Jakki Mohr; Robert Spekman -- Characteristics of Partnership Success- Partnership Attributes,...

Strategic Management Journal, Vol. 15, 135-152 (I 994)

/ CHARACTERISTICS OF PARTNERSHIP SUCCESS: PARTNERSHIP ATTRIBUTES, COMMUNICATION BEHAVIOR, AND CONFLICT RESOLUTION TECHNIQUES JAKKI MOHR College of Business and Administration, University of Colorado, Boulder, Colorado, U.S.A.

Darden Graduate School of Business Administration, University of Virginia, Charlottesville, Virginia, U.S.A.

I-

T- \ ROBERT SPEKMAN

The formation of partnerships between firms is becoming an increasingly common way for firms to find and maintain competitive advantage. While the antecedents of partnership formation and the characteristics of the resulting cooperative working relationship have been explored in the literature, an understanding of characteristics associated with partnership success is lacking. Such an understanding is important in reconciling the prescriptions to form partnerships with the reality that a majority of such partnerships do not succeed. We hypothesize that partnership attributes, communication behavior, and conflict resolution techniques are related to indicators of partnership success (satisfaction and sales volume in the relationship). The hypotheses are tested with vertical partnerships between manufacturers and dealers. Results indicate that the primary characteristics of partnership success are: partnership attributes of commitment, coordination, and trust; communication quality and participation; and the conflict resolution technique of joint problem solving. The findings offer insight into how to better manage these relationships to ensure success.

PURPOSE

To begin, partnerships are defined as purposive strategic relationships between independent firms who share compatible goals, strive for mutual benefit, and acknowledge a high level of mutual interdependence. They join efforts to achieve goals that each firm, acting alone, could not attain easily. The formation of these alliances and partnerships is motivated primarily to gain competitive advantage in the marketplace (Bleeke

Key words: cation

Strategic partnership, success, communi-

and Ernst, 1991; Powell, 1990). Partnerships can afford a firm access to new technologies or markets; the ability to provide a wider range of products/services; economies of scale in joint research and/or production; access to knowledge beyond the firm's boundaries; sharing of risks; and access to complementary skills (Powell, 1987: 71). However, prescriptions for the formation of such partnerships often overlook the drawbacks/ hazards of such relationships. For example, increasing complexity, loss of autonomy and information asymmetry (Provan, 1984; William- son, 1975) may accompany partnering relationships.

Although the number of attempted partnerships

CCC 01 43-2095/94/020135-18 0 1994 by John Wiley & Sons, Ltd.

Received 31 July 1991 Final revision received 2 June 1993

136 1. Mohr and R . Spekman

has grown almost geometrically in recent years, the rates of success are rather low (Harrigan, 1988; Kanter, 1988; Levine and Byrne, 1986). In fact, while the formation of partnering relationships is often viewed as a panacea for an individual firm’s competitive woes, the prescrip- tion to ‘form an alliance’ to gain competitive advantage overlooks the fact that many strategic partnerships do not succeed. Unfortunately, the academic literature has been slow to embrace this important managerial concern (i.e., Day and Klein, 1987), and little guidance has emerged on how to better ensure partnership success. Knowledge of factors that are associated with partnership success could aid in the selection of partners as well as in the on-going management of the partnership.

The purpose of this paper, then, is to address the characteristics of partnerships that are associated with its success. First, we provide a brief overview of the literature on strategic alliances. Then, we build a model of partnership success. We empirically test our model in the context of vertical partnerships in the computer industry. Finally, conclusions for managers and researchers are discussed.

LITERATURE REVIEW

Research on strategic alliances has posited theories addressing the reasons why firms enter into closer business relationships. For example, transactions costs analysis (Williamson, 1975, 1985), competitive strategy (i.e., Porter, 1980), resource dependence (Pfeffer and Salancik, 1978; Thompson, 1967), political economy (Benson, 1975; Stern and Reve, 1980), and social exchange theory (e.g., Anderson and Narus, 1984) each make predictions about when partnerships will be formed. Implicit in this research is the assumption that, when used under the appropriate circumstances and environmental conditions, partnerships will be successful. Yet, as mentioned previously, a large percentage of these strategic partnerships do not succeed (e.g., Harrigan,

might be viewed as a function of continuation (e.g., Harrigan, 1988), relationship longevity (vs. dissolution) may not accurately capture partnership success-some partnerships are pur- posively dissolved after a period of time (Hamel, Doz, and Prahalad, 1989). In our model we use two indicators of partnership success: an objective indicator (sales volume flowing between dyadic partners) and an affective measure (satisfaction of one party with the other).’

The objective indicator grows from the belief that strategic partnerships are formed to achieve a set of goals (e.g., to enhance a company’s competitive position). The attainment of such goals can provide one indicator of relationship success. For example, in a partnership between firms in a distribution channel (e.g., Johnston and Lawrence, 1988; Narus and Anderson, 1987), manufacturers form partnerships with downstream channel members for a variety of reasons, including the ability to increase local market penetration. Manufacturers working in concert with these channel partners are able to provide better service to customers, thereby increasing their sales base in a particular geo- graphic region.

The affective indicator (satisfaction) is based on the notion that success is determined, in part, by how well the partnership achieves the performance expectations set by the partners (e.g., Anderson and Narus, 1990). A partnership which generates satisfaction exists when performance expectations have been achieved.

THEORETICAL FRAMEWORK

Our framework is based upon the following two premises. First, partnerships tend to exhibit behavioral characteristics that distinguish these more intimate relationships from more traditional (conventional) business relationships (Borys and Jemison, 1989). Second, while partnerships in general tend to exhibit these behavioral characteristics, more successful partnerships will exhibit

1985, 1988). Given this inconsistency, one must question what factors are associated with partner- shiD success.

