Evaluating buyer–supplier relationship–performance spirals: A longitudinal study

Abstract Interorganizational relationships and their impact on firm performance have been studied at length in various business literatures, with many studies predicting that in dyadic exchange contexts strong relationships should lead to better performance for both parties involved. However, some studies reverse this causal ordering, arguing that the performance gains attributed to prior relational activity predict the strength of the dyadic relationship in future time periods. While supported, both of these perspectives on relationship strength/performance dynamics are incomplete, as the research studies are only cross-sectional snapshots of the phenomenon. We remedy this gap in the existing literature by examining the dynamic cyclical linkage between relationship strength and performance of a buyer–supplier relationship in a longitudinal setting, using a relationship strength–performance spiral model. Results of testing a multiyear sample of 323 buyer–supplier relationships in the construction industry indicate not only that relationships tend to spiral positively following relationship initiation, but also that positive relationship spirals will self-correct following multiple associations of alternating increases. These findings advance theory on buyer–supplier relationships, and provide insight for companies looking to improve supply chain outcomes through superior relationship management.

[1]  R. Johnston,et al.  Operational performance gaps in business relationships , 2005 .

[2]  Beverly B. Tyler,et al.  Antecedents and consequences of social capital on buyer performance improvement , 2008 .

[3]  F. Webster.  The Changing Role of Marketing in the Corporation , 1992 .

[4]  Thomas O. Toole,et al.  Classifying relationship structures: relationship strength in industrial markets , 2000 .

[5]  J. Singer,et al.  Applied Longitudinal Data Analysis , 2003 .

[6]  Robert G. Eccles,et al.  Bureaucratic versus Craft Administration: The Relationship of Market Structure to the Construction Firm. , 1981 .

[7]  Christine M. Pearson,et al.  Tit for Tat? The Spiraling Effect of Incivility in the Workplace , 1999 .

[8]  K. Weick.  The social psychology of organizing , 1969 .

[9]  Rohit Verma,et al.  Supplier-Switching Inertia and Competitive Asymmetry: A Demand-Side Perspective , 2006, Decis. Sci..

[10]  Shankar Ganesan.  Determinants of Long-Term Orientation in Buyer-Seller Relationships , 1994 .

[11]  Kyle J. Mayer,et al.  Relationships and Hybrid Contracts: An Analysis of Contract Choice in Information Technology , 2004 .

[12]  Michael D. Michalisin,et al.  Toward a Typology of Buyer-Supplier Relationships: A Study of the Computer Industry , 2008, Decis. Sci..

[13]  J. Scott Armstrong,et al.  Estimating nonresponse bias in mail surveys. , 1977 .

[14]  Antonio Capaldo.  Network Structure and Innovation: The Leveraging of a Dual Network as a Distinctive Relational Capability , 2006 .

[15]  K. Goffin,et al.  An exploratory study of ‘close’ supplier–manufacturer relationships , 2006 .

[16]  Denzil G. Fiebig,et al.  Seemingly Unrelated Regression , 2007 .

[17]  Kyle J. Mayer,et al.  Complementarity and Evolution of Contractual Provisions: An Empirical Study of IT Services Contracts , 2007, Organ. Sci..

[18]  P. Cousins,et al.  THE IMPLICATIONS OF SOCIALIZATION AND INTEGRATION IN SUPPLY CHAIN MANAGEMENT , 2006 .

[19]  R. Handfield,et al.  Creating supply chain relational capital: The impact of formal and informal socialization processes , 2006 .

[20]  Elliot Rabinovich,et al.  Why do Internet commerce firms incorporate logistics service providers in their distribution channels?: The role of transaction costs and network strength , 2007 .

[21]  Daniel R. Krause,et al.  The relationships between supplier development, commitment, social capital accumulation and performance improvement , 2007 .

[22]  R. Gulati,et al.  Where Do Interorganizational Networks Come From?1 , 1999, American Journal of Sociology.

[23]  F. Dwyer,et al.  Developing Buyer-Seller Relationships: , 1987 .

[24]  B. Uzzi,et al.  Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness , 1997 .

[25]  P. Adler,et al.  Social Capital: Prospects for a New Concept , 2002 .

[26]  Robert W. Palmatier,et al.  A Comparative Longitudinal Analysis of Theoretical Perspectives of Interorganizational Relationship Performance , 2007 .

[27]  P. V. Marsden,et al.  Measuring Tie Strength , 1984 .

[28]  G. Day.  Managing market relationships , 2000 .

[29]  Sandy D. Jap,et al.  Control Mechanisms and the Relationship Life Cycle: Implications for Safeguarding Specific Investments and Developing Commitment , 2000 .

[30]  John T. Mentzer,et al.  AN EMPIRICAL EXAMINATION OF RELATIONSHIP MAGNITUDE , 2006 .

[31]  Jule B. Gassenheimer,et al.  The role of economic value, social value, and perceptions of fairness in interorganizational relationship retention decisions , 1998 .

[32]  G. Labianca,et al.  A Multilevel Model of Group Social Capital , 2006 .

[33]  L. Hayduk,et al.  Latent Variable Interaction and Quadratic Effect Estimation: A Two-Step Technique Using Structural Equation Analysis , 1996 .

[34]  Daniel J. Brass,et al.  Efficacy-Performing Spirals: A Multilevel Perspective , 1995 .

