the relationship are significant determinants for the suppliers. In both sample sets, goal consistency significantly affects inter-firm cooperation.     

Host country institutional pressures and cross-border relationship governance

This study examines the effects of transaction cost, strategic positioning and institutional factors on the governance of international relationships. A firm's product differentiation strategy and export market ethnocentricity are identified as antecedents to specific investments, whereas state influences in the export market are identified as an antecedent to relationship governance. The hypotheses are empirically tested on a sample of 160 international business-to-business relationships. The results show that both product differentiation and export market ethnocentricity impact the level of specific investments, and state influences make it difficult to use both formal contracting and relational norms as governance mechanisms. Furthermore, specific investments made by the supplier are positively related to formal contracting, and product differentiation is positively related to relational norms.     

Strategic agility,dynamic relational capability and trust among SMEs in transitional economies

Rapid growth and urbanizing populations are transforming Africa, despite environmental turbulence, uncertainty and relational complexity. Research highlights how small firms rely upon trust-based buyer-supplier relationships in such contexts. Our study adopts a micro-foundational perspective and builds on dynamic capabilities literature and psychological trust theory. Our conceptual model shows how relational dimensions (i.e. communication, social bonds, and knowledge), influenced by meta-capabilities (strategic sensitivity, resource fluidity and leadership unity) embedded in micro-foundational activities build trust in small business cross-border buyer-seller relationships to support dynamic relational capability and enhance strategic agility in transitional economies.     

Manufacturing technology and the supply chain: Linking buyer-supplier relationships and advanced manufacturing technology

The literature on advanced manufacturing technology (AMT) implementation and buyer-supplier relationships is reviewed, and the links between the two factors are examined. These links are summarized and highlighted through a causal influence diagram. A major influence is focused on, namely that the adoption of AMT causes adopters to change their relationships with their parts suppliers to more collaborative forms. Empirical data drawn from a recent survey of the Turkish automotive industry demonstrate support for this major influence.     

Purchasing power

The concept of power in commercial exchange relationships is defined in terms of changes in purchasing and product specifications. A distinction is drawn between actual and potential purchasing power. The relationship between the interdependent nature of buyer-supplier relations, the attractiveness and availability of the resources offered by both suppliers and buyers, and the factors affecting the ability of buyers to convert potential into actual power, are explored.     

Mutual adaptation in buyer-supplier relationships

In buyer-supplier relationships, effective partnerships require mutual adaptation to execute strategies effectively. Using LISREL, we test a model of relational exchange factors that includes dependence, joint action and trust and their influence on the mutual adaptation of supplier and buyer firms in the U.S. automotive industry. The results of the study indicate that both economic and social dimensions of the relationship impact mutual adaptation, but that these two are not necessarily complementary. Specifically, supplier adaptation is negatively impacted by trust between supplier and buyer, but positively impacted by dependence and joint action. Buyer adaptation, on the other hand, is positively impacted by trust between the two, joint action and the adaptation undertaken by the supplier. The negative relationship between trust and supplier adaptation may be symptomatic of deeper issues in the U.S. automotive industry that should merit concern.     

How to reduce coordination failure in option-dated forward contracts: the compensatory role of relational governance

The aim of this study is to explore the relationship between prior ties and informal norms in achieving interorganizational coordination as an outcome of exchange efficiency. The data from the hotels operating in the Antalya tourism region show that prior ties reduce the potential for unfair rents from ex post renegotiations in flexible contractual settings. Hence, informal norms from prior ties result in enhancing efficiency of interorganizational exchange relationships with a consistent and effective management of operational risks from external environment. Overall, this study contributes to the governance literature by exemplifying compensatory role of relational governance from prior ties in coordination failure of option-dated forward contracts.     

You are charging your friend a fee? The influence of brand relationship norms on consumer judgments

Prior research has found that consumer interpersonal relationship norms influence how consumers view marketing actions by a brand. Exchange relationships (e.g. payment for benefit received) and communal relationships (e.g. altruistic concern for a partner’s welfare) were studied. Violating relationship norms negatively affected consumer judgments. We replicate and extend this finding. We show general support for the proposed interaction across a range of dependent measures, manipulations and with an Australian sample. We also show that the negative effects of norm transgression by charging consumers a fee can be attenuated when the fee is modest and that exchange participants can also regard fees as violations of relationship norms.