I We recognize that these two indicators of partnership success, while being applicable to many partnerships, may not be aDDhcable to all oartnershbs. As discussed subseouentlv in . . . ,

Developing a model of partnership begs the question Of what partnership

the Methods section, these two indicators are context- dependent, tailored for the specific empirical context for this studv-vertical DartnershiDs between manufacturers and

means. Although success in strategic partnerships dealers.

Characteristics of Partnership Success 137

these characteristics with more intensity than less successful partnerships.

These behavioral characteristics might include attributes of the partnership, such as commitment and trust (e.g., Salmond and Spekman, 1986); communication behaviors, such as information sharing between the partners (e.g., Mohr and Nevin, 1990); and conflict resolution techniques, which tend towards joint problem solving, rather than domination or ignoring the problems (e.g., Borys and Jemison, 1989). Figure 1 serves as an organizing framework for both the theoretical discussion and the subsequent testing of hypotheses.

Attributes of the partnership

Kanter (1988) suggests that strategic partnerships result in blurred boundaries between firms in which there emerge close ties that bind the two parties. John (1984) describes the long and sticky nature of the relationship between firms that serves to reduce the potential for opportunistic behavior. In such relationships there exists a set of process-related constructs that help guide the

flow of information between partners, manage the depth and breadth of interaction, and capture the complex and dynamic interchange between partners. Extant literature has focused on commitment, coordination, interdependence and trust as important attributes of partnerships (e.g., Anderson and Narus, 1990; Day and Klein, 1987; Dwyer, Schurr, and Oh, 1987; Frazier, Spekman, and O’Neal, 1988; Salmond and Spekman, 1986). The existence of these attributes implies that both partners acknowledge their mutual dependence and their willingness to work for the survival of the relationship. Should one party act opportunistically, the relationship will suffer and both will feel the negative consequences.

Commitment

Commitment refers to the willingness of trading partners to exert effort on behalf of the relationship (Porter ec al., 1974). It suggests a future orientation in which partners attempt to build a relationship that can weather unanticipated problems. A high level of commitment provides the context in which both parties can achieve

Attributes of the Partnership

Success of Partnership - Satisfaction - Dyadic Sales

1

- Commitment - Coordination - Interdependence - Trust

Communication Behavior - Quality - Information Sharing - Participation 1

-Joint Problem Solving - Persuasion - Smoothing - Domination - Harsh Words - Arbitration

I

Figure 1. Factors associated with partnership success

138 J . Mohr and R . Spekman

individual and joint goals without raising the specter of opportunistic behavior (e.g., Cum- mings, 1984). Because more committed partners will exert effort and balance short-term problems with long-term goal achievement, higher levels of commitment are expected to be associated with partnership success (Angle and Perry, 1981).

Coordination

Coordination is related to boundary definition and reflects the set of tasks each party expects the other to perform. Narus and Anderson (1987) suggest that successful working partnerships are marked by coordinated actions directed at mutual objectives that are consistent across organizations. Pfeffer and Salancik (1978) suggest that stability in an uncertain environment can be achieved via greater coordination. Without high levels of coordination, Just-in-Time processes fail, production stops, and any planned mutual advantage cannot be achieved.

Interdependence

As firms join forces to achieve mutually beneficial goals, they acknowledge that each is dependent on the other. This perspective flows directly from an exchange paradigm (e.g., Cook, 1977). Interdependence results from a relationship in which both firms perceive mutual benefits from interacting (e.g., Levine and White, 1962) and in which any loss of autonomy will be equitably compensated through the expected gains (Cummings, 1984). Both parties recognize that the advantages of interdependence provide benefits greater than either could attain singly.

Trust

Pruitt (1981) indicates that trust (i.e., the belief that a party’s word is reliable and that a party will fulfill its obligation in an exchange) is highly related to firms’ desires to collaborate. Williamson (1985) states that, other things being equal, exchange relationships featuring trust will be able to manage greater stress and will display greater adaptability. Zand (1972) contends that the lack of trust will be deleterious to information exchange, to reciprocity of influence, and will diminish the effectiveness of joint problem solving. Anderson and Narus (1990) add credence to the above and

suggest that once trust is established, firms learn that joint efforts will lead to outcomes that exceed what the firm would achieve had it acted solely in its own best interests.

In sum, the literature cited above suggests that more successful partnerships are expected to be characterized by higher levels of commitment, coordination, interdependence and trust than are less successful partnerships. This can be stated more formally by the following hypothesis.

HI: More successful partnerships, compared with less successful partnerships, exhibit higher levels of: a. commitment b . coordination c. interdependence d . trust.

Communication behavior

Because communication processes underlie most aspects of organizational functioning, communication behavior is critical to organizational success (Kapp and Barnett, 1983; Mohr and Nevin, 1990; Snyder and Morris, 1984). In order to achieve the benefits of collaboration, effective communications between partners are essential (Cummings, 1984). Communication captures the utility of the information exchanged and is deemed to be a key indicant of the partnership’s vitality. Three aspects of communication behavior are discussed here: communication quality, extent of information sharing between partners, and participation in planning and goal setting.

Communication quality

Communication quality is a key aspect of information transmission (Jablin et al . , 1987). Quality includes such aspects as the accuracy, timeliness, adequacy, and credibility of information exchanged (Daft and Lengel, 1986; Huber and Daft, 1987; Stohl and Redding, 1987). Across the range of potential partnerships, communication quality is a key factor of success. Timely, accurate, and relevant information is essential if the goals of the partnership are to be achieved. MacNeil(l981) and others acknowledge the importance of honest and open lines of communication to the continued growth of close ties between trading partners.


Information sharing

Information sharing refers to the extent to which critical, often proprietary, information is communicated to one’s partner. Huber and Daft (1987) report that closer ties result in more frequent and more relevant information exchanges between high performing partners. By sharing information and by being knowledgeable about each other’s business, partners are able to act independently in maintaining the relationship over time. The systematic availability of information allows people to complete tasks more effectively (Guetzkow, 1965), is associated with increased levels of satisfaction (Schuler, 1979), and is an important predictor of partnership success (Devlin and Bleackley, 1988).

