Dependence in Buyer-Supplier Relationships [1st ed.] 978-3-658-24251-0, 978-3-658-24252-7

Table of contents :
Front Matter ....Pages i-xvi
Introduction (Tobias Mandt)....Pages 1-18
Dependence in Buyer-Supplier Relationships – Present State and Future Perspectives (Tobias Mandt)....Pages 19-50
The Emergence of Dependence and Lock-in Effects in Buyer–Supplier Relationships – A Buyer Perspective (Tobias Mandt)....Pages 51-84
Managing Distinct Buyer–Supplier Dependencies – A Typological Differentiation (Tobias Mandt)....Pages 85-122
Phases and Drivers of Buyer-Supplier Dependence - Developmental Insights of a Logistics-Service Relationship in Textile Retailing (Tobias Mandt)....Pages 123-156
Conclusion & Outlook (Tobias Mandt)....Pages 157-160

Citation preview

Edition KWV

Tobias Mandt

Dependence in Buyer-Supplier Relationships

Edition KWV

Die „Edition KWV“ beinhaltet hochwertige Werke aus dem Bereich der Wirtschaftswis­sen­ schaften. Alle Werke in der Reihe erschienen ursprünglich im Kölner Wissenschaftsverlag, dessen Programm Springer Gabler 2018 übernommen hat.

Weitere Bände in der Reihe http://www.springer.com/series/16033

Tobias Mandt

Dependence in Buyer-Supplier Relationships

Tobias Mandt Wiesbaden, Germany Bis 2018 erschien der Titel im Kölner Wissenschaftsverlag, Köln

Edition KWV ISBN 978-3-658-24251-0 ISBN 978-3-658-24252-7  (eBook) https://doi.org/10.1007/978-3-658-24252-7 Library of Congress Control Number: 2019934950 Springer Gabler © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018, Reprint 2019 Originally published by Kölner Wissenschaftsverlag, Köln, 2018 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer Gabler imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Geleitwort In der vorliegenden Dissertation thematisiert Tobias Mandt sogenannte Käufer-Zulieferer-Beziehungen (KZB), die in der Praxis in verschiedenen Erscheinungsformen auftreten. Sie sind in Outsourcing-Verhältnissen, Service- oder Zulieferbeziehungen zu beobachten und wegen des sich intensivierenden Austauschverhältnisses von einem einmaligen Kauf bis zu einem regelmäßigen Austausch oftmals durch ihren evolutionären Charakter gekennzeichnet. Die bisherige Forschung zu KZB hat sich insbesondere damit beschäftigt, herauszufinden, welche Faktoren solche langfristigen Austausche grundsätzlich ermöglichen und am Leben erhalten. Dabei werden insbesondere gegenseitiges Vertrauen, Loyalität, ein Beziehungsbekenntnis und Abhängigkeit zwischen den Partnern als entscheidende Parameter diskutiert. Die Abhängigkeit zwischen Partnern in KZB als besonders kritisches und übergeordnetes Konstrukt wurde bereits intensiv untersucht, die Literatur weist aber dennoch einige grundlegende und wesentliche Forschungslücken auf. Hier setzt die vorliegende Dissertation an und verfolgt das Ziel, in vier fokussierten Beiträgen zunächst einen ordnenden Überblick über das zerklüftete Themengebiet zu geben, sodann ein Verständnis für die Entstehung von Abhängigkeiten zu entwickeln, die daraus resultierenden Formen von Abhängigkeiten genauer zu unterscheiden und Handlungsempfehlungen für betroffene Unternehmen herauszuarbeiten. Insgesamt strebt die Arbeit eine langfristige Perspektive an, mit dem Ziel, die Entwicklungsphasen von Abhängigkeiten in KZB zu identifizieren. Mit dem Beitrag „Dependence in Buyer-Supplier Relationships – Present State and Future Perspectives“ gelingt es dem Autor ausgezeichnet, in Form eines strukturierten Literaturüberblicks das bisher fragmentierte Forschungsfeld transparent aufzuarbeiten und Anknüpfungspunkte für die weitere Forschung aufzuzeigen, die sich in den nachfolgenden Beiträgen der Dissertation wiederfinden lassen. Die Studie „The Emergence of Dependence and Lock-in Effects in Buyer-Supplier Relationships – A Buyer Perspective“ untersucht das Zusammenspiel einzelner Faktoren in Wirkungszusammenhängen explorativ und zeigt auf, wie Abhängigkeiten und deren stärkste Formen der „Lock-in-Effekte“ in KZB entstehen. Obwohl diese Studie nur auf einem Einzelfall beruht, liefert sie eine ausgezeichnete Anwendung der qualitativen Grounded-Theory-Methodik auf hohem Niveau. Mit der Arbeit „Managing Distinct Buyer-Supplier Relationships – A Typological Differentiation“ setzt es sich der Autor zum Ziel, die gegensätzlichen Managementempfehlungen der bisherigen Forschung zum Umgang mit Abhängigkeiten in KZB zu integrieren. Die These des Beitrags lautet, dass die bisherigen Empfehlungen sich nicht gegenseitig ausschließen, sondern vielmehr in der richtigen Abhängigkeitssituation angewendet werden müssen und keine pauschale Gültigkeit besitzen. Mit diesem komplexen Beitrag ge-

lingt dem Autor eine stringente und logische Argumentation, die sowohl durch die Ableitung von Strategiegruppen als auch mithilfe einer typologisierten Darstellung von Abhängigkeitssituationen die bestehende Forschung in beachtlicher Weise bereichert. In dem Beitrag „Phases and Drivers of Buyer-Supplier Dependence – Developmental Insights of a Logistics-Service Relationship in Textile Retailing“ wählt der Autor passend einen qualitativen, prozessorientierten Fallstudienansatz, um einen Einzelfall einer Logistikdienstleistungsbeziehung in der Textilbranche zu untersuchen. Es gelingt ihm, den konkreten Fall theoretisch zu beleuchten und fünf Phasen der Abhängigkeitsentwicklung abzuleiten. Dieses Phasenmodell ist hoch interessant und kann mit der Ableitung verschiedener Triebkräfte der Phasenentwicklung absolut überzeugen. Insgesamt ist es Tobias Mandt mit der vorliegenden Dissertation ausgezeichnet gelungen, einen integrativen Überblick über das Themengebiet der Abhängigkeiten in KZB zu geben, ein Verständnis für die Entstehung von Abhängigkeiten, deren unterschiedliche Formen und Managementansätze zu entwickeln sowie Entwicklungsphasen von Abhängigkeiten in KZB zu identifizieren. In seiner methodisch breit aufgestellten Arbeit gelingt es dem Autor in bemerkenswerter Weise, neue und weiterführende Beiträge zum Forschungsfeld zu leisten. Ich wünsche der Arbeit eine breite Diskussion in Wissenschaft und Praxis.

