8/14/2019 The climate for co-operation http://slidepdf.com/reader/full/the-climate-for-co-operation 1/24 The climate for co-operation: buyer-supplier beliefs and behavior David A. Johnston and Mehmet Murat Kristal Schulich School of Business, York University, Toronto, Canada Abstract Purpose – The purpose of this paper is to investigate the climate for co-operation, from both the supplier and buyer perspectives, for its impact on co-operative activities. Climate encompasses the constructs of cross functional barriers, participation by the respondent in strategic customer/supply decisions and expectation of the continuity of the relationship, competitive pressure and institutionalized beliefs about co-operation in the firm’s industry. Design/methodology/approach – The design of the study is based on a cross-sectional mail-based survey of 89 buyer and supplier dyads, involving 178 manufacturing companies. First, the psychometric properties of the proposed constructs were assessed. Then the relationships among the proposed constructs were tested by structural equation modeling for the supplier and then the buyer samples. Findings – Both parties’ co-operative behaviors were strongly influenced by the expected continuity of the relationship. Suppliers differed from buyers in that they were influenced by institutional beliefs about co-operation. Involvement in decision making positively affected shared planning activities for the suppliers whereas it affected relationship flexibility for the buyers. Lastly, buyers in contrast to suppliers were influenced by competitive pressure. Research limitations/implications – As a cross-sectional study about complex inter-firm relationships, the research does not directly capture relationship effects over time. The paper also does not address how climate affects the formulation and implementation of dysfunctional buyer-supplier relationships. Practical implications – Buyers and suppliers should be aware that there are significant similarities and differences in how their partners respond to the context in which they operate. This knowledge is important in understanding what drives the other party’s behavior in the formal and informal negotiations and problem solving that characterize an ongoing relationship. Originality/value – The research uses dyadic data to understand both sides of the buyer supplier relationship. It introduces constructs such as institutional belief and cross-functional barriers and functional involvement in strategic planning as components of a new concept called co-operative climate. This concept is found to be relevant to both buyer and supplier perspectives. Keywords Buyer-seller relationships, Cooperative marketing, Channel relationships Paper type Research paper Introduction The capability to form successful highly co-operative buyer-supplier relationships has been classified as a core competency leading to knowledge-based competitive advantage (Doz and Hamel, 1998; Miller and Shamsie, 1996; Dyer, 1997). These relationships have been identified by the degree to which the dyad parties participate in joint resolution of problems and sharing of benefits (McCutcheon and Stuart, 2000; Heide and Miner, 1992). The advantages of partnering over more traditional adversarial relationships include improved outcomes in new product and service The current issue and full text archive of this journal is available at www.emeraldinsight.com/0144-3577.htm Buyer-supplier beliefs and behavior 875 Received 11 May 2007, Revised 29 November 2007, 1 April 2008 Accepted 20 May 2008 International Journal of Operations & Production Management Vol. 28 No. 9, 2008 pp. 875-898 q Emerald Group Publishing Limited 0144-3577 DOI 10.1108/01443570810895294
The climate for co-operation:buyer-supplier beliefs
and behaviorDavid A. Johnston and Mehmet Murat Kristal
Schulich School of Business, York University, Toronto, Canada
Abstract
Purpose – The purpose of this paper is to investigate the climate for co-operation, from both thesupplier and buyer perspectives, for its impact on co-operative activities. Climate encompasses theconstructs of cross functional barriers, participation by the respondent in strategic customer/supplydecisions and expectation of the continuity of the relationship, competitive pressure and
institutionalized beliefs about co-operation in the firm’s industry.Design/methodology/approach – The design of the study is based on a cross-sectional mail-basedsurvey of 89 buyer and supplier dyads, involving 178 manufacturing companies. First, the psychometricproperties of the proposed constructs were assessed. Then the relationships among the proposedconstructs were tested by structural equation modeling for the supplier and then the buyer samples.
Findings – Both parties’ co-operative behaviors were strongly influenced by the expected continuityof the relationship. Suppliers differed from buyers in that they were influenced by institutional beliefsabout co-operation. Involvement in decision making positively affected shared planning activities forthe suppliers whereas it affected relationship flexibility for the buyers. Lastly, buyers in contrast tosuppliers were influenced by competitive pressure.
Research limitations/implications – As a cross-sectional study about complex inter-firmrelationships, the research does not directly capture relationship effects over time. The paper alsodoes not address how climate affects the formulation and implementation of dysfunctional
buyer-supplier relationships.Practical implications – Buyers and suppliers should be aware that there are significantsimilarities and differences in how their partners respond to the context in which they operate. Thisknowledge is important in understanding what drives the other party’s behavior in the formal andinformal negotiations and problem solving that characterize an ongoing relationship.
Originality/value – The research uses dyadic data to understand both sides of the buyer supplierrelationship. It introduces constructs such as institutional belief and cross-functional barriers andfunctional involvement in strategic planning as components of a new concept called co-operativeclimate. This concept is found to be relevant to both buyer and supplier perspectives.