[35]  A. Parasuraman,et al.  Marketing Services: Competing Through Quality , 1991 .

[36]  Fred O. Walumbwa,et al.  RETRACTED: The relationship between brokers’ influence, strength of ties and NPD project outcomes in innovation-driven horizontal networks , 2008 .

[37]  R. Gulati,et al.  Dependence Asymmetry and Joint Dependence in Interorganizational Relationships: Effects of Embeddedness on a Manufacturer's Performance in Procurement Relationships , 2007 .

[38]  N. Lin.  Social Capital: Frontmatter , 2001 .

[39]  James M. Barry,et al.  A cross‐cultural examination of relationship strength in B2B services , 2008 .

[40]  Joseph P. Cannon,et al.  An Examination of the Nature of Trust in Buyer–Seller Relationships: , 1997 .

[41]  S. Ghoshal,et al.  Social Capital, Intellectual Capital, and the Organizational Advantage , 1998 .

[42]  Jan B. Heide.  Interorganizational Governance in Marketing Channels , 1994 .

[43]  John T. Gardner,et al.  Developing and Implementing Supply Chain Partnerships , 1996 .

[44]  Matthew S. Kraatz.  Learning by Association? Interorganizational Networks and Adaptation to Environmental Change , 1998 .

[45]  Chad W. Autry,et al.  SUPPLY CHAIN CAPITAL: THE IMPACT OF STRUCTURAL AND RELATIONAL LINKAGES ON FIRM EXECUTION AND INNOVATION , 2008 .

[46]  Blake E. Ashforth,et al.  Petty Tyranny in Organizations , 1994 .

[47]  F. Ian Stuart,et al.  Supplier alliance success and failure: a longitudinal dyadic perspective , 1997 .

[48]  S. Hunt,et al.  The Commitment-Trust Theory of Relationship Marketing , 1994 .

[49]  H. Yen,et al.  Determinants of supplier‐retailer collaboration: evidence from an international study , 2006 .

[50]  Rafik I. Beekun,et al.  Organization Structure from a Loose Coupling Perspective: A Multidimensional Approach , 2001, Decis. Sci..

[51]  John T. Mentzer,et al.  EXPLORING THE DRIVERS OF INTERORGANIZATIONAL RELATIONSHIP MAGNITUDE , 2005 .

[52]  Liliana L. Bove,et al.  Customer relationships with service personnel: do we measure closeness, quality or strength? , 2001 .

[53]  Ian N Caddy,et al.  Definition problems and a general systems theory perspective in supply chain management , 2006 .

[54]  R. Gulati.  Does Familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances , 1995 .

[55]  P. Daugherty,et al.  SUPPLY CHAIN COLLABORATION AND LOGISTICAL SERVICE PERFORMANCE , 2001 .

[56]  C. Moorman,et al.  The Acquisition and Utilization of Information in New Product Alliances: A Strength-of-Ties Perspective , 2001 .

[57]  Michael Masuch,et al.  Vicious circles in organizations. , 1985 .

[58]  B. Uzzi,et al.  The Sources and Consequences of Embeddedness for the Economic Performance of Organizations: The Network Effect , 1996 .

[59]  Justin W. Webb,et al.  A multi‐theoretic perspective on trust and power in strategic supply chains , 2007 .

[60]  Gina Colarelli O'Connor,et al.  Major Innovation as a Dynamic Capability: A Systems Approach* , 2008 .

[61]  Fremont E. Kast,et al.  General Systems Theory: Applications for Organization and Management , 1972 .

[62]  Daniel R. Krause,et al.  BUYER–SUPPLIER RELATIONSHIPS: DERIVED VALUE OVER TWO DECADES , 2008 .

[63]  Jane M. Howell,et al.  Efficacy-Performance Spirals: An Empirical Test , 2000 .

[64]  Ian Wilkinson,et al.  The principle of the conservation of business relationship energy: or many kinds of new beginnings , 2002 .

[65]  Scott B. MacKenzie,et al.  Common method biases in behavioral research: a critical review of the literature and recommended remedies. , 2003, The Journal of applied psychology.

[66]  Jan B. Heide,et al.  Performance implications of buyer-supplier relationships in industrial markets: A transaction cost explanation , 1995 .

[67]  C. Medlin.  Interaction in business relationships: A time perspective , 2004 .

[68]  Andreas Eggert,et al.  Value creation in the relationship life cycle: A quasi-longitudinal analysis , 2006 .

[69]  D. Hambrick,et al.  Compositional gaps and downward spirals in international joint venture management groups , 2001 .

[70]  Dean M. Behrens,et al.  Redundant governance structures: an analysis of structural and relational embeddedness in the steel and semiconductor industries , 2000 .

[71]  A. Zellner.  An Efficient Method of Estimating Seemingly Unrelated Regressions and Tests for Aggregation Bias , 1962 .

[72]  N. Lin.  Social Capital: A Theory of Social Structure and Action , 2001 .

[73]  Richard L. Flight,et al.  A market-level model of relationship regulation , 2008 .

[74]  S. Hunt,et al.  The Comparative Advantage Theory of Competition , 1995 .

[75]  Andrea L. Larson.  Network Dyads in Entrepreneurial Settings: A Study of the Governance of Exchange Relationships , 1992 .

[76]  Mark S. Granovetter.  The Strength of Weak Ties , 1973, American Journal of Sociology.