Werner Delfmann

vi

Vorwort Eine langjährige und enge Beziehung zwischen zwei kooperierenden Parteien gilt in der Management-Literatur oftmals als Ursache für gegenseitige Abhängigkeiten. Diese wiederum sind laut der vorherrschenden Meinung negativ konnotiert und sollten von den Akteuren vermieden werden. Dennoch stimme ich am Ende meiner Promotion mit denjenigen überein, die eine intensive und beständige Zusammenarbeit zwischen Partnern als Erfolgsfaktor für die gemeinsame Arbeit der betroffenen Akteure ansehen. Denn auch dieses Buch würde heute nicht vor Ihnen liegen, wenn ich nicht von Personen umgeben gewesen wäre, die diese Promotion überhaupt erst möglich gemacht haben: Meine Familie, die Angehörigen des Seminars für Unternehmensführung & Logistik und die vielen bekannten und unbekannten Diskutanten auf Forschungskonferenzen sind in den letzten viereinhalb Jahren zu dem Kreis geworden, dem ich schließlich die Fertigstellung meiner Doktorarbeit von den ersten Schritten bis hin zum Zielsprint verdanke. Und so endet meine Promotion zwar mit einem intensiven Sprint, ähnelt in ihrer Rückschau aber in vielerlei Hinsicht eher einem lange vorbereiteten Marathon. Meine Motivation, bei meinem persönlichen Marathon anzutreten, bestand weniger darin, schlicht die Ziellinie zu überqueren, sondern darin, aus Freude am eigentlichen Weg an den Start zu gehen. Unterwegs und am Streckenrand gab es viele Begleiter, die auf unterschiedliche Weise meinen Lauf unterstützt haben und denen ein besonderer Dank gebührt: Meine Rennleitung bestand allen voran aus Prof. Dr. Dr. h.c. Werner Delfmann. Ich danke ihm für den günstigen Startplatz, das Abnehmen von Zwischenzeiten, das Aufzeigen entscheidender Wegbiegungen und nicht zuletzt für alle Freiheiten und das Wohlfühl-Umfeld aus Mitstreitern am Seminar für Unternehmensführung & Logistik. Die Rennleitung ergänzt haben Prof. Dr. Werner Reinartz und Prof. Dr. Franziska Völckner, denen ich besonders für Ihre Unterstützung beim Zieleinlauf meiner Promotion danke. Zu den wichtigsten Renn-Organisatoren gehören Heike Kirch und Hilde Reuter, die vom Start bis ins Ziel jede erdenkliche Hilfe geleistet, die wichtigen Verpflegungsstände – sowohl im wörtlichen als auch im übertragenen Sinne – bereitgestellt und damit für optimale Rahmenbedingungen gesorgt haben. Nicht zuletzt danke ich allen Interviewpartnern meiner Fallstudien, die mit ihrer Offenheit und Gesprächsbereitschaft die zu bewältigende Strecke mitgestaltet haben. Nicht nur für die entscheidende initiale Aufforderung und Ermunterung, bei diesem Marathon an den Start zu gehen, danke ich Prof. Dr. Sascha Albers, sondern auch für seinen stetigen freundschaftlichen und wissenschaftlichen Rat sowie die gute Zeit auf gemeinsamen Konferenzreisen. Nach meiner Entscheidung am Lauf teilzunehmen, begann die intensive Vorbereitung auf den Start. Hierbei hatte ich das Glück, andere Läufer um mich zu

haben, die mich mitgezogen und ihre Erfahrungen weitergegeben haben. Ich danke daher ganz besonders meinen persönlichen „Trainern“ und Co-Autoren Dr. Bastian Schweiger und Dr. Jost Daft, die mich nicht nur bei den ersten Schritten auf zahlreichen Tagungen begleitet und während inhaltlicher Diskussionen an die Wissenschaft herangeführt haben, sondern die mir auch unterwegs halfen, die nötige Geschwindigkeit aufzunehmen und mit permanentem Antrieb das Tempo bis ins Ziel hochzuhalten. Sobald dann der tatsächliche Startschuss gefallen war, kam es darauf an, im Gewusel der Startphase nicht den Überblick zu verlieren, zu schnell voranzupreschen oder vom Weg abzukommen. Ich danke Jun.-Prof. Dr. Anne Lange für die vielen Ratschläge, das An-dieHand-nehmen und die Fokussierung auf die wesentlichen Aspekte gerade in dieser Anfangsphase, aber auch auf dem ganzen Weg der Dissertation. Einmal auf gutem Weg galt es dann, den eigenen Rhythmus zu finden, um erfolgreich in möglichst guter Zeit das Ziel zu erreichen. Dazu braucht man um sich herum gleichgesinnte Mitstreiter, die auch zur selben Zeit dieses Ziel erreichen wollen. Ich danke daher meinen Trainingspartnern Dr. Stefanie Dorn und Dr. Simon Krapp für ihre langjährige, freundschaftliche Begleitung „vom Hiwi bis zum Doktor“, das gegenseitige Aufbauen und Unterstützen, die gemeinsamen Reisen und die vielen heiteren Momente in den letzten Jahren. Zudem geht ein besonderer Dank an Ralph Müßig, der durch alle Phasen des Rennens hinweg bei zahlreichen Gesprächen, abendlichen Laufrunden und anschließenden Kaltgetränken verlässlich nicht nur mit seinen Erfahrungen und Ratschlägen geholfen hat, sondern auch für die nötige Lockerheit sorgte. Ein Lauf ist jedoch nichts ohne das gesamte Läuferfeld, das ebenfalls zum Rennen angetreten ist und dessen kollegiale Unterstützung das Promovieren leicht gemacht hat. Ich danke daher Dr. Tobias Lukowitz, Thilo Heyer und Simon von Danwitz sowie Paul Schneider, Dr. Falco Jaekel, Christoph Menke und Oliver Wirths für ihren engagierten Beitrag. Wer einen Marathon gemeistert hat, der weiß, dass es unterwegs sowohl Phasen gibt, in denen alles wie von selbst läuft, aber das auch längere Durchhänger und Durststrecken zu überstehen sind, während derer man leicht die Machbarkeit des Vorhabens in Frage stellen kann. In solchen Situationen hilft oftmals nur das Publikum, ohne dessen Anfeuerungen und Unterstützung von außen schnell die nötige Energie für das Durchhalten verloren geht. Deshalb gilt mein besonderer Dank meiner Familie, Hildegard, Heinz Peter und Simone Schmitz, Kethe Lützler, Iris, Norbert und Christina Mandt, die mir jederzeit die Wegstrecke freigehalten, bei Bedarf Verpflegung gereicht und große Zuversicht verbreitet haben. Mein größter Dank gilt aber meiner Frau Isabell, die mich nicht nur zu Beginn zur Promotion ermutigt, sondern mit der ich die Erfahrung einer Promotion über alle Höhen und Tiefen hinweg teilen konnte und dabei mein Rückhalt war. Gegenseitiges Verständnis, unzählige Gespräche über unsere Projekte und aufmunternder Zuspruch haben mich stets motiviert und waren meine größte Hilfe, insbesondere in Nachtschichten vor drohenden Abgabefristen. Ihnen allen ist dieses Buch gewidmet. viii