Participation

Participation refers to the extent to which partners engage jointly in planning and goal setting. When one partner’s actions influence the ability of the other to effectively compete, the need for participation in specifying roles, responsibilities, and expectations increases. And- erson, Lodish and Weitz (1987) and Dwyer and Oh (1988) suggest that input to decisions and goal formulation are important aspects of participation that help partnerships succeed. Driscoll (1978) also found that participation in decision-making is associated with satisfaction. Joint planning allows mutual expectations to be established and cooperative efforts to be specified.

In sum, more successful partnerships are expected to exhibit higher levels of communication quality, more information sharing between partners, and more participation in planning and goal setting than less successful partnerships. Stated more formally, we hypothesize that:

H2: More successful partnerships, compared with less successful partnerships, will exhibit higher levels of: a. communication quality 6 . information sharing c. participation in planning.

Conflict resolution techniques

Conflict often exists in interorganizational relationships due to the inherent interdependen-

cies between parties. Given that a certain amount of conflict is expected, an understanding of how such conflict is resolved is important (Borys and Jemison, 1989). The impact of conflict resolution on the relationship can be productive or destructive (Assael, 1969; Deutsch, 1969). Thus, the manner in which partners resolve conflict has implications for partnership success.

Firms in a strategic partnership are motivated to engage in joint problem solving since they are, by definition, linked in order to manage an environment that is more uncertain and/or turbulent than each alone can control (Cummings, 1984) and integrative outcomes satisfy more fully the needs and concerns of both parties (Thomas, 1976). When parties engage in joint problem solving, a mutually satisfactory solution may be reached, thereby enhancing partnership success. Partners often attempt to persuade each other to adopt particular solutions to the conflict situation. These persuasive attempts will generally be more constructive than the use of coercion or domination (Deutsch, 1969). The use of destructive conflict resolution techniques (e.g., domination, confrontation) are seen as counter-productive and are very likely to strain the fabric of the partnership.

In some partnerships, the method of conflict resolution is institutionalized, and third party arbitration is sought. While such mediation can be helpful in producing beneficial outcomes (Anderson and Narus, 1990), ‘internal resolution’ (i.e., not relying on outside parties) shows a greater promise of long-term success (Assael, 1969: 580). While outside arbitration may be effective for a particular conflict episode, ongoing use of arbitrators may indicate inherent problems in the relationship.

Other conflict resolution techniques (e.g., smoothing over or ignorindavoiding the issue) are somewhat at odds with the norms and values espoused in more successful strategic partnerships (see Ruekert and Walker, 1987). Such techniques do not ‘fit’ with the more proactive tone of a partnership in which problems of one party become problems affecting both parties. As a result, smoothing or avoiding fails to go to the root cause of the conflict and tends to undermine the partnership’s goal of mutual gain. Thus, we hypothesize that:

H3: More successful partnerships, compared with less successful partnerships, will exhibit:

140 J . Mohr and R. Spekman

a. higher use of constructive resolution techniques, including joint problem solving and persuasion b. lower use of destructive conflict resolution techniques including domination and harsh words c. lower use of conflict resolution techniques including outside arbitration, and smoothing1 avoiding issues.

METHOD Data collection: Context and sample

Although strategic partnerships can take many forms, including both horizontal and vertical relationships (Borys and Jemison, 1989), this study focused on vertical relationships between manufacturers and dealers (e.g., Anderson and Narus, 1990; Heide and John, 1990). While not all channel relationships are strategic partnerships, manufacturers and dealers often form bonds that transcend a more market-based set of transactions. These closer, more intimate, bonds are what separates these partnerships from a more transaction-based set of exchanges which are limited in scope and purpose. Partners have jointly aligned goals to accomplish mutually beneficial ends. They are linked in form and substance in ways that go beyond the more conventional flow of products and paper trail found in other manufacturer-retailer relationships. In fact, the trend towards partnerships in channels relationships appears to be quite pronounced (Johnston and Lawrence, 1988; Sethuraman, Anderson, and Narus, 1988).

The context selected for this study was the personal computer industry. As the market has matured, manufacturers have relied less on direct sales and more on dealer networks to help reach the vast market of small business customers (Bertrand, 1989; Business Week, 1989).* These manufacturers found that dealers in local markets were able to develop tailored solutions for specific market applications and to undertake the selling job, both more effectively and

* In recent years, mail order channels (e.g., Dell) have taken a portion of the PC market (Business Week, 1991). Nonetheless, retail channels still account for the majority of PC sales and even Dell has begun to distribute through retail channels.

efficiently. In addition, such dealer partnerships enabled manufacturers to retain some control over dealer strategies and provided more accurate and valuable ‘street-level’ market knowledge.

Although single-industry studies often lack generalizability, they do afford greater control over sources of extraneous variation due to industry characteristics, environmental noise, and the like (e.g., McDougall and Robinson, 1990; see also Spekman and Gronhaug, 1986). We have attempted to enhance the study’s internal validity, with full recognition that it is achieved with some loss in its external validity (Cook and Campbell, 1979).

The unit of analysis in this study was the relationship between a computer dealer and one of its suppliers (i.e., manufacturers). We focused on the dealer’s perceptions of the relationship with a ‘referent’ manufacturer (described below). While dyadic data (collected from both the dealer and the manufacturers) would have been desirable, both time and expense considerations necessitated focusing on one side of the dyad.