IntroductionThe capability to form successful highly co-operative buyer-supplier relationships hasbeen classified as a core competency leading to knowledge-based competitiveadvantage (Doz and Hamel, 1998; Miller and Shamsie, 1996; Dyer, 1997). Theserelationships have been identified by the degree to which the dyad parties participatein joint resolution of problems and sharing of benefits (McCutcheon and Stuart, 2000;Heide and Miner, 1992). The advantages of partnering over more traditionaladversarial relationships include improved outcomes in new product and service
The current issue and full text archive of this journal is available at
development due to synergy of resources; faster speed to market through concurrentdesign; long-term cost reductions, including reduced transaction costs (Williamson andOuchi, 1981; Walker and Poppo, 1991; Hartley and Choi, 1996); improved processtechnology adoption and environmental conformance (Johnston and Linton, 2000);
improvements in conformance quality; risk reduction; and reductions in capitalinvestments (Lado et al., 1997). Establishing highly co-operative relationships has beendirectly l inked to improved financial performance measures such asreturn-on-investment, net income, and return on sales (Carr and Pearson, 1999), andto improved operating performance measures such as on-time delivery andresponsiveness (Stanley and Wisner, 2001).
This paper focuses on the premise that beliefs held by both the buyers and suppliersfacilitate specific behaviors in highly co-operative relationships. Highly co-operativerelationships are dyads of buyers and suppliers where both parties agree that therelationship is mutually co-operative rather than being one of coercion or compliance.These beliefs create the climate for highly co-operative relationships.
Johnston et al. (2004) found that high levels of shared planning, and flexibility inarrangements in dealing with unexpected situations by both the buyer and supplier inhighly co-operative dyads resulted in higher buyer performance. Both of theseconstructs were positively influenced by two antecedent constructs attributed to trust,that is, the supplier’s belief in the buyer’s dependability and benevolence.Dependability means that the supplier is confident that they can rely on the buyerto work hard at making the relationship work. Benevolence means that the supplierbelieves that the buyer will not damage their relationship by abuse of proprietaryinformation or their power for just the buyer’s gain. While these measures of trust werefound to explain a significant portion of the variance in the amount of joint co-operativeactivity, there remained considerable room for other constructs to be introduced aspotential influences on the level of co-operative activity in buyer-supplier dyads.
In this paper, the case is made that other constructs, such as beliefs about theinterfacing functions’ involvement in the strategic decisions about the relationship,the level of co-operation from other functions, the expectation of continuity in therelationship, competitive pressures, and the desirability of increased co-operation inthe context of the industry, collectively contribute to the formulation of a climate forco-operation. They in turn impact the level of planning and flexibility in co-operativerelationships. More formally, the co-operative climate is defined as the set of beliefsheld by participants directly involved in the buyer-supplier relationship buildingprocess. These beliefs surround the capability of their organizations to participate inhighly co-operative relationships.
Given that highly co-operative relationships imply mutual belief, actions andbenefits, the dyad is the unit of analysis for this research. As Smith and Barclay (1997)
intimate, the nature of a dyad can only be adequately assessed by taking into accountboth parties’ views; either party’s perception in isolation may misrepresent the actualstate of the buyer-supplier relationship. To this end, similar questions were asked inthis research to respondents in matching pairs of buyer and supplier organizationsabout the climate for co-operation and the resulting co-operative behaviors. Lastly, inthis research the intent is not to explore all potential constructs that might be involvedin creating the climate for co-operation. Rather the starting point is to confirm that a setof relatively well developed theoretical constructs, which cross management
disciplines such as marketing, organizational behavior and operations management,are present in the minds of buyers and suppliers and relate to specific co-operativebehaviors.
In the next section five constructs are presented as representing the enabling
climate for both buyers and suppliers in highly co-operative dyads. After a descriptionof the methods for examining buyer and supplier dyads using structural equationmodeling (SEM), the results are presented, followed by a discussion of the importanceof these findings for theory and practice.
Beliefs and the climate for co-operationThe theory of reasoned action (Sheppard et al., 1988) suggests that human beingsconsider the implications of their actions and therefore behave in a sensible manner.Their intentions are influenced by two factors: their own attitude towards the behaviorand their perception of social pressure to behave in a specified manner. From thisperspective, both the buyer’s and the supplier’s decisions to co-operate are influencedby rational beliefs about the positive outcomes of co-operation and normative beliefsabout whether co-operation is a trend or best practice in their industry.
These beliefs are shaped by the position of the buyers and suppliers in the supplychain. From the suppliers’ point of view, the marketing literature emphasizes that thekey to success for a firm is determining the needs and wants of customers and satisfyingthese needs more effectively than the competition (Kotler and Armstrong, 1991). As aresult, the suppliers have to make substantial investments that may have little or novalue outside the relationship (Heide and John, 1990). These investments force suppliersto establish long-term, strategic relationships with their buyers, leading them to aligntheir interest with the buyers, and thus to co-operative relationships (Gulati et al., 2005).