Im Ziel angekommen, ist die Freude über das Erreichte groß. Ich bin dankbar für die Zeit am Seminar für Unternehmensführung & Logistik und für die Möglichkeit, die oben genannten Menschen durch den Promotionsmarathon kennengelernt zu haben. Obwohl das zurückgelegte Rennen angestrengt hat, diskutiert man im Ziel eines solchen Laufs unter allen Beteiligten immer dieselbe Frage: „Würdest Du nochmal an den Start gehen?“ - Also ich wäre dabei. Tobias Mandt

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Table of Contents Geleitwort .................................................................................................................. v Vorwort ................................................................................................................... vii Table of Contents .................................................................................................... xi List of Figures ........................................................................................................ xiv List of Tables ........................................................................................................... xv List of Abbreviations ............................................................................................. xvi 1. Introduction .......................................................................................................... 1 1.1. Motivation ....................................................................................................... 1 1.2. Theoretical embedding.................................................................................... 3 1.2.1. The dependence construct in business research .....................................3 1.2.2. Buyer-supplier relationships as a specific field of inter-organizational exchange ................................................................................................5 1.2.3. Dependence in buyer-supplier relationships ..........................................7 1.3. Research focus and structure of the cumulative dissertation project ............ 9 References ............................................................................................................ 14 2. Dependence in Buyer-Supplier Relationships – Present State and Future Perspectives ............................................................. 19 2.1. Introduction ................................................................................................. 20 2.2. Dependence in buyer-supplier relationships ............................................... 21 2.2.1. Theoretical explanations for the existence of dependence ..................21 2.2.2. Buyer-supplier relationships................................................................22 2.3. Systematic literature review ........................................................................ 23 2.3.1. Review approach .................................................................................23 2.3.2. Initial observations ..............................................................................27 2.4. Present state of BSD research ..................................................................... 30 2.4.1. Dependence causes ..............................................................................30 2.4.2. Dependence forms ...............................................................................32 2.4.3. Dependence effects..............................................................................34 2.4.4. Perceptions of and attitudes towards dependence ...............................37 2.4.5. Dependence management ....................................................................38 2.5. Future research suggestions on BSD .......................................................... 39 2.6. Conclusion................................................................................................... 42 References ............................................................................................................ 44

3. The Emergence of Dependence and Lock-in Effects in Buyer–Supplier Relationships – A Buyer Perspective ................................................................ 51 3.1. Introduction .................................................................................................. 52 3.2. Dependence and lock-in in buyer–supplier relationships ............................ 53 3.3. Empirical setting and methodology ............................................................. 56 3.3.1. Approach and case selection ............................................................... 56 3.3.2. Case context ........................................................................................ 57 3.3.3. Data collection .................................................................................... 57 3.3.4. Data analysis ....................................................................................... 60 3.4. Findings ....................................................................................................... 62 3.4.1. Convincing .......................................................................................... 62 3.4.2. Tying ................................................................................................... 64 3.4.3. Complementing ................................................................................... 65 3.4.4. Lock-in ................................................................................................ 65 3.5. Towards a conceptual model of the emergence of dependence and lock-in situations in buyer–supplier relationships ................................................... 67 3.5.1. Dynamics leading to dependence and lock-in .................................... 67 3.5.2. Convincing .......................................................................................... 69 3.5.3. Tying ................................................................................................... 70 3.5.4. Complementing ................................................................................... 71 3.5.5. Lock-in ................................................................................................ 72 3.6. Discussion .................................................................................................... 73 3.6.1. Theoretical implications ...................................................................... 73 3.6.2. Managerial implications ...................................................................... 75 3.7. Conclusion ................................................................................................... 76 References ............................................................................................................ 78 Appendix .............................................................................................................. 83 4. Managing Distinct Buyer–Supplier Dependencies – A Typological Differentiation ............................................................................ 85 4.1. Introduction .................................................................................................. 86 4.2. Theoretical foundations ............................................................................... 87 4.2.1. Resource dependence theory............................................................... 87 4.2.2. Relational view ................................................................................... 88 4.3. Buyer–supplier dependencies ...................................................................... 88 4.3.1. Buyer–supplier relationships .............................................................. 88 4.3.2. Inter-organizational dependence ......................................................... 89 4.3.3. Handling buyer–supplier dependencies .............................................. 90 4.3.4. Structuring distinct BSDs.................................................................... 95 4.4. Managing BSDs ......................................................................................... 109 4.4.1. Low/ asymmetric dependencies ........................................................ 109 xii

4.4.2. Low/ symmetric dependencies ..........................................................110 4.4.3. High/ asymmetric dependencies ........................................................111 4.4.4. High/ symmetric dependencies .........................................................112 4.5. Discussion ................................................................................................. 113 4.5.1. Theoretical implications ....................................................................114 4.5.2. Managerial implications ....................................................................116 4.6. Conclusion................................................................................................. 117 References .......................................................................................................... 118 5. Phases and Drivers of Buyer-Supplier Dependence - Developmental Insights of a Logistics-Service Relationship in Textile Retailing ................ 123 5.1. Introduction ............................................................................................... 124 5.2. Theoretical foundations ............................................................................. 125 5.2.1. Buyer-supplier dependence ...............................................................125 5.2.2. The development of buyer-supplier relationships .............................127 5.3. Methodology ............................................................................................. 128 5.3.1. Case-study approach and empirical context ......................................129 5.3.2. Data collection ...................................................................................130 5.3.3. Data analysis ......................................................................................130 5.4. The case of a logistics service relationship in textile retailing ................. 132 5.5. Phases and drivers of buyer-supplier dependence .................................... 139 5.5.1. Phases of buyer-supplier dependence................................................139 5.5.2. Towards a model on driving forces of BSD development ................146 5.6. Discussion ................................................................................................. 148 5.7. Conclusion................................................................................................. 151 References .......................................................................................................... 153 6. Conclusion & Outlook ..................................................................................... 157 References .......................................................................................................... 160

xiii

List of Figures Figure 1.1:

Structure of the dissertation project

9

Figure 2.1:

Data reduction process

25

Figure 2.2:

Number of search hits as of year of publication in the review sample

27

Figure 2.3:

Spread of review contributions across research domains

28

Figure 2.4:

Current state of research on buyer-supplier dependence

33

Figure 3.1:

Analysis steps and resulting data structure

63

Figure 3.2:

Model on the emergence of dependence and lock-in in buyersupplier relationships

68

Figure 4.1:

The IMP-Model

89

Figure 4.2:

Strategies to handle buyer-supplier dependencies

91

Figure 4.3:

Strategy recommendations for characteristic dependence types

115

Figure 5.1:

The TexCo – Log-Inc. history

133

Figure 5.2:

Characteristic milestones TexCo – Log-Inc. relationship

140

Figure 5.3:

Phases of buyer-supplier dependence

145

Figure 5.4:

Sequences of dependence buildup, dependence extension, and conflict

146

Figure 5.5:

Driving forces that trigger dependence phases

149

List of Tables Table 1.1:

Overview of the dissertation project

12

Table 2.1:

Applied combination of search terms in the data collection process

24

Table 2.2:

Inclusion criteria as applied in the review process

26

Table 2.3:

List of journals represented in the final review sample

29

Table 2.4

Number of studies in the review sample per year and focus

30

Table 3.1:

Preliminary observations and data sources

59

Table 4.1:

Summary of BSD management measures

94

Table 4.2:

Structural approaches towards dependence constructs across extant literature

96

Table 4.3:

The dependence magnitude dimension

98

Table 4.4:

The relational dimension

102

Table 4.5:

A systematic structure of dependence types

103

Table 4.6:

Forms of buyer-supplier dependencies

106

Table 5.1:

The conceptual dependence construct

126

Table 5.2:

Characteristics of fashion markets

129

Table 5.3:

List of conducted interviews

131

Table 5.4:

Changes in the dependence construct across characteristic milestones

142

List of Abbreviations 3PLR

Third-party logistics relationship

BS

Buyer-supplier

BSD

Buyer-supplier dependence

BSR

Buyer-supplier relationship

BSRs

Buyer-supplier relationships

CEO

Chief Executive Officer

IMP

Industrial Marketing and Purchasing (IMP-Group)

IOR

Inter-organizational relationship

IORs

Inter-organizational relationships

OEM

Original equipment manufacturer

PPR

Price-performance ratio

RDT

Resource dependence theory

RV

Relational view

TCE

Transaction cost economics

1. Introduction 1.1. Motivation When Hassan, the chef of the new Indian restaurant Maison Mumbai, visits the local market one morning, he finds none of the products he needs on the stalls. In order to hamper Hassan, her new competitor, Madame Mallory, owner of a Michelin-starred restaurant, also went to the market to deliberately buy the entire stock of fish, vegetables and ingredients of superior quality. Hassan, who is just preparing for Maison Mumbai’s grand opening night, is under pressure to get hold of the ingredients he still needs. Being in this critical situation, Hassan is forced to travel to the next town to buy alternative products of inferior quality in order to adapt the pre-planned menu and create novel Franco-Indian dishes at the last minute. While these are only scenes from a movie called ‘The Hundred-Foot Journey’, they also well depict a frequently experienced situation in which an organization, as well as its final product, is directly influenced by the conditions in the supply market. It points out the interconnected nature of two firms positioned at consecutive stages of value chains, which scientific research calls buyer-supplier relationships (BSRs) (Håkansson, 1982). Moreover, Hassan’s specific situation sheds light on one potential problem that management practitioners experience on an ongoing basis, namely, the dependence on external input factors as a necessity to conduct their business and to prepare their final product. These dependencies in BSRs represent a ubiquitous problem in everyday business. Dependence can be described as the need to rely on a partner’s input when pursuing one’s own goals (Frazier, 1983). Prominent examples of such situations can be found in different contexts, such as retailing, the automotive and technology industries, or even governmental intelligence services. For Markus Mosa, CEO of the large German retail chain Edeka, the strategic decision to produce selected goods as a private label enables a company “not to get into strong dependencies towards the industry” (Focus, 2014). While, in this case, the buying company reacts to a (potential) dependence situation, in other examples it is a supplying firm that is facing dependence relations. Dialog Semiconductor, for instance, is a German manufacturer of computer chips, which manage the power supply in smartphones. The company fears an announcement by Apple to invest in a center for computer chip production in order to produce these on their own, given that the American customer account for 70 percent of Dialog’s overall business (Haas, 2017). Most prevalent are cases in the automotive industry when expensive production stops are acknowledged as disruptions in critical supply relationships. Only recently, Bosch caused a production stop in BMW’s German and Chinese production plants because of a lack of casting parts. Bosch, which was dependent on an Italian supplier who faced financial problems, finally reacted by buying the Italian firm in order to fully ensure a reliable supply in the future, thus avoiding © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 T. Mandt, Dependence in Buyer-Supplier Relationships, Edition KWV, https://doi.org/10.1007/978-3-658-24252-7_1

TOBIAS MANDT

compensation payments to their customers, such as BMW (Spiegel, 2017). Such instances even apply to other organizational settings: “We are strongly dependent […] and this dependence is dangerous” was the comment of a political expert reporting on the “outsourcing” of the German intelligence service to the American foreign intelligence agency with regard to the prevention of terroristic attacks in Germany (Steinberg, 2015). When comparing these distinct examples, it becomes clear that dependence situations are of major relevance and impact for the involved organizations. Such dependencies exist because firms are unable to produce every required input factor on their own, while having to rely on exchanges with partner firms (Buchanan, 1992). These exchanges are again seldom one-time occurrences; rather, they take place on a repetitive basis, as firms have a constant demand for resources, such as products, services, employees, financial support, or information and advice (Ring & Van de Ven, 1992). This results in buyer-supplier relationships that promise efficient administration and improvements in the performance of the exchange. Academic research has intensively examined these repeated exchanges, identifying the most crucial constructs that characterize BSRs, of which dependence is considered to be of major importance (Andaleeb, 1996; Kumar et al., 1995). This importance of dependence to BSRs is also mirrored in the different theoretical approaches to explain its existence. With reference to theoretical frameworks, such as transaction cost economics (TCE) or resource dependence theory (RDT), scholars have focused on the origins and reasons for dependence (e.g., Hammervoll, 2005), on its different appearances (Thompson, 1967), and on the impact of dependence on the processes in and outcomes for BSRs (e.g., Gassenheimer & Ramsey, 1994; Geyskens, Steenkamp, Scheer & Kumar, 1996; Gulati & Sytch, 2007; Razzaque & Boon, 2003). Despite this attention paid to dependence within BSRs, extant research has neglected to integrate these findings into a coherent framework that illustrates their interplay. Moreover, research on buyer-supplier dependence (BSD) is predominantly characterized by static investigations into interrelations between dependence, which is in contrast to BSD being as an inherently dynamic construct (Laaksonen et al., 2008). It is the aim of this thesis to connect to with prior work on dependence within BSRs. In a cumulative manner, the first aim is to consolidate the extant and so-far isolated knowledge about BSD in order to comprehensively depict the current state of research on BSD. Secondly, based on this overview, an understanding of which factors are involved and which mechanisms interact in an emerging BSD is pursued. Building on this understanding, it is necessary to distinguish between specific types of dependencies in BSRs and to explore how to handle these in the best way. Lastly, this thesis pays attention to the construct’s dynamic nature by investigating how BSD develops over time. By way of introducing this thesis, this synopsis should prepare the groundwork by first presenting the theoretical background of organizational dependence as well as the nature 2