A list of computer dealers was obtained from the Association of Better Computer Dealers, the personal computer industry trade association. Each dealer was contacted by telephone prior to mailing a questionnaire in order to identify the ownerhanager (the key informant), to solicit cooperation for the study, and to assign a referent manufacturer. One informant from the dealer firm was deemed to be appropriate (see Ander- son, 1985; Campbell, 1955) since the owner1 manager is typically the top decision maker within the dealer firm; has key contact with the manufacturer with respect to strategic decisions (as opposed to contact for technical support, etc.); and, is the focal point for these small businesses (average number of employees ranges from %34, Computer Reseller News, 1988). During the initial phone contact, dealers were randomly assigned a referent manufacturer about whom the questionnaire centered. This random assignment ensured that dealer respondents did not pick either their most or least favored (i.e., best or worst) manufacturer as the referent.

Five hundred fifty-seven surveys were mailed, with follow-up letters 4 weeks later. A total of 140 dealers returned surveys (25% response rate). This response rate was lower than expected, and likely due to the lengthy nature of the questionnaire and the busy time of the year at


which it was mailed (November-December). Nonetheless, the response rate is quite acceptable and is consistent with the rate found in other studies (cf. Pearce and Zahra, 1991; Weiss and Anderson, 1992). Sixteen surveys were eliminated from analysis due to incomplete responses, leaving a total of 124 surveys for analysis.

An ideal assessment of nonresponse bias compares characteristics of respondents to characteristics of the population from which the sample was drawn, in this case, the trade association membership. However, this trade association did not keep detailed records on their membership. In fact, it lacked meaningful information on even basic data, such as dealer size and sales volume. Absent this comparison base, we assessed nonresponse bias by compar- ing early to late respondents, as suggested by Armstrong and Overton (1977). They argue that late respondents are more representative of those in the sample who did not respond than are early respondents. This comparison indicated no significant differences between early and late respondents on characteristics such as sales volume and length of relationship with the referent manufacturer. Early respondents were, however, slightly smaller than later respondents in terms of number of employees ( t = -2.36, p < 0.02) and total sales volume ( t = -1.68, p < 0.10). Based on these results, nonresponse bias did not appear to present a problem in testing our framework.

Five of the dealers who responded to the survey indicated that they were owned by the manufacturer (i.e., Heath Zenith, Radio Shack). Because vertical integration is an alternative governance form to partnerships (Achrol, Scheer, and Stern, 1990; Harrigan, 1985) these five dealers were omitted from data analysis. Additionally, dealers who did not deal directly with the manufacturer (i .e., purchased from distributors) were also omitted from the data analysis (n = 17). The remaining sample (n = 102) was comprised of dealers with an average of 24 employees, and total monthly sales of $1.15 million. These dealers reported on relationships with the following vendors: IBM (n = 21), Apple (n = 21), Compaq (n = 14), Hewlett Packard (n = 7), Epson (n = 6), NEC (n = 5) , Hyundai (n = 4), with the remaining 24 dealers responding on 16 manufacturers. The average length of these trading relationships was 3.87 years.

Measurement

All measures were pretested in a series of personal interviews with computer dealers in which the items were revised iteratively until no further changes were suggested. The Appendix lists items used to measure each of the constructs. Reliability analysis was conducted and items with low item-to-total correlations were deleted. Cronbach’s alphas were computed, and all scales (with one exception, as noted) exceeded Nunnally’s (1978) reliability guidelines of 0.7 or above. The one exception, Information Sharing, had a Chronbach alpha of 0.68, which was deemed acceptable to further analysis. Principal component factor analyses with varimax rotations also were conducted for the variables in each hyp~thesis.~ Through this process, measures retained for the analysis exhibit favorable reliability, as well as convergent and discriminant validity (Churchill, 1979). Table 1 lists summary scale statistics.

Success of the partnership

Because vertical partnerships in the computer industry are formed in order to gain competitive advantage by more effectively and efficiently selling product, dealer sales volume of the referent manufacturer’s product served as one indicator of partnership success. In a vertical partnership one would expect that closer ties between the manufacturer and the dealer would result in the dealer selling more of that particular manufacturer’s product.

Two objective measures of sales volume were taken; one was a direct measure and one was indirectly computed from two other items. The first (direct) measure asked the dealer:

What is your approximate volume of sales of thh manufacturer’s product, on a monthly basis?

The second measure was computed based on the dealer’s response to two items:

0 What are the total monthly sales of your dealership?

0 Of the total sales of your dealership, what percent comes from this manufacturer’s product?

The factor analyses are available from the first author, upon request.

142 J. Mohr and R. Spekman

For this second measure, the two items were multiplied together as an indirect measure of the dealer’s monthly sales volume of the referent manufacturer’s product.

We felt that by assessing dyadic sales volume

Table 1. Summary statistics for measures

Variable Mean* Coefficient (S.D.) Alpha

Dependent variables Dyadic sales

Satisfaction with support from mftr Satisfaction with profit

Independent variables H1: Trust

Commitment

Coordination

Interdependence

H2: Communication quality

Participation

Information sharing

H3: Joint problem solving

Persuasion

Smoothing

Arbitration

Severe resolution****

Covariate Closeness

8.13*** 0.51** (2.13) 3.25 0.80

(0.81) 2.79 0.63**

(1.01)

3.28 0.75 (0.85) 4.27 0.81

(0.84) 3.10 0.68**

(0.86) 2.61 0.26**

(1.00) 3.52 0.91

(0.91) 2.53 0.84

(0.97) 3.57 0.68

(0.68)

3.28 NA (0.98) 3.37 NA

(0.83) 3.15 NA

(0.91) 1.40 NA

(0.79) 2.09 0.56**

(1.05)

3.27 0.83 (0.77)

* Means are scaled from 1-5, with 5 being highest. * * Correlation coefficient, rather than coefficient alpha, is reported for a 2-item scale. * * * Mean of sales (log) ranges from 3.92 to 13.69. See text in the Measurement Section for elaboration.

Severe Resolution includes the average of Harsh Words + Manufacturer Domination. NA Because Conflict Resolution Techniques were measured using composite indicators, which are comprised of single items, no reliability analysis is conducted (e.g. , Howell, 1987).

