Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of...

Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania.

Wednesday, April 19, 2023 1

Outlines

• Introduction

• Theoretical Perspective and hypothesis formulation

• Research Methodology and Operationalization of Variables

• Data Assessment (Preliminary screening, Discriminant validity and Reliability).

• Research Model (Regression Model)

• Regression Assumptions

• Regression Estimation and Hypotheses Testing

• Managerial Implications, Limitations and Areas for further Research


Introduction

Background information

Main coffee buyers in Tanzania-Primary societies/Associations (KNCU,

MBOCU).

Complaints from farmers> buyers no longer offering incentives (fertilizers,

insecticides, equipment(CPU) and credits).


Introduction…Ctd.

Research Problem

Buyers characterized: lying>insincerity>undervaluation of products.

These behaviors>reflection of buyers’ opportunistic behavior (John

1984; Williamson 1985).

Research Question

What is the key factor affecting suppliers’ perception on buyers

opportunism?


Introduction…Ctd.

Objective of the study

Enhance relationship to reduce perception on buyers opportunism.

Specifically how supplier specific development (investment) affect

suppliers’ perception on buyers opportunism.


Theoretical Perspective

A good theory is the best tool in understanding/solving practical business

issues (problems).

Transaction Cost Theory (Douma & Schreuder Ch. 8, 2011) >The founder:

Ronald Coase>1937: ‘‘Why do firms exist?’’

What are Transaction Cost?

Control and monitoring costs (e.g. cost documentation)

Bargaining costs (e.g. haggling about terms of trade)


Theoretical Perspective…Ctd.

Transaction Cost is induced when SPI is deployed> It is not possible to

avoid this cost>Challenge: Minimize them.

Basic assumptions> Bounded Rationality, Uncertainty/Complexity,

Information Asymmetry and Opportunism.

Opportunism: ‘Self seeking with-guile’’ (Williamson 1975; p.6)>Take

advantage upon a situation, charge unfair prices, reduce the original

product quality.


Theoretical Perspective…Ctd.

• Three Basic Elements> Specific Assets, Uncertainty/Complexity of Trade, Frequency or Volume of Trade.

• Specific Assets: Investment of Buyer and /or seller in> specific knowledge>routines >machines >tools to serve a specific trade partner (Risky Investment)

• SPI are sunk cost (irreversible).

• Previous Studies on Opportunism>Focused on Suppliers Opportunism; no studies on Buyers Opportunism.


Research model


OPPOR

SALESVOL

REDURA

SUDEV

Hypothesized effect

Control Effect

Research hypothesis

Hints: Transaction-Specific Supplier Development (SUDEV)> ‘‘a long

term cooperative effort between a buying firm and its suppliers to

upgrade the suppliers’’ (Bucklin and Sengupta 1993; Parkhe, 1993).

SUDEV (SPI)-reduce opportunism (Joshi, 1998).

making visit;> discuss issues for performance improvement with respect to

grading of my coffee beans; >recognizing farmers’ business for

achievements/performance in the form of awards;> providing farm businesses

with training/education; >providing farm businesses with equipment or tools

for improvement, >providing farmers with credit/capital (Krause and Ellram,

1997; Wagner, 2006).

H1: There is a negative association between transaction-specific

supplier development and buyer opportunism.Wednesday, April 19, 2023 10

Research methodology

Empirical research setting : Coffee industry in Tanzania

Cross sectional research design

Cross sectional research design (Malhotra and Birks, 2006).Questionnaire Instrument

Developing and reviews of questionnaire (adapting items)=>Translation- 2 ways and validationSample Size, Data collection procedures and technique

More than 400, 000 smallholders.=>Sample=123 each=>Key informants=>Finding the farmer for more than five years=>Personal interview


Operationalization of variables

Constructs are operationalized as latent variables and all variables are measured as reflective scales> Variables were operationalized by question items with 7 points likert scale.The question items for opportunism were adapted from Gundlach et al., (1995); Skarmeas et al., (2002) and Provan and Skinner, (1989).While question items for Specific Supplier Development (SUDEV) were adapted from Krause (1999) and Ghijsen et al., (2009).


Discriminant Validity

• Discriminant Validity: Exploratory Factor Analysis (Table 1.1) Rotated Component Matrix Extracted Principal Component Analysis. Rotated Method: Varimax with Kaiser Normalization. Rotation converged in 3 iterationsWednesday, April 19, 2023 13

Factor

Component

1 2

OPPOR2 .653 .130

OPPOR4 .810 .063

OPPOR5 .755 .016

OPPOR6 .646 .015

SUDEV1 .044 .698

SUDEV2 .061 .748

SUDEV3 .059 .720

SUDEV4 .036 .619

Reliability

Reliability: Correctness or exactness>internal consistency >Cronbach alpha

(Table 1.2).


Construct Items No. of Items

Reliability

(Cronbach alpha) α

Buyer opportunism OPPOR 2, 4,5 6 4 .80 Transaction-specific supplier development

SUDEV 1,2,3,4 4 .71

Regression Model (Research Model)

Regression analysis

Statistical tool used to describe relationship between dependent and

independent variables> bivariate (simple)>multivariate (multiple).

Regression Model (Research Model)

OPPOR = bo +b1REDURA +b2SALESVOL +b3SUDEV+ ԑ


Regression assumptions and Estimation

Regression assumptions:

Multicollinearity (Correlation Matrix: OPPOR & SUDEV, REDURA)

Collinearity (Tolerance>0.10, Variance Inflation Factor (VIF)<10)

Normality (Histogram & Normal P-P Plot of Standardized Residual)

Homoscedasticity (Scatter Plot)

Regression estimation:

OLS > to estimate parameters of our regression model (Table 1.3)



Hierarchical

Regression

Model

Independent variables Unstandardized coefficients

t-value Tolerance (VIF)

Constant b0 5.02 2.66***

REDURA b1 -.35 -1.66** .76 (1.32)

SALESVOL b2 .13 .61 .83 (1.21)

R2 =.33 SUDEV b3 -.31 -2.67*** .74 (1.35)

R2adj=.26 F (7, 65) = 4.54 p<.001 Values for REDURA and SATIS are

mean centered scores

**p<.05 t- values greater than 1.64 are significant at 0.05 one tail

***p<.01 t-values greater than 2.33 are significant at 0.01 one tail

Hypothesis Testing

Hypothesis 1:

supported by coefficient term, b3 = -0.31, t value = -2.67, p ≤0.01.


Discussion, Managerial Implications, Limitations and Areas for Further Research

Discussion

Training on :picking>pulping>washing,>fermentation>washing>drying.

Investment on: Machines (CPU)/Tools> Provision of Capital/Credit

Personnel visits to help improve on suppliers performance.

Invite farmers>discuss>performance improvement>grading of coffee beans.


Managerial Implications, Limitations and Areas for Further Research…Ctd.

Managerial Implications

Lays out foundation on>stakeholders (buyers) >reduce opportunism.

Frequent communication and well established reporting system>SMS

& telephone calls.

Establishment of training centers: seminars, establishing farms for

training

increasing follow-up

Frequently>inviting farmers to discuss issues>on performance

improvement with respect to grading system of coffee.


Managerial Implications, Limitations and Areas for Further Research…Ctd.

Providing farmers with equipment or tools for improvement.

Providing farmers with credit/capital.

Buyer Organizations should cooperate with supplier when deployment of

SUDEV is appropriate/profitable.

Limitations and areas for further research

Analyses only coffee industry

Cross sectional design


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Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of...

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