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

of BSRs in more detail. The subsequent sections will provide a brief overview of existing BSD research, before an overarching research framework for this thesis’ research questions is derived. Finally, this synopsis makes links with the four cumulative studies by providing an overview of their respective motivation, research question, approach and contribution in more detail.

1.2. Theoretical embedding 1.2.1. The dependence construct in business research The demotic meanings of being dependent as “determined or conditioned by another” as well as “relying on another for support” and “subject to another’s jurisdiction” (Merriam-Webster, 2017) provide orientation for the discussion about dependence in management research. With regard to the context of this thesis, the subject within these definitions (‘another’) can be interpreted as organizations and individuals who are the main actors in business exchanges (Håkansson, 1982). Such interactions can take place between single individuals as well as between groups of individuals (Thibaut & Kelley, 1959). It is this particular relation between groups of individuals, and more specifically between organizations, such as companies, that is the focus of this thesis. The organizational examination of dependence dates back to the seminal work of Emerson (1962), who stated that: “The dependence of actor A upon B is (1) directly proportional to A’s motivational investment in goals mediated by B, and (2) inversely proportional to the availability of those goals to A outside to the A-B relation” (Emerson, 1962, p. 32). Thompson (1967), meanwhile, made reference to this definition by explaining the dependence on an element as the degree to which an organization needs resources or performances that this particular element can provide. He further interpreted Emerson’s dependence definition as the inverse degree to which other elements can provide the same elements or performance (Thompson, 1967). This understanding spurred the interest of scholars towards paying attention to the organizational environment (Aldrich & Pfeffer, 1976). In particular, relational marketing researchers utilized this conception in order to examine partner interrelations and explore the dependence term as a determinant for long-lasting relationships (e.g., Anderson & Narus, 1990; Ganesan, 1994; Hallen, Johanson & SeyedMohamed, 1991). Here, dependence is commonly understood as the extent to which a firm needs to maintain a relationship in order to achieve its desired goals (Frazier, 1983). Anderson and Narus also referred to Emerson’s initial perception by defining dependence in a less technical manner as the superiority of the outcomes of a specific relationship, as opposed to the outcomes of potential alternative relationships (Anderson & Narus, 1990). Buchanan (1992) further defined the construct as the extent to which a trade partner provides important and critical resources for which there are few alternative sources of supply.

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Taking these varying understandings together, this thesis refers to four characteristics, which summarize the basic understanding of dependence. According to Heide and John (1988), dependence relations are understood as describing either: (1)

important, critical, or large scope relationships,

(2)

exchanges with the only exchange partner of a firm,

(3)

exchanges that account for a high share of an actor’s entire exchanges, or

(4)

larger or superior exchanges compared to available alternatives.

This dependence description serves as the underlying understanding of this thesis. Dependence is a two-sided construct, ranging from balanced to imbalanced dependencies (Stern & Reve, 1980). Emerson’s definition above represents the perspective of a single actor, who is dependent on another organization. Such one-sided dependencies are called asymmetric, unidirectional, unilateral or imbalanced (Gulati & Sytch, 2007; Roemer, 2004). However, research has also identified instances in which this understanding of dependence holds true for both organizations involved, meaning that both organizations are dependent on each other in a balanced way. These cases of interdependence are also called symmetric, bidirectional, bilateral or two-sided (Buchanan, 1992; Geyskens et al., 1996). The existence of dependence between organizations is explained by different theoretical lines of thought. First, RDT provides an explanatory logic, as it states that organizations are not self-sufficient enough to survive and thus need to rely on their external environment for an adequate supply of resources (Pfeffer & Salancik, 2003). At the same time as organizations rely on external input, they face an environmental uncertainty with regard to future access to the resources they need to survive (Hillman et al., 2009). This dependence towards the external environment among organizations needs to be managed, since they are assumed to strive for maximum autonomy and thus control over the required resources (Albers, 2005). Hence, as RDT touches the core of existing dependencies, it has informed many of the studies in the field (e.g., Bourantas, 1989; Casciaro & Piskorski, 2005; Ebers & Semrau, 2015). Second, TCE discusses the costs associated with a specific exchange (Williamson, 1981). In turn, it describes so-called switching costs as the costs associated with leaving an exchange partner, as well as searching for an alternative partner and setting up a comparable exchange with a successor (Scheer et al., 2015). Making use of the dimensions of asset specificity, frequency and uncertainty, it postulates an increase in switching costs for exchanges that are centered around frequently required, inherently specific and particularly uncertain transactions (Rindfleisch & Heide, 1997). Such high switching costs foster dependence on an exchange partner, as they can overcome the financial strength or economic viability of the intended change in the partner organization (Caniëls & Gelderman, 2007; 4

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

Harrison et al., 2012). Hence, the transaction cost approach is frequently taken into consideration in studies on organizational dependence (e.g., Geiger et al., 2012; Kim, Jung & Park, 2015). Finally, the relational view (RV) supports the existence of organizational dependence and considers potential sources for companies to sustainably gain competitive advantages (Dyer & Singh, 1998). It assumes that organizations are embedded in diverse interrelations to other organizations and, as such, pursue different ways of interaction. By either jointly investing in assets that are of specific value to the interacting organizations, or by combining complementary skills, resources or knowledge on a routinized basis, the RV points to so-called relational rents. These are profits that exceed those that an organization is able to earn on its own terms and are directly linked to a specific exchange relationship (Dyer & Singh, 1998). Hence, these relational rents can resemble an important or critical input or a sufficiently large share of income for an organization that is dependent on the partner organization with which these relational rents are created. In comparison to RDT and TCE, RV is less applied in studies in this field, despite several calls for its consideration (van Weele & van Raaij, 2014). The above descriptions of dependence represent how dependence is interpreted in each of the following studies within this cumulative thesis. In particular, this understanding of dependence is applied to the specific relational setting of so-called BSRs.