****

in two different ways, we would get a more accurate assessment of this variable. These sales measures were adjusted for the size of the dealer (in terms of the number of employees). This adjustment was necessary in order to remove dealer size as an alternative explanation for greater sales volume, and therefore, a more successful partnership. The two sales measures were transformed with a logarithmic transfor- mation to account for the increasing size of the categories (e.g., Govindarajan, 1988) and summed to form one measure, Dyadic Sales (see Table l) .4

An additional indicator of partnership success was also taken. Anderson and Narus (1990) suggested that satisfaction with aspects of the working relationship between partners can serve as a proxy for partnership success. Satisfaction/ dissatisfaction is a cognitive state and examines the adequacy of the rewards received through the relationship (e.g., Frazier, 1983). Hence, an additional indicator of success in this study examined one partner’s satisfaction with the other across several aspects of the relationship, ranging from the general nature of personal dealings, to the level of promotional support, to profitability (Ruekert and Churchill, 1984).

The factor analysis for the satisfaction items resulted in a two-factor solution. One factor, comprised of the two items tapping satisfaction with profit and margins, was termed ‘Satisfaction and Profit.’ The second factor, comprised of the remaining satisfaction items, was termed ‘Satisfaction with Manufacturer Support .’ Table 1 shows the relevant scale statistics and reliability coefficients of these two scales.

Attributes of the partnership

Commitment, coordination, and trust were each measured with 3-item scales. The Commitment and Trust scales exhibited acceptable reliabilities, as shown in Table 1. One of the coordination items had a low item-to-total correlation and was dropped from analysis; the remaining two items had an intercorrelation of r = 0.68 (p < 0.001). Interdependence was measured with a two item scale and examined the ease with which each

Note that the variable ‘Dyadic Sales’ is a scale and the values that it takes do not (and are not meant to) represent actual sales volume.


party could switch to a new trading partner (Phillips, 1981). While the intercorrelation between these two items was relatively low ( r = 0.26, p < 0.001), one would not necessarily expect both dealer and manufacturer dependence on the other to covary. In fact, it is possible that one party may find it easy to switch, while the other does not (see Spekman and Salmond, 1992). In any case, as the sum of these two items increases, so too does interdependence in the relationship.

All items exhibited high loadings on their respective factors, with only one item cross- loading (one coordination item on trust); however, in order to avoid using single-item measures this item was retained. The impact of this decision on the discriminant validity of trust and coordination must be kept in mind in interpreting the results.

Aspects of communication behavior

Communication quality was assessed with a 5-item scale; participation was measured with a 4-item scale and tapped the extent to which the dealer’s input was solicited by the manufacturer for planning purposes. Both of these measures exhibited good reliability and clean factor loadings.

Information sharing tapped the extent to which partners kept each other informed about important issues on a voluntary basis and was assessed with an 8-item scale. Two items were dropped during initial reliability assessment. In the initial factor analysis, the two items that assessed the manufacturer’s sharing of information with the dealer did not exhibit clean loadings and, in fact, loaded more strongly on the other two measures of communication behavior. Thus, these two items were dropped, and four items were retained for the dealer’s information sharing with the manufacturer (coefficient alpha = 0.68). The items for this measure loaded cleanly on one factor, and were retained in the analysis.

as a ‘check list,’ or composite scale, in which each item taps a different dimension of the construct. Hence, traditional reliability analysis is not appropriate. Four of these items (joint problem solving, persuasive attempts by either party, smoothing over the problem, and arbitration) were treated as unitary items. The remaining two items (harsh words and manufacturer domination) exhibited a relatively high intercorrelation (r = 0.56, the highest intercorrelation of the conflict resolution modes, the next highest at r = 0.45), and in the interest of parsimony, were summed and labeled Severe Conflict Resolution. Again, each variable loaded cleanly on its own factor.

Covariate

In testing the hypotheses, it was important to rule out alternative explanations for the findings, or other causal factors of partnership success. It was particularly important to establish that the independent variables (detailed above) were actually predictors of the success of the partnership, and not merely characteristics of partnerships in general. In order to control for this possibility, an additional measure was taken for the degree of closeness in the relationship. Such an analysis allows for partialing out the effects of partnerships in general (i.e., that they are closer relationships and thus exhibit more of the characteristics posited here to be predictors of partnership success) before testing the hypotheses for predictors of partnership success.

Varadarajan and Rajaratnam (1986) portray closeness as the proximity of the relationship as it pertains to joint programs and the ties that bind the working relationship between parties. Closeness, as operationalized here, reflects notions of joint action and shared norms and is consistent with work by Heide and John (1990) and MacNeil (1981). The four items comprising this scale loaded on one factor and had a coefficient alpha of 0.83.

Conflict resolution Multicollinearity

The measures for conflict resolution included six Correlation matrices were computed for the modes by which conflict could be resolved. These variables tested in each of the hypotheses. items were designed to cover a spectrum of Multicollinearity becomes a concern with high conflict resolution modes as described previously. intercorrelations among the independent vari- Howell (1987) refers to this type of mesaurement ables (Cohen and Cohen, 1983; Mason and


Perreault, 1991). For H1, only one pair-wise correlation was problematic, that between trust and coordination ( r = 0.56). The remaining correlations ranged from r = 0.04-0.37. For both H2 and H3, the pair-wise correlations among the independent variables ranged from r = 0.01-0.39. While these correlations indicate that multicollinearity is not a severe problem, the analysis for H1 was also conducted on 85 percent and 90 percent of the ample.^

RESULTS

The hypotheses were tested using multiple regression analysis. For each hypothesis,6 models were run separately for each of the dependent variables: satisfaction with manufacturer support, satisfaction with profit, and dyadic sales. While conducting analyses in this fashion may result in an inflated Type 1 error rate, this approach is consistent with other research (e.g., Kohli, 1989b). As an additional precaution, we also compared the findings with a multivariate multiple regression approach (e.g., Sinha, 1990). The multivariate statistics are also reported with each hypothesis. The multivariate findings are significant for all three hypotheses, with univari- ate tests confirming those found with standard regression techniques.