From the buyer’s point of view, the traditional approach to supplier relationships isshaped by the idea of achieving the lowest initial purchase prices while assuring
supply. Such an approach includes having multiple suppliers, which are evaluatedbased on purchase price, cost-based information systems, and formal short-termcontracts. The fundamental assumption in this approach is more tactical rather thanstrategic. It states that:
. suppliers are interchangeable; and
. suppliers would take advantage of the buyers if they become too important(Spekman et al., 1998).
This traditional view is changing as the nature of the competition among firms isshifting from firm level to supply chain level (Cousins et al., 2008; Carr and Pearson,2002). Based on this change, buyers see the strategic importance of co-operativerelationships with their suppliers; they also change their approach to the relationship
with suppliers from tactical to strategic, leading them to engage in co-operativebehaviors (Cousins et al., 2006).
The picture that emerges for both the buyer and supplier is that the businessenvironment will reward them for greater co-operation with each other but for differentreasons. In addition, they approach the task of co-operating with different beliefs thatreflect their position in the supply chain and their functional position in their respectivefirms. We collectively call these beliefs co-operative climate, in that they influencewhether each party will engage in specific co-operative behaviors.
Co-operative relationship behaviors Jap (1999) proposed that coordinative efforts between buyers and suppliers distinguishtruly collaborative exchange relationships from more arm’s-length arrangements.
Johnston et al. (2004) found that shared planning and flexibility in arrangements in
dealing with unexpected situations, which are present in highly co-operativebuyer-supplier relationships, significantly affected buyer performance measures.Stuart (1993) found that similar effects were present not only in situations involvingproduct and process innovation but also in the facilitation of the exchange of goods andservices over time between partners.
Shared planning refers to the involvement of buyers and suppliers in joint decisionsabout ways to improve cost efficiency, order entry procedures, delivery schedules,product/service design, or quality monitoring/improvement, as well as the actions thatboth parties take towards strategic planning ( Johnston et al., 2004). Co-operativebuyer-supplier relationships require the exchange of information, over an extendedperiod, to maintain the relationship and promote success for both sides of the exchangedyad (Whipple et al., 2002; Mentzer et al., 2000; Weitz and Jap, 1995).
Similar to shared planning, flexibility in arrangements has been ubiquitous in theliterature on buyer-supplier relationships (Heide and Miner, 1992). Flexibility towardsthe partner represents the willingness of both buyers and suppliers to deviate fromcontractual obligations to accommodate changes in the business environment or torespond to the requests of the other party. Implied in the literature on agilemanufacturing and supply chains is the importance of capable supply partners thatrespond appropriately to an environment of rapid product change and demandvolatility (Swafford et al., 2006).
Model of the beliefs contributing to a climate for co-operationIn this section, five constructs are presented that are hypothesized to influence two
co-operative relationship behaviors in highly co-operative relationships, namely sharedplanning and flexibility in arrangements. After discussing the support in the literaturefor their formulation, their impact on the co-operative behaviors is hypothesized. Itshould be noted that there is no prior work that confirms empirically the linkagesbetween antecedent conditions leading to these specific co-operative behaviors.Furthermore, these linkages have not been explored simultaneously on both sides of the same buyer-supplier dyad. Another unique aspect of this research is the elaborationof the differences between buyer and supplier beliefs. Not much is known as to thesimilarities and differences in these beliefs and how they impact the respondent’s viewof co-operation. Therefore, in the following sub-sections we propose hypotheses abouteach construct in our model for both the buyer and supplier. The overall structure of our model can be seen in Figure 1.
Involvement in decisions about strategic relationships. As CEOs of leading companiesrecognize the opportunity to strategically manage their resources in order to increasetheir firms’ competitiveness (Carr and Pearson, 1999), the purchasing function hasevolved from strictly a buying function to a more strategic function (Ellram and Carr,1994). Purchasing researchers have advocated that the involvement and integration of purchasing decision making with corporate strategy formulation and implementation isessential to both firm competitiveness and the purchasing function’s status in thecompany (Ellram and Carr, 1994; Cavinato, 1991). The strategic point of view of
purchasing advocates involvement of the purchasing function in the strategy makingprocess within the firm. In this way, the purchasing function can gain access to vitalinformation from top management planning and other functions in order to makedecisions that are aligned with the firm’s competitive goals. As a result, involvement of purchasing functions in firm level strategy requires the purchasing function to follow amore proactive path in order to interact with others within the firm (Carr and Pearson,2002). Takeishi (2001) states that manufacturing firms need internal capabilities toevaluate and integrate external resources, such as suppliers, into their operations.Purchasing as the supplier management function therefore is a critical source of externalcapabilities for the manufacturing firm. Carr and Pearson (1999) give the example of Dun and Bradstreet, which integrates purchasing into the strategic decision-makingprocess in order to establish closer relationships with the firm’s suppliers. There is alsoempirical evidence that there is a direct positive relationship between the strategicorientation of the purchasing function within the firm and co-operative buyer-supplierrelationships. For example, Carr and Pearson (1999) found that as the purchasingfunction is allowed to adopt a more strategic orientation, there will be increasedcommunication, co-operation, and coordination with key suppliers. In an empiricaltaxonomy of purchasing functions, Cousins et al. (2006) found that companies that
integrate purchasing into the strategic orientation of their firms achieve higher levels of integration and better co-operative relationships with their suppliers.