1.2.2. Buyer-supplier relationships as a specific field of inter-organizational exchange Arrangements in which organizations interact with other organizations are called interorganizational relationships (IORs), which are of major significance to company performance (Delfmann & Albers, 2000). Due to the amount, variety and complexity of tasks that have to be fulfilled in order to provide a final product or service to the market, companies rely on the contributions of external parties in their production or service creation process (Barthélemy, 2003; Dyer & Singh, 1998; Lieb, 1992; Razzaque & Sheng, 1998). IORs exist in various forms and can be differentiated according to the number of involved organizations (Johnsen et al., 2008), the direction in which the interacting parties are positioned in the value chain (Dussauge & Garrette, 1999) and the intensity of their interaction (Makadok & Coff, 2009). With regard to the number of involved organizations, at least two interacting organizations have to be in contact to form an IOR. This minimal form of an IOR is called a dyad (Johnsen et al., 2008). In addition to dyadic, or also called bilateral, relationships, scholars have examined relationships in triadic relationships (comprising exactly three organizations) (Choi and Wu, 2009), as well as IORs involving more than three organizations.

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These forms of IORs are called multilateral relationships and are - determined by their composition and perspective - networks (Lazzarini, 2008), alliances (Das & Teng, 2002), or partner portfolios (Wassmer, 2010). Concerning the direction of relationships, vertical and horizontal interactions can be distinguished. In turn, vertical relationships encompass participating organizations at subsequent stages of a value chain (Dussauge & Garrette, 1999), such as an industrial producer of groceries and a retail firm. In contrast, horizontal relationships describe the interaction between organizations that are located at the same stage of the value chain, such as cooperation between transportation companies (Schmoltzi & Wallenburg, 2011). As a third dimension, the intensity with which organizations interact varies. As described by TCE with respect to the frequency of exchanges (Williamson, 1981), one can roughly differentiate between a single occurrence of interaction between organizations and the repeating interaction of organizations, as well as a permanent and continuous interaction of two or more organizations (Håkansson, 1982). This thesis focusses on dyadic interactions between two vertically arranged firms. These so-called BSRs (Choi & Wu, 2009; Håkansson, 1982; Johnsen et al., 2008) are fundamentally different from horizontal relationships (e.g., Bengtsson & Kock, 2000; Gulati, 1995; Rindfleisch, 2000; Schmoltzi & Wallenburg, 2011). First, vertical relationships are the fundamental exchange setting between firms (Iacobucci & Hopkins, 1992), in which buyer and supplier have a mutual interest to interact (Bengtsson & Kock, 2000) in order to realize the provision of important resources and necessary inputs (Rindfleisch, 2000). As such, vertical relationships develop innately based on a firm’s core reason for existence, i.e., buying and selling goods and services, and a mutual interest regarding interaction (Bengtsson & Kock, 2000), whereas horizontal relationships have to be initiated on purpose. Second, the complementary sets of skills is also taken as a reason why dependence in vertical relationships is more likely and perceived to be higher than in horizontal relationships (Gulati, 1995; Rindfleisch, 2000). While vertical relationships emerge because of this complementarity, horizontal relationships can also exist without complementary resources by, e.g., combining resources or capabilities to mutually expand capacities. Hence, the purpose of vertical relationships can be described as relationship sustenance and disposal in terms of buying and selling products or service. Conversely, the purpose of horizontal relationships can be described as being focused on company improvement by the joint creation of innovations, efficiencies or market positions. Third, with regard to company interaction, scholars have referred to a higher level of trust and interfirm cooperation for vertical, rather than horizontal, relationships, which leads to an overall lower level of opportunism (Rindfleisch, 2000) and conflict (Bengtsson 6

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& Kock, 2000), but more intense levels of sharing knowledge (Mowery et al., 1996). Although researchers refer to these positive characteristics, vertical relationships come with the specificity of requiring a legal cooperation base, which at least takes the form of a purchasing contract if, e.g., one firm orders a product from another firm. This legal foundation could carry the potential for conflicts to occur, as the respective goals of buyer and seller, such as the price levels, may contradict. Such BSRs occur in many forms and are discussed in different areas of study, such as marketing and retail channels, outsourcing and third-party relationships, service arrangements, or purchasing and supply relationships. These BSRs are specifically characterized by their evolution from recurring transactions between partners over time (Schurr, 2007; Wilson, 1995), which are associated with many advantages (Dwyer et al., 1987), such as the buyer’s focus on core competences, accessing a specialist’s knowledge, skills and resources, reducing costs, or increased flexibility. Furthermore, shared costs, exploiting synergetic effects, and accessing complementary resources yield cost decreases and relational rents when producing an output or service (Dyer & Singh, 1998; Wilson, 1995). Extant research on such BSRs is well-established. From a European perspective, the Industrial Marketing and Purchasing (IMP) Group prepared the groundwork for studies on BSRs with their seminal development and discussion of the IMP-Model (Johnsen et al., 2008). The IMP-Model, according to Håkansson (1982), structures a BSR around two focal organizations, each of which is composed of employed individuals. Both organizations are described as interacting on a short- and long-term basis, and are thereby surrounded by a cooperative atmosphere, which involves distinct manifestations of power and dependence relations, cooperation, closeness, and mutual expectations of the two partner firms. Within this cooperative setting, the BSR is placed in an environment that encompasses the market structure, its dynamics, its degree of internationalization, its channel position and its social system (Johnsen et al., 2008). Such relationships have been the focus of various studies in the past. In turn, the predominant perspective has been on the practices of the buying company when selecting, evaluating and managing its supplier, while further emphasis has been placed on the dyad’s mutual relationship management, as well as on the operational performance or financial effects of being in a BSR (Terpend et al., 2008). Against this backdrop, research has identified the factors that enable BSRs to exist and operate. Among these, dependence is acknowledged to have an overarching meta role, which influences other relational constructs, such as power, conflict, trust and satisfaction in a BSR (Zhou et al., 2007). 1.2.3. Dependence in buyer-supplier relationships In order to examine the dependence construct in IORs, BSRs serve as “a logical starting point” (Zhou et al., 2007, p. 310), as they enable an examination of the behavior of actors 7