The handling of the covariate in the regression equations followed guidelines suggested by Cohen and Cohen (1983). As indicated, the covariate was added to the model before adding the independent variables in order to partial out its effects prior to hypothesis testing (see also the Change in F statistic reported in Tables 24) . The regression assumptions were tested for outliers and for normality of the residuals and revealed no problems.

These analyses are premised upon the notion that, if multicollinearity is present, beta coefficients are unstable. To the extent that the estimated coefficients are similar (i.e., remain stable) in sign and magnitude on subsets of the data, one can infer that multicollinearity is not affecting the results (cf. Kohli, 1989a). Hence, the hypotheses were tested three times--once on 100 percent of the sample, again on 85 percent of the sample, and a third time on 90 percent of the sample. The beta coefficients remained stable in each of the analyses, indicating that multicollinearity was likely not influencing the results.

We also ran the analyses in one overall regression equation. Results were similar to those presented here.

Hypothesis 1

Recall H1 posited that higher levels of commitment, coordination, trust, and interdependence are associated with more successful partnerships, compared to less successful partnerships. The results for H1 are shown in Table 2. The multivariate test was significant (Wilk’s Lambda = 7.68, p < 0.001). As Table 2 shows, commitment and coordination are positively associated with satisfaction with manufacturer support. Trust is significantly associated with satisfaction with profit. Predictors of dyadic sales include both commitment and coordination. Interdependence is not significantly related to any of the dependent variables.

Hypothesis 2

Recall H2 stated that higher levels of communication quality, participation, and information sharing are associated with more successful partnerships, compared to less successful partnerships. The multivariate test for H2 was significant (Wilk’s Lambda = 9.49, p < 0.001). Table 3 shows that as communication quality and participation are higher, satisfaction with manufacturer support is higher (participation at p < 0.10). Interestingly, as information sharing is higher, satisfaction with profit is lower. Participation is the only significant predictor of dyadic sales. Thus, H2 receives partial support.

Hypothesis 3

Hypothesis 3 stated that the use of constructive conflict resolution techniques is positively associated with more successful partnerships, compared to less successful partnerships, and that the use of destructive conflict resolution techniques is negatively associated with successful partnerships. The multivariate test for H3 was significant (Wilk’s Lambda = 4.03, p < 0.001). Table 4 shows that joint problem solving is significantly related to satisfaction with manufacturer support. Both severe resolution tactics (harsh words and domination) and smoothing over problems are negatively associated with satisfaction with profit, while arbitration is positively associated with satisfaction with profit (p < 0.10). The regression equation for dyadic sales as the dependent variable is not significant. Thus, H3 also receives partial support.


Table 2. Beta coefficients from regression analyses for H1

Dependent variables:

Satis. with mftr Satis. with profit Dyadic sales support (log)

Covariate: Closeness 0.57* * *

Independent variables: Commitment 0.22** Coordination 0.42*** Trust Interdependence

Change in F A

df 5/96

11.95* * *

R2 adjusted for df. 0.53***

0.39***

2.52*

5/96

0.19***

0.18

0.28** 0.32** - -

5.23***

5/96

0.16* * * A < 0.10; * p < 0.05; *'p < 0.01; *** p < 0.001; -nonsignificant ' The change in F-statistic shows the significance of the variance explained by the independent

variables after accounting for (partialing out) the variance explained by the covariate.

Table 3. Beta coefficients from regression analysis for H2


Satis. with mftr Satis. with profit Dyadic sales support (log)

Covariate: Closeness 0.57*** 0.39*** 0.18 *

Independent variables: Commun. quality 0.48*** - - Information sharing - -0.20* -

Change in F ~ I 13.79*** 3.08* 7.97***

Participation 0.14 * - 0.45***

df 4/97 4/97 4/97

R2 adjusted for df 0.51*** 0.19*** 0.19***

A

* < 0.10; * p < 0.05; * * p < 0.01; * * * p < 0.001; -nonsignificant The change in F-statistic shows the significance of the variance explained by the independent

variables afrer accounting for (partialing out) the variance explained by the covariate

DISCUSSION

The following variables were found to be significant in predicting the success of the partnership (either satisfaction or sales): coordination, commitment, trust, communication quality, information sharing, participation, joint problem solving, and avoiding the use of smoothing over problems or severe resolution tactics

(both negatively related to satisfaction with profit). Our research suggests that as these variables are present in greater amounts, the success of the partnership is likely to be greater. Interdependence, and persuasive tactics as a method to resolve conflict were found not to be predictors of partnership success.

The strong, consistent findings for coordination as a predictor of partnership success are similar to


Table 4. Beta coefficients from regression analysis for H3


Satis. with mftr Satis. with profit Dyadic sales SUPPO* (log)

~~ ~~

Covariate: Closeness

Independent variables: Joint problem solving Persuade Severe resolution Smooth Arbitration

Change in F ’

df

adjusted for df

0.57*** 0.39* * * 0.18

3.31*** 2.88* -

6/95 6/95 6195

0.39*** 0.22*** -

” p- < 0.10; * p < 0.05; * * p < 0.01; * * * p < 0.001; - nonsignificant The change in F-statistic shows the significance of the variance explained by the independent

variables after accounting for (partialing out) the variance explained by the covariate.

other findings on closer business relationships. Frazier et al. (1988) suggested in their study of Just-in-Time relationships that high levels of coordination are associated with mutually ful- filled expectations.

The findings for trust and commitment are also consistent with emerging research on partnering relationships. Anderson and Narus (1990) and Anderson and Weitz (1992) suggest that such feelings are important in mollifying a partner’s fear of opportunistic behavior. In particular, the relationship between Trust and Satisfaction with Profits is interesting. Profits derived from a particular vendor might contribute to a dealer’s feeling of vulnerability. Powerful, and popular, manufacturers tend not to give the best margins. Yet, believing that the vendor will act fairly and in the best interest of the relationship might serve to calm the dealer’s fear of opportunistic behavior and might lead to greater perceived satisfaction with this aspect of the partnership.