In the marketing literature, the willingness of the supplier to accommodate (i.e. beflexible) and share information with the customer is important in achieving loweracquisition and operating costs (Cannon and Homburg, 2001). From the marketorientation perspective, it is important for the suppliers to establish co-operativerelationships with their customers in order to provide them with superior customer value(Kohli and Jaworski, 1990). Narver and Slater (1995) state that in order to establish such
Figure 1.Supplier’s view of highlyco-operative relationships
relationships, an appropriate organizational climate should be cultivated in the firm.Webster (1992) advocates that the marketing/sales function within the company should bea part of strategic decision making process of the firm in order to establish co-operativerelationships with their customers (i.e. most directly the buying function). Similarly,
Walker and Ruekert (1987) state that as the participation and influence of themarketing/sales department increases in the strategic and administrative decisions withinthe firm, their performance regarding their relationships with their customers willincrease.
From both the purchasing and marketing literatures, the implication is that if purchasing/sales and marketing functions are involved in high level organization-widedecision making, their propensity to engage in more co-operative relationships withtheir buyers or suppliers will increase. The capability to act more co-operatively withselect partners comes not just from the authority and insight of participating incorporate strategy. To be effective, both the purchasing and sales/marketing functionsshould have direct involvement in the selection of strategic alliance partners (in thecontext of supply chains) and the negotiation of any agreements (e.g. contracts) with
these organizations. These are, in theory, basic strategic functional capabilities thatpurchasing and sales/marketing bring to the overall company in the context of buyer-supplier relationships. From the buyer side, Faes et al. (2001) state that the roleof the purchasing function has evolved from that of a clerical buyer, focusingpredominantly on price, delivery and quality, to managing strategic, long-term andcomplex agreements among suppliers. From the supplier side, the marketing/salesfunction’s responsibilities have evolved from order takers into relationship managersinvolving the development of agreements, coordinating relationship team tasks forboth buyer and supplier firms, as well as cultivating co-operative relationship norms(Walter, 1999; Webster, 1992). A construct to describe the involvement of a function inthe higher level management decision-making processes of identifying, negotiatingand implementing relationships with important suppliers is therefore proposed.We hypothesize that the stronger the involvement of the respective functions(i.e. purchasing, or sales and marketing), the more the resulting co-operative behaviors:
H1a. The greater the involvement of the purchasing/sales function in the strategicdecision making surrounding supply relationships, the greater the sharedplanning between buyers and suppliers.
H1b. The greater the involvement of the purchasing/sales function in the strategicdecision making surrounding supply relationships, the greater the flexibilityin supply arrangements between buyers and suppliers.
Cross-functional barriers. Integration between functions such as marketing andmanufacturing has been investigated in previous research (Hausman et al., 2002). The
marketing literature refers to this in some work as inter-functional climate (Kahn et al.,2004). However, the study of cross-functional co-operation, or the lack of it, infacilitating co-operation in supply chains is new. In the supply chain literature, thefocus has been on integration with customers and suppliers (Frohlich and Westbrook,2001). Eng (2005) found that cross-functional support in the supply function improvedcustomer satisfaction and supply chain responsiveness. Boyd et al. (2002) mention thatcross-functional relationships are important in the sales/marketing decision-makingprocess, which is associated with buyer-supplier relationships. Furthermore, they
maintain that dysfunctional relationships are problematic without elaborating on thespecific behaviors and their prevalence.
Other functions can limit the actions of purchasing or sales and marketing toachieve highly co-operative relationships. This research focuses on the influence of
accounting, production, and engineering. All these functions provide valuable inputsinto the production of goods and services for both buyer and seller firms (Hayes et al.,1988). They get involved in the “process for designing, developing, optimizing, andmanaging the internal and external components of the supply system, includingmaterial supply, transforming materials and distributing finished products or servicesto customers” (Spekman et al., 1998, p. 631). For example, the accounting functioncollaborates with the purchasing function in some firms to do value analysis,make-or-buy analysis, and supplier audits and certification (Joyce, 2006), whichdirectly affects buyer-supplier relationships. The importance of the integration of production with purchasing has long been recognized by OM scholars (Narasimhanand Das, 2001). Similarly, integration between the purchasing and the engineeringdepartments should also impact the buyer supplier relationship. For example, Ansari
and Modarress (1990) state that the interaction between the engineering andpurchasing departments within the firm leads to the ability to solve quality-relatedproblems that can occur in both the buyer’s and supplier’s companies. The importanceof sales and purchasing integration has also been noted in the literature. For example,Novack et al. (1992) and Germain and Iyer (2006) state that purchase systems createdby the purchasing and sales departments together enable the buyers and suppliers toplan production and shipping operations better.