TOBIAS MANDT

(Stern & Reve, 1980). Studying dependence within IORs especially makes sense in BSRs, as the likelihood for partner dependence in a dyadic setting is higher than in a context involving multiple partners (Dussauge & Garrette, 1999). Furthermore, this basic level of interaction serves as a feasible and promising framework for studying dependence, which could yield insights that serve as starting points for expanding the view on a wider set of actors based on the derived findings (Iacobucci & Hopkins, 1992). Scholars argue that dependence is a crucial relational construct, along with commitment, trust and loyalty (Andaleeb, 1996; Kumar et al., 1995; Morgan & Hunt, 1994). Interestingly, the latter three constructs are widely acknowledged as positive and mandatory for successful relationships (Morgan & Hunt, 1994), whereas the former construct of BSD is inconsistently described and evaluated in the current literature (Gassenheimer et al., 1998). Dependence is commonly understood as the extent to which a partner firm contributes to the achievement of objectives in a way in which few alternatives exist (Buchanan, 1992; Emerson, 1962; Frazier, 1983). On the one hand, researchers specifically point to the risks of dependence on a partner, such as limited strategic flexibility, vulnerability or opportunism (Gulati & Sytch, 2007; Langley et al., 2013; Cahill et al., 2010; Lonsdale, 2001; Narasimhan et al., 2009). On the other hand, studies exist that highlight the positive effects of being in a dependence situation, such as more efficient processes or competitive advantages through mutual adaptation (Andaleeb, 1996; Anderson & Narus, 1990; Buchanan, 1992; Rindfleisch & Heide, 1997; Steensma & Corley, 2000). In addition, further approaches have looked at the topic from a more neutral, analytical perspective (Gulati & Sytch, 2007; Gulati et al., 2008; Maurer & Ebers, 2006; Kumar et al., 1995; Emerson, 1962; Salancik, 1986). One reason for the disparate evaluation of dependence could be its fundamental, overarching meta role as a precursor to any relational outcome, be it positive or negative (Zhou et al., 2007). Although dependence possesses this crucial role in the analysis of BSRs, research on BSD appears fragmented and isolated. Existing contributions predominantly focus on the sources that lead to BSD or on the effects of BSD. Exemplary sources for BSD include a limited scope of supply options (Kim et al., 2015) or superior supplier skills (Corsten & Felde, 2005; Kim & Wemmerlöv, 2015), whereas illustrative effects of BSD are mutual adaptation and integration (Hallen et al., 1991; Pennings et al., 1984), as well as increased vulnerability (Lee et al., 2015) or the threat of opportunistic behavior (Joshi & Arnold, 1998). Furthermore, authors have proposed that dependence has a mediating influence on relational long-term orientation (Chung, 2012) or relational norms (Provan & Gassenheimer, 1994). Few studies have examined the perceptions of involved actors on dependence, such as the loss of control (Cousins and Crone, 2003), or recommended potential management measures, such as forming coalitions with third parties (Emerson, 1962) or emphasizing one’s importance towards the partner firm (Ganesan, 1994; Pfeffer & Salancik, 2003). 8

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

1.3. Research focus and structure of the cumulative dissertation project Despite the variety of contributions on BSD from different literature streams, extant research lacks a common ground across the areas of general IORs, marketing channels, supply chain or strategic management, and outsourcing. Moreover, the aforementioned areas of interest in BSD research have been investigated in isolation, rather than simultaneously. As such, the BSR arena has treated dependence in one-dimensional terms as appearing either unilaterally or bilaterally, without paying attention to various intermediate forms that could result from different characteristics. Lastly, only a few scholars have attempted to apply a long-term perspective to BSD in particular, although BSD is considered to evolve and change over time (Håkansson & Snehota, 1995). Addressing these restrictions in the extant literature, this thesis sets out to contribute to the field of BSD research by investigating the following overarching research questions: Based on the extant knowledge about BSD: 1) Which factors and mechanisms lead to BSD and in what particular way? 2) How can the resulting characteristic dependence situations be individually managed and how do they develop over time? These research questions are approached in four individual, but logically interlinked, steps, which are illustrated in Figure 1.1. 2

1

Dependence in BuyerSupplier Relationships – Present State and Future Perspectives

The Emergence of Dependence and Lock-in Effects in Buyer-Supplier Relationships – A Buyer Perspective How do dependencies emerge? (Qualitative empirical study)

3 Managing Distinct Buyer–Supplier Dependencies - A Typological Differentiation

What do we know about BSD? (Systematic literature review)

How to cope with different types of BSD? (Conceptual typology development)

4

Phases and Drivers of Buyer-Supplier Dependence – Developmental Insights of a Logistics Service Relationship in Textile Retailing How does BSD develop over time? (Qualitative empirical study)

Figure 1.1: Structure of the dissertation project

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The initial aim is to consolidate the extant and so-far isolated knowledge on BSD in order to comprehensively depict the current state of research. To do so, this thesis starts off with a systematic overview of the existing knowledge in the field. Secondly, the focus is set on the emergence of BSD by questioning how far previously described triggers of dependence interact, to identify the underlying mechanisms that form a dependence relationship. Afterwards, the so-far inconsistent recommendations on how to cope with BSD are addressed by conceptually arguing for their fit, depending on characteristic situations of BSD. Lastly, this thesis pays attention to the construct’s dynamic nature by investigating how BSD develops over time. Taken together, this thesis summarizes the extant knowledge on BSD, it sheds light on how dependencies emerge and how they can be managed in distinct situations, before proposing phases of its development over time. In order to do so, the remainder of this thesis is structured as follows: Chapter 2 is called “Dependence in Buyer-Supplier Relationships – Present State and Future Perspectives”1. This paper is a single-authored systematic literature review and provides an introduction to this thesis. It investigates the extant literature in the field of BSD, which appears to be scattered across distinct research domains and involves differing findings. This impedes a synthesized and holistic overview of the extant knowledge, which might serve as an orientation point for future studies. Therefore, this study conducts a systematic literature review covering the time span between 1984 and 2016. By looking at 98 studies published on BSD across different outlets, it locates the results from earlier studies into a coherent framework. Accordingly, the BSD domain consists of studies focusing on the causes, forms and effects of BSD, as well as on its mediating influences, the perceptions of involved actors and recommended managerial measures. The study presents extant findings in each of these topic areas. This serves as the basis from which to point to eight specific directions for future research on BSD. Among these, it is proposed that there should be a move away from the focus areas to a more integrated examination of the topic, while focusing on behavioral and time-oriented perspectives relating to BSD. Chapter 3 is called “The Emergence of Dependence and Lock-in Effects in BuyerSupplier Relationships – A Buyer Perspective”2. This co-authored3 study refers to widely 1 An earlier version of this paper was presented at the 31st Annual IMP Conference and Doctoral Colloquium in Kolding (Denmark). 2 A developing version of this paper was presented at the 2014 Academy of Management Annual Meeting in Philadelphia (USA). 3 This study was co-authored with Dr. Bastian Schweiger and Dr. Jost Daft. My contribution to this study was focused on the data collection, which took place as part of a student project in 2012. Data were collected by conducting expert interviews, as well as by acting as a participant observer in the field for five months. Furthermore, my contribution to this study also included the paper’s framing in the introduction, the theoretical background on dependence and lock-in, the data analysis, and the development, argumentation and discussion of the resulting theoretical model. Dr. Schweiger contributed to the selection and argumentation of the methodological approach, while Dr. Daft contributed by discussing the context of logistics relationships. All three authors participated in developing the theoretical model’s rationale.