This study adds credence to the notion that communication problems are associated with a lack of success in strategic alliances (Mohr, 1989; Sullivan and Peterson, 1982). Without communication quality and participation, the success of the partnership is placed in doubt.

The importance of communication becomes critical in signaling future intentions and might be interpreted as an overt manifestation of more subtle phenomena such as trust and commitment. These findings are consistent with Anderson et al. (1987) who found that mutual participation was associated with resource allocation among channel members.

The negative association between Information Sharing and Satisfaction with Profits is both counter-intuitive and inconsistent with this discussion. It is possible, however, that greater information sharing may give the dealer the impression that he/she is entitled to a greater share of the fruits of the partnership, as evidenced by higher margins from the manufacturer. Greater information transfer might be interpreted as closeness between manufacturer and dealer in which margins are viewed, albeit incorrectly, as ‘joint property.’

This study indicates that the manner in which conflict is resolved has an impact on relationship success. Joint problem solving, whereby griev- ances are aired and the underlying issues are brought to the surface, fosters a win-win solution between partners. Arbitration has also been beneficial to the success of the relationship in extreme conflict situations. Anderson and


Narus (1990) indicate that distributor councils and distributor ombudsmen are two mechanisms by which conflicts can be diffused and settled constructively. At the same time, arbitration is viewed by some (Assael, 1969) as an effective but a less preferred conflict resolution mechanism when compared with internal solutions.

Harsh Words and Smoothing Over Problems as conflict resolution modes do little to uncover the underlying problems associated with conflict and tend to exacerbate the fundamental differences that exist between trading partners. Both serve to solve short-term difficulties but do not begin to address the longer-term issues that might affect the relationship. Neither of these conflict resolution mechanisms work towards joint resolution of problems nor do they focus on information sharing and communication as important components of problem solving.

The nonsignificant findings in this study bear discussion. Interdependence was not related to any of the measures of partnership success. The nonsignificance of this relationship may be due, in part, to the measure used by interdependence. Interdependence may be more than each party’s dependence on the other, and may include issues of magnitude as well as symmetry (Gundlach and Cadotte, 1989). The measures for Communication Behavior appeared to do a better job of predicting the more qualitative aspects of partnership success; only participation was significantly related to the quantitative outcome of sales. Communication Behaviors may eventually impact quantitative outcomes such as sales volume in a two-step process in which higher levels of satisfaction are associated with more effort on behalf of the partnership; eventually these efforts are associated with increased performance (Mohr and Nevin, 1990). The fact that none of the conflict resolution modes was significantly related to Dyadic Sales is surprising-and only one of the modes, Joint Problem Solving-was related to Satisfaction with Support. These nonsignificant findings may be explained by the use of single-item measures, o r by the two-step process mentioned for Communication Behaviors previously.

The findings from this research, as in all research, must be tempered by the limitations of the study. Clearly, the findings are contingent upon the context and the type of partnerships

studied-partnerships between computer manufacturers and their dealers. The generalizability of these results across a broad range of strategic partnerships is cautioned. In addition, data were collected from only one side of the dyad-the manufacturer’s perceptions of the partnership remain unknown. Data were collected from only a single informant from the dealer’s organization. While use of a single informant met Campbell’s (1955) criteria, it is clear that these respondents were providing their perceptions of organizational-level phenomena.

In any study, it is important to control for alternative explanations of the findings. Two alternative explanations for these results could be that the size of the dealer, the closeness of the relationships, or the length of the relationship accounted for the findings. In this study, the size of the dealer was explicitly controlled for in testing the hypotheses related to sales (by adjusting the sales measure). (Size was unrelated to the satisfaction measures; hence, it was unnecessary to add as a control variable for those hypotheses). Closeness of the relationship was explicitly added as a covariate in all analysis, so the results cannot be explained by the degree of closeness of the partnership. Length of relationship duration was uncorre- lated with the two satisfaction measures (and therefore was unnecessary as a control variable) and significantly correlated with the Dyadic Sales measure. However, when adding length of the relationship as a control variable, the results remain unchanged.

Finally, there might exist a common method variance problem since data on both the dependent and independent variables were collected from the same respondent. However, two possibilities mitigate against such an explanation for the results. First, the questionnaire was fairly lengthy, addressing aspects of manu- facturerldealer relationships beyond those used in this study. It is unlikely that respondents would have been able to guess the purpose of the study and forced their answers to be consistent. Second, the dependent variables asked not only for perceptual data, but also objective (sales) data. Objective data are less likely to be subject to halo effects than are affective/perceptual data (i. e., satisfaction measures).


CONCLUSIONS

The rationale for and the decision to form strategic partnerships appears to be fairly well- documented both in the marketing and strategy literatures as well as in the trade press. However, very little guidance exists regarding the processes required to develop and nurture the partnership beyond the initial decision to forge such a relationship. Given both the costs and risks associated with mismanaging a potentially valuable partnership, insight into the factors affecting partnership success is quite useful. This research sheds light on these issues and offers an improved understanding of the form and substance of the interaction between partners.

This study suggests that trust, the willingness to coordinate activities, and the ability to convey a sense of commitment to the relationship are key. Critical also to partnership success are the communications strategies used by the trading parties. The quality of information transmitted and the joint participation by partners in planning and goal setting send very important signals to the trading parties. Recent pronouncements by both P & G and Wal-Mart, for example, who have dedicated resources for the sole purpose of effectively managing the interface between these two firms, support our findings. Although the level of magnitude is quite different, the fundamental processes and mechanisms mirror our results and add support.