Even though the integration of purchasing with other functions has been found tohave positive effects on both operational performance and buyer-supplierrelationships, organizational behavior research indicates that inter-organizationconflicts are not uncommon (Takeishi, 2001). Hillebrand (1996) and Hillebrand andBiemans (2003) state that in order to perform well in external co-operation(i.e. buyer-supplier relationship), the firm has to co-operate internally as well. Thisrelationship has also been empirically observed by Frohlich (2002a, p. 549) who statesthat “reducing internal barriers is the necessary initial step for any company thatwants to integrate its supply chain.” Thus, more co-operation in buyer-supplierrelationships would be expected in situations in which the other functions are lessresistant to the purchasing or sales function’s engagement in greater co-operation. Thebasic premise is that if the sales or purchasing function interfacing with the supplychain partner does not believe it can co-operate with the other functions within its ownfirm that are needed to support the relationship, it will be difficult to commit to anymeaningful level of co-operative behavior. Therefore:
H2a. The greater the cross-functional barriers to co-operation with suppliers
(or buyers), the less the shared planning in the relationship.
H2b. The greater the cross-functional barriers to co-operation with suppliers(or buyers), the less the flexibility in arrangements in the relationship.
Expectation of the continuation of the relationship. Heide and John (1990) and Krause(1999) propose that the expectation of relationship continuity, or in other words, along-term relationship, is important for motivating co-operation in inter-organizationalrelationships. Expectation of continuity is a significant antecedent for successful
supplier development (Krause, 1999). If there is no commitment for the longer term (asindicated by frequent turnover in customers and suppliers), then firms will tend toadopt a purely transactional approach and not value investment in learning. Partieswill not invest in relationship-specific assets because there will be no foreseeable return
(Williamson, 1993). Part of that investment is the time and effort to engage in jointplanning (i.e. organizational slack) required to be flexible enough to accommodate theother partner. The beliefs about the continuation of the relationship should be reflectedin the co-operative behaviors for both parties. Therefore:
H3a. The greater the expectation of continuity of the relationship, the greater theshared planning.
H3b. The greater the expectation of continuity of the relationship, the greater theflexibility in arrangements.
Institutional beliefs about co-operation. DiMaggio and Powell (1983) suggest that threetypes of social pressures – coercive, mimetic, and normative – compel organizational
decision makers to adopt innovations. Co-operative buyer-supplier relationships can beviewed as innovative organizational forms. Coercive practices are imposed onorganizations by other organizations upon which they are dependent (DiMaggio andPowell, 1983). This includes regulation and buyers’ imposition of practices such as EDIand other MIS practices on suppliers (Webster, 1995; Teo et al., 2003). Mimetic pressureis based on the diffusion of a practice and its perceived success within an industry(Haveman, 1993). Normative pressure arises from the beliefs about what others wantthe individual or organization to do. Normative organizational decision making can beinfluenced by inter-organizational supply relationships such as those with suppliersand customers (Burt, 1982) and other organizational relationships such as membershipin professional associations (Powell and DiMaggio, 1991).
Given that the focus in this research is on a comparison of beliefs common to bothparties about the climate for highly co-operative relationships, we are most interestedin mimetic and normative beliefs as antecedents to co-operation. The advocacy of closer working relationships between buyers and suppliers became an industry trendin the early 1980s (Spekman et al., 1998). In 1983, in its “Vendor Profile Forecast,”purchasing magazine predicted that within five to ten years, almost everymanufacturer of discrete products will be moving to closer relationships withproven vendors. Similarly throughout the 1990s multiple studies showed that therewas an industry trend in which buyers are more inclined to engage in moreco-operative versus adversarial behaviors with their suppliers (Trent and Monczka,1998; Landeros and Monczka, 1989; Monczka and Trent, 1991). As a result, we suggestthat both suppliers’ and buyers’ co-operative behaviors will be conditioned by their
beliefs about the desirability of co-operation as an existing or emerging trend in theirindustry and whether they believe it is the right thing to do for their organization.Therefore:
H4a. The greater the institutional beliefs about co-operation, the greater the sharedplanning between buyers and suppliers.
H4b. The greater the institutional beliefs about co-operation, the greater theflexibility in arrangements between buyers and suppliers.
Competitive pressure. Lewin and Volberda (1999) and Levinthal and March (1993) positthat the level of environmental turbulence makes adaptation essential and thereforemotivates firms to innovate. A similar construct, industry competitiveness, isfrequently mentioned in the strategy, marketing, and organization theory literatures as
an interaction term in both intra- and inter-firm learning (Volberda and Lewin, 2003; Joshi and Campbell, 2003). Implicit in categorization schemes such as Bensaou (1999) isthat firms consider increasing or decreasing their investment in buyer-supplierco-operation based upon their perception of the opportunities to improve theircompetitive position. As Bowersox et al. (1999) assert, the competition is shifting fromfirm against firm to supply chain against supply chain, creating the need forco-operative buyer-supplier relationships. Coupled with this change in theenvironment, numerous authors state that both buyers and suppliers are engagingin co-operative relationships due to increased competitive pressure that they observefrom their business environment (Kannan and Tan, 2004; D’Aveni, 2002; Kalwani andNarayandas, 1995; Stank et al., 1999). Thus, the expectation is that both the buyer andthe supplier will pursue more co-operative behaviors as the perceived competitive
pressure from both sides increases. Therefore:
H5a. The greater the perceived competitive pressure to co-operate, the greater theshared planning between buyers and suppliers.
H5b. The greater the perceived competitive pressure to co-operate, the greater theflexibility in arrangements between buyers and suppliers.
MethodologyOne of the unique and challenging aspects of this research was the collection andanalysis of data that capture the beliefs and behaviors of both sides of buyer-supplierdyads. In this research 89 dyads, or pairs, of buyer and supplier firms were used. The
data set were as restricted to dyads in which the buying firm was a manufacturer inorder to control for differences between the purchasing and manufacturing functions of service organizations and those of public and private firms. To get a trulyrepresentative picture of the co-operation between buyers and suppliers, both parties’points of view must be considered (Smith and Barclay, 1997). Dyadic research onsupply chain relationships has until recently been relatively rare from both themarketing perspective (Lindgreen, 2001) and the supply perspective (Saeed et al., 2005;Angeles et al., 1998; Ellram and Hendrick, 1995). The next section details measurementselection and adaptation, followed by the data collection strategy and then the controlfor validity and reliability issues. The techniques used in the hypothesis testing arealso described, including the operationalization of antecedent and co-operativebehavior beliefs of both buyers and suppliers.
Measure selection and operationalizationMany of the measures for this study were adapted from previous research. The scalesfor relationship flexibility and shared planning were modified from Heide and Miner(1992) and from Campbell’s (1992) study of the European flexible packaging industry,respectively. Both were replicated in Johnston et al. (2004). The expectation of relationship continuity construct represents a modification of the approach taken byHeide and John (1990) and Krause (1999). Competitive pressure, involvement in
strategic decision making, and institutional beliefs were motivated by the previouslymentioned literature (Krause, 1999; Powell and DiMaggio, 1991; Burt, 1982; Fearon andLeenders, 1995; Fearon and Bales, 1995) but required the creation of new measures.A list of items and their measurement properties is provided in the Appendix.
Survey design and sampleThe initial sample was developed using a membership list provided by the PurchasingManagement Association of Canada. This list contained both the names and thepositions of potential respondents for the buyers’ perspective. The sample was selectedat random from this list, and the targeted respondents were mailed a questionnaireaccompanied by a cover letter and a postage-paid envelope for returning the survey.The cover letter requested that the purchaser identify their firm’s “most co-operativesupplier” and a knowledgeable respondent in that organization for a similarquestionnaire. The identified suppliers were then sent the supplier version of thequestionnaire, again with a cover letter and a return envelope. This cover letter indicatedthat the supplier firm had been selected by its customer but made no mention that it had
been identified as a “highly co-operative” supplier. No indication was given as to whythey had been selected. Both suppliers and buyers were promised anonymity. In linewith university ethics guidelines, the researchers indicated that the research wasvoluntary and for the purposes of academic research and professional education.A follow-up reminder was sent out to non-respondents with another copy of the surveyafter two months. A total of 1,094 purchaser surveys were mailed, from which weobtained 270 usable responses that identified matching supplier organizations,representing a response rate of 24.7 percent. From the 270 supplier surveys that werethen sent out, 164 usable responses were received, which represents a response rate of 62.4 percent. The 164 pairs of matched buyer-supplier responses comprised the finaldyad count for the sample. From this final sample, 89 dyads involving onlymanufacturing-firm buyers (54.3 percent) were selected, yielding a final data set of 178firms. In similar survey studies in the OM literature, the average response rate is around30 percent (Frohlich, 2002b). Our response rate is well above this average. To estimatethe likelihood of non-response bias, a difference-of-means test was applied to nine keyvariables for both the buyers’ and suppliers’ responses, comparing the responses fromthe initial mailing to those from the follow-up mailing. The average responses varied byless than one percent, which was not statistically significant. Use of Harman’s one-factortest (Podsakoff and Organ, 1986) indicated there are seven independent factors andtherefore common-methods variance was not a significant issue.
Table I reports the median values for firm size and age of relationship. The medianrather than the mean is used to emphasize the range of organization sizes and ages in
Buyer size (numberof employees)
Supplier size(number of employees)
Relationship age(avg. dyadic
response, in months)Buyer’s sector Min. Med. Max. Min. Med. Max. Min. Med. Max.
the sample. The value for relationship duration is the average of the times reported bythe buyers and suppliers, since they did not always agree on the precise value.
Missing data in the database was assessed using Little’s (1988) missing completely atrandom (MCAR) test. Neither the buyer nor the supplier samples violate the assumption
of an MCAR pattern ( x 2¼ 1,164.96, df ¼ 1,110, p $ 0.10). Therefore, the researchers
could utilize the full information maximum likelihood approach to dealing with missingvalues, which uses all the available data to generate maximum-likelihood-basedstatistics (Arbuckle, 2005).