Joint participation enables both parties to better understand the strategic choices facing each other. Such openness is not natural for management and it must develop its communications skills and learn to accommodate/modify its traditional concern for decision autonomy. This skill is nontrivial to the success of the partnership. Management must also move towards processes and behavioral mechanisms that support working with another firm to achieve mutually beneficial goals. Consistent with this view is the importance of joint problem solving as a conflict resolution mechanism. The partners’ ability to take the other’s perspective and attempt to reconcile differences improves problem solving.

While we demonstrate that certain characteristics and processes are associated with partnership success, there is a certain irony that arises in managing these partnerships. That is, it is

likely that managers feel they are trading one set of risks and uncertainty for another. In a number of instances, partners are unprepared to answer questions related to the management of this new relationship, and research has not systematically addressed the array of skills needed to help ensure that the partners’ mutual goals are achieved.

The managerial implications to be drawn from this research relate to the manner in which partners attempt to manage the future scope and tone of their relationship. Trust, commitment, communication quality, joint planning, and joint problem resolution all serve to better align partners’ expectations, goals, and objectives. These factors all contribute to partnership success. The challenge, however, lies in developing a management philosophy or corporate culture in which independent and autonomous trading parties can relinquish some sovereignty and control, while also engaging in planning and organizing which takes into account the needs of the other party. Such a wilful abdication of control (and autonomy) does not come easily but appears to be a necessary managerial requirement for the future. For example, Corning, a company admired for its partnering acumen, espouses corporate values that add credence to our results.

While it would seem that similarities across organizational cultures would improve the prob- ability of partnership success (see Harrigan, 1988), such compatibility cannot be ensured. In many cases. differences in culture, operating procedures, and practices become apparent only during the course of the partnership. Effort must be dedicated to the formation and implementation of management strategies that promote and encourage the continued growth and maintenance of the partnership.

In light of the scant and fragmented nature of the literature which address those factors that differentiate successful from unsuccessful partnerships, this research has attempted to clarify this problem. Managerially, such research offers insight into how to proactively manage partnerships in order to reap the benefits of success, and to avoid the damaging costs inherent in their failure. Theoretically, a specification of the linkages between characteristics of the partnership and its success can provide a useful framework for future research. The empirical test reported


here provides a first attempt to better understand partnership success and the factors that contribute to success.

ACKNOWLEDGEMENTS

The authors gratefully acknowledge the helpful comments of Jan Heide, Michael Lawless, Jack Nevin, and Linda Price, and three anonymous SMJ reviewers on this paper.

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APPENDIX: ITEMS *

Indicators of success

Dyadic sales volume of the referent manufacturer’s product:

What is your approximate volume of sales of this manufacturer’s product, on a monthly basis? (Seven categories)

What are the total monthly sales of your dealership? (seven categories);

Of the total sales of your dealership, what percent comes from this manufacturer’s product? (0%/100% in 10% increments)

multiplied by:

Satisfaction: How satisfied are you with the following aspects of the relationship with this manufacturer? (Very dissatisfiedhery satisfied)

Personal dealings with manufacturer’s sales reps Assistance in managing inventory Cooperative advertising support Promotional support (coupons, rebates, displays) Off-invoice promotional allowances Profit on sales of manufacturer’s product

How does this manufacturer’s product stack up to its closest competitors on reseller margins? (LowedHigher)

Attributes of the partnership (Strongly disagree/ strongly agree) Commitment: We’d like to discontinue carrying this manufacturer’s product (reverse scored). We are very committed to carrying this manufacturer’s products. We have a minimal commitment to this manufacturer (reverse scored).

Coordination: Programs at the local level are well coordinated with the manufacturer’s national programs. We feel like we never know what we are supposed to be doing or when we are supposed to be doing it for this manufacturer’s product (reverse scored). * *


Our activities with the manufacturer are well coordinated.

Trust: (Strongly disagree/strongly agree) We trust that the manufacturer’s decisions will be beneficial to our business. We feel that we do not get a fair deal from this manufacturer. This relationship is marked by a high degree of harmony.

Interdependence: (Strongly disagree/strongly agree) If we wanted to. we could switch to another manufacturer’s product quite easily (reverse- scored). If the manufacturer wanted to, they could easily switch to another reseller (reverse-scored).

Communication behavior Communication Quality: To what extent do you feel that your communication with this manufacturer is:

Timelyhntimely Accuratehnaccurate Adequatetinadequate Comple te/incomple te Credibfelnot credible

Participation: (Strongly disagreelstrongly agree) Our advice and counsel is sought by this manufacturer. We participate in goal setting and forecasting with this manufacturer. We help the manufacturer in its planning activities. Suggestions by us are encouraged by this manufacturer.

Information sharing (Strongly disagree/strongly agree) We share proprietary information with this manufacturer. We inform the manufacturer in advance of changing needs.

In this relationship, it is expected that any information which might help the other party will be provided. The parties are expected to keep each other informed about events or changes that may affect the other party. It is expected that the parties will only provide information according to prespecified agreements (reverse scored). * * We do not volunteer much information regarding our business to the manufacturer (reverse scored). * * This manufacturer keeps us fully informed about issues that affect our business.** This manufacturer shares proprietary information with us (e.g., about products in development, etc.). * *

Conflict resolution techniques Assuming that some conflict exists over program and policy issues and how you implement the manufacturer’s programs, how frequently are the following methods used to resolve such conflict?

Smooth over the problem Persuasive attempts by either party Joint problem solving Harsh words Outside arbitration Manufacturer-imposed domination

(Very infrequentlyhery frequently)

Covariate for strategic partnership disagreehtrongly agree)

(Strongly

In this relationship, the parties work together to solve problems. The manufacturer is flexible in response to requests we make. The manufacturer makes an effort to help us during emergencies. When an agreement is made, we can always rely on the manufacturer to fulfill all the requirements.

* as shown in parentheses, except where noted. * * Variable eliminated during scale purification.

All items are on a 5-point scale with the endpoints labeled

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