Validity and reliabilityConfirmatory factor analysis (CFA) was used to assess the reliability and validity of our constructs (Gerbing and Anderson, 1988). The CFA results are presented in theAppendix. Owing to the sample-size constraint and the existence of many constructs,each theoretical construct was assessed separately. For each CFA run, theoreticalconstructs were paired with the buyer and supplier samples in order to gauge whetherthe theoretical constructs would show any difference in their measurement propertiesdepending on whether the respondent was a buyer or a supplier. To assess model fit,three widely used fit indices were employed, namely, Bollen’s incremental fit index(IFI) (Bollen, 1989), the Bentler-Bonett non-normed fit index (NNFI) (Bentler and Bonett,1980), and the comparative fit index (CFI) (Bentler, 1990). x 2 statistics and the rootmean square error approximation (RMSEA) were also calculated.
The results of these analyses showed that the measurement models provide areasonable fit to the data (Appendix). As a result all of the original items were retained.Overall, both buyer and supplier models demonstrated an acceptable fit. The majority of the item loadings were greater than 0.60, and all were positive. The remainder of the itemloadings was less than 0.60 but greater than 0.50.These items were retained, since thecritical ratio for each loading was significant and this indicates that the items represent
the underlying constructs well (Gerbing and Anderson, 1988). Overall, the underlyingmeasurement model demonstrates convergent validity and unidimensionality in thecomponent scales (Hair et al., 1998).
To assess discriminant validity, within each sample we tested all possible pairs of latent constructs, allowing each pair to freely correlate and then setting the correlationbetween the two constructs to 1.00 (Bagozzi et al., 1991). A significant x 2 differencebetween the two nested models indicated that the two constructs are distinct. All thex
2 differences were statistically significant ( p , 0.001), indicating discriminantvalidity among the theoretical constructs.
Construct reliability was determined by evaluating composite reliability (Fornelland Larcker, 1981; Bollen, 1989; Hair et al., 1998) and average variance extracted (AVE)(Fornell and Larcker, 1981). Except for one of the constructs (i.e. the supplier’s
involvement in shared planning activities), all of the composite reliability values weregreater than 0.70, and all the AVE values were either greater than or slightly less than0.50, indicating acceptable reliability levels (Fornell and Larcker, 1981; O’Leary-Kellyand Vokurka, 1998).
ResultsThe major requirements for proceeding with the SEM were met. The observedvariables all had univariate normal distributions but exhibited moderate departure
from multivariate normality. However, Mahalanobis distances of the observations didnot indicate the existence of significant outliers. Maximum likelihood estimation wasused to estimate the model. According to the literature, this estimation method isrobust against moderate non-normality when the variables are continuous (Olsson
et al., 2000; Lei and Lomax, 2005). x 2 plots of all residuals were developed, and no signof systematic curvature was detected in the plots.
To test the hypotheses, overall fit of the theoretical model (Figures 1 and 2) wascalculated. The various fit indices consistently indicate that the theoretical model fits thedata well (for the buyer sample, x 2 ¼ 12.94, df ¼ 9, p value ¼ 0.17, IFI ¼ 0.96,NNFI ¼ 0.84, CFI ¼ 0.95, RMSEA ¼ 0.07; for the supplier sample, x 2 ¼ 6.80,df ¼ 9, p value ¼ 0.66, IFI ¼ 1.03, NNFI ¼ 1.11, CFI ¼ 1.00, RMSEA , 0.01).Only the correlations that were significant in our models were retained (Bollen, 1989).Previous studies (Johnston et al., 2004) and the correlation matrix in Table II indicate thatshared planning and flexibility in buyer-supplier relationships are related; as a result,the error terms of the dependent variables were allowed to freely correlate (Cochrane andOrcutt, 1949).The empiricalresultsof the structuralmodels areshown in Figures1 and 2,including the standardized structural (path) coefficients and the error variance of endogenous variables in the model. Lastly, given the small sample size a bootstrapanalysis was run, with 1,000 replications for each group (Efron and Tibshirani, 1993).These analyses yielded results similar to those of the initial analyses, indicating therobustness of the models despite the relatively small sample size (Table III).
The results indicate that for the supplier group, involvement in strategic decisionmaking ( g ¼ 0.17, p , 0.05) positively affects shared planning, supporting H1a. Similarly,institutional beliefs positively affect shared planning ( g ¼ 0.29, p , 0.01), supporting H4a.Lastly, the positive effects of expectation of relationship continuity were observed on bothshared planning ( g ¼ 0.45, p , 0.01) and relationship flexibility ( g ¼ 0.38, p , 0.01).
Figure 2.Buyer’s view of highlyco-operative relationships
Interestingly, no effects were observed of either cross-functional barriers or competitivepressure on supplier collaboration with buyers.
From the buyer perspective, involvement in strategic decision making positivelyimpacts relationship flexibility ( g ¼ 0.19, p , 0.05). Expectation of relationship
continuity positively affects both shared planning ( g ¼ 0.41, p , 0.01) and relationshipflexibility ( g ¼ 0.32, p , 0.01). In a similar manner, competitive pressure affects bothshared planning ( g ¼ 0.40, p , 0.01) and relationship flexibility ( g ¼ 0.27, p , 0.01).However, not observed are any effects of cross-functional barriers or institutionalbeliefs on co-operative behavior for the buyer. Table IV summarizes the support for thehypotheses in light of these results. Hypotheses with probabilities greater than 0.05were rejected.
DiscussionWe found that four of the five beliefs affected either or both the buyers’ or suppliers’ beliefsabout their own co-operative behaviors. These beliefs explained significant portions of the variation in both parties’ co-operative behaviors. Expectation of the continuity of therelationship was the strongest belief, impacting both shared planning and flexibility. Onlyexpected relationship continuity affects relationship flexibility for suppliers. Therefore,actions such as longer-term contracts and open communication about future opportunitiesfor collaboration represent important buyer signals motivating supplier co-operation. Onthe other hand, joint planning to secure supply, improved terms, and collaboration ininnovation may in turn be important signals from the supplier side to the buyer side inorder to increase buyer’s motivation to co-operate for the long-term.
For suppliers, involvement in strategic decision making has a positive impact onwhether they engaged in shared planning with their buyer. Purchasing’s involvementin the buying firm’s strategic decision making positively affects co-operation, but,unlike suppliers, it affects relationship flexibility rather than shared planning. Oneinterpretation is that involvement by the buyer in the choice and structure of therelationship empowers them to change the terms of the agreement. Buyers, in contrastto suppliers, believed they responded to competitive pressure by engaging more inboth types of co-operative behaviors.
One of the surprising findings of this study was that beliefs about the presence of cross functional organizational barriers to highly co-operative relationships scoredhighly but did not have any effect on either co-operative behavior. One interpretation of
Hypothesis Buyer view Supplier view
H1a. Involvement in strategy and shared planning Not supported Supported
H1b. Involvement in strategy and flexibility Supported Not supported H2a. Cross functional barriers and shared planning Not supported Not supported H2b. Cross functional barriers and flexibility Not supported Not supported H3a. Continuity and shared planning Supported Supported H3b. Continuity and flexibility Supported Supported H4a. Institutional beliefs and shared planning Not supported Supported H4b. Institutional beliefs and flexibility Not supported Not supported H5a. Competitive pressure and shared planning Supported Not supported H5b. Competitive pressure and flexibility Supported Not supported
this may be that the respondents, who were primarily sales and purchasing managers,found the climate for co-operation amongst their peers in their own organization to benot so much one of hostility and active opposition as one of indifference, which theysuccessfully overcame. Interestingly, the suppliers on average felt the barriers to
co-operation to be more significant in their organizations than did the buyers (Table II).Institutional beliefs were a strong positive predictor of co-operative behaviors for
suppliers but not buyers. In this research we cannot parse out whether a given supplier’sbeliefs copy the prevailing beliefs of similar suppliers (i.e. are mimetic) or are merelystrongly held, normative beliefs of the respondent based on his or her interaction withother opinion leaders inside and/or outside the firm. The belief in co-operation appears tostand by itself (without significant covariance with other constructs) in the supplier’smind but is not present in the mind of the buyer. The buyer’s beliefs, in contrast, are morefocused on responding to the competitive pressure for co-operation than the intrinsicvalue of co-operation as “the right thing to do” to manage the supply chain.
Limitations of the researchThere are three major limitations to this research. First, the study is not longitudinal,and therefore there are limits to what can be captured in a cross sectional mail-basedsurvey about complex interfirm relationships which may evolve over time. This paperconcentrates on firms that agree that they are in highly co-operative relationships.It does not address how climate affects the formulation and implementation of dysfunctional buyer-supplier relationships. Because of the focus on highly co-operativefirms, there has been no attempt to examine coercive pressures such as unequal powerin the relationship or other antecedents which might be dysfunctional. We wouldexpect to find higher levels of agreement between buyers and a supplier that they hadpicked versus a random sampling from all relationships in the supply base. Finally,plausible arguments can be made that the relationships between constructs such as
expected continuity of relationship and co-operative behaviors may be cursive. Resultsof alternative modeling (not reported) indicated that co-operative behaviors did not actas antecedents for our five beliefs. That is, the alternative SEM models did notdemonstrate sufficient goodness of fit.
Further researchTwo immediate refinements present themselves for further study from the currentmodel. From the supplier’s perspective, competitive pressure has a significant positivecovariance with expected relationship continuity. Competitive pressure does not,however, influence the co-operative behaviors. The way that competitive pressureinfluences the process of decision making to support or disrupt highly co-operativerelationships is a subject for future qualitative research.
For buyers and suppliers, shared planning and flexibility covaried strongly,although they maintained their integrity as constructs. This suggests that sharedplanning is perceived by both the buyer and the supplier as an activity by means of which they can adjust the ongoing terms of the relationship. For the buyer, which has asignificantly higher covariance than the supplier, future research should explore howbeliefs about competitiveness and strategic involvement influence their behavior in
joint buyer-supplier planning activities to provide both parties the flexibility to adaptto uncertain business environments.
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Appendix. List of variables and measurement model CFA results
(Table AI follows overleaf.)
Corresponding authorDavid A. Johnston can be contacted at: [email protected]
Buyer-supplierbeliefs and
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