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discussed sources that lead to dependence and lock-in situations between buyers and suppliers. These sources, however, have only been examined in isolation before. Thus, prior research has neglected the underlying mechanisms that connect distinct sources of BSD, while failing to explain their interplay, which leads to the emergence of dependence relationships. Therefore, the purpose of this study is to uncover and explain these mechanisms by examining a case study involving a third-party logistics relationship in the German mechanical engineering industry. By using a grounded theory approach to analyze the qualitative data, the study proposes an explanatory model that reveals the four specific theoretical dimensions of convincing, tying, complementing and lock-in in order to explain how dependencies and lock-in situations emerge. This model enables the derivation of theoretical implications regarding single constructs and future research suggestions, while also providing managerial implications from a buyer’s perspective on managing service provider relationships. Chapter 4 is called “Managing Distinct Buyer-supplier Dependencies – A Typological Differentiation”4. In this single-authored paper, the dependence construct is discussed conceptually. Prior research has recommended contrasting management measures for coping with BSD. This has left practitioners with little guidance and a mixture of strategy proposals, which range from the termination to an expansion of a relationship. This paper, however, suggests that both strategic directions could be appropriate, if they are applied in a suitable situation. Therefore, it first reviews extant strategic recommendations on BSD and integrates them into four strategy groups. Afterwards, the paper makes use of the theoretical dependence construct’s components, as discussed in prior studies, in order to develop eight distinct types of BSD. These are presented in detail, along with arguments for their relevance. As a final step, an allocation of the four strategy groups to each form of BSD is proposed. In order to achieve this, reference is made to decision parameters introduced by both the RV and RDT. As a result, this paper responds to the calls made in prior research by jointly considering the RV and RDT in BSD discussions. Second, it integrates seemingly contradicting strategy propositions based on situation-specific recommendations for practitioners. Lastly, the suggestion of a dependence typology provides a starting point for future research on characteristic dependence situations to a more differentiated extent. Chapter 5 is called “Phases and Drivers of Buyer-supplier Dependence – Developmental Insights of a Logistics Service Relationship in Textile Retailing”5. This single-authored,

4

An earlier version of this article was presented at the 2016 Academy of Management Annual Meeting in Anaheim (USA). 5 This working paper was presented at the 2017 CEMS Seminar on Supply Chain Management in Riezlern (Austria), where it received the award for the best PhD presentation. A further developed version was presented at the 2017 NOFOMA Conference of the Nordic Logistics Research Network in Lund (Sweden). This working paper is targeted to be submitted to Industrial Marketing Management.

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work-in-progress paper addresses the so-far static examinations of BSD, which contrast the dynamic nature of dependence as an evolving state over time.

Chapter

Study [Author(s), Journal, Status]

2

Tobias Mandt

Dependence in Buyer-supplier Relationships – Present State and Future Perspectives International Journal of Physical Distribution & Logistics Management (Impact factor: 2,577; VHB: B) Under review, second round (revise & resubmit in first round [special issue on structured literature reviews]).

3

Tobias Schmitz6, Bastian Schweiger and Jost Daft

The Emergence of Dependence and Lock-in Effects in Buyer–supplier Relationships – A Buyer Perspective Industrial Marketing Management (Impact factor: 3,166; VHB: B) Published: Special topic forum ‘The Dark Sides of Buyer-supplier Relationships; 2016 (May), Vol. 55, pp. 22-34.

4

Tobias Mandt

Managing Distinct Buyer-supplier Dependencies – A Typological Differentiation Journal of Purchasing & Supply Management (Impact factor: 3,24; VHB: B) Under review, first round.

5

Tobias Mandt

Phases and Drivers of Buyer-supplier Dependence – Developmental Insights of a Logistics Service Relationship in Textile Retailing Presented at: NOFOMA Conference 2017, Lund (Sweden); 14th CEMS Research Seminar on Supply Chain Management 2017, Riezlern (Austria). Working paper, targeted at Industrial Marketing Management. * Impact factor according to 2016 Journal Citation Reports, Clarivate Analytics; VHB-Ranking according to Jourqual 3 (2015), Verband der Hochschullehrer für Betriebswirtschaft.

Table 1.1: Overview of the dissertation project

6 The article ‘The Emergence of Dependence and Lock-in Effects in Buyer-supplier Relationships – A Buyer Perspective’, co-authored with Dr. Bastian Schweiger and Dr. Jost Daft, was published under the birth name of this thesis’ author, Tobias Schmitz. The subsequently developed studies in Chapters 1, 3 and 4 have been written under the name of Tobias Mandt.

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Although seminal conceptual studies exist, which elaborate on the development of BSRs by introducing life cycle models, on the whole, they take a more general perspective regarding BSRs. Hence, research on BSD to date lacks a long-term focus on the timely development of dependent BSRs over time. This paper is motivated to fill this gap. In order to do so, a BSR in the German textile retailing sector is examined, where a third-party logistics provider conducts the operations for a textile brand. By collecting interview-based data from affected managers, as well as secondary data from company or media archives, a 17-year timespan is observed. Based on a qualitative data analysis, a theoretical process model identifies five phases of a dependence development, namely, formation, stabilization, wake-up and defense phase, as well as a realignment and leverage phase. Furthermore, the driving forces that foster dependence development from phase to phase are identified and discussed. In turn, this study’s contribution is to make an initial attempt to understand the development of BSD over time and suggest future research directions. Managers of dependent BSRs can derive implications for potential precautionary measures as valuable insights.

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References Albers, S. (2005), The Design of Alliance Governance Systems, 1st ed., Kölner Wissenschaftsverlag, Köln. Aldrich, H.E. and Pfeffer, J. (1976), “Environments of Organization”, Annual Review of Sociology, Vol. 2, pp. 79–105. Andaleeb, S.C. (1996), “An Experimental Investigation of Satisfation and Commitment in Marketing Channels: The role of Trust and Dependence.”, Journal of Retailing, Vol. 72 No. 1, pp. 77–93. Anderson, J.C. and Narus, J. A. (1990), “A Model of Distributor Firm and Manufacturer Firm Working Partnerships”, Journal of Marketing, Vol. 54 No. 1, p. 42. Barthélemy, J. (2003), “The seven deadly sins of outsourcing”, Academy of Management Executive, Vol. 17 No. 2, pp. 87–98. Bengtsson, M. and Kock, S. (2000), “Coopetition in Business Networks - To Cooperate and Compete Simultaneously”, Industrial Marketing Management, Vol. 426 No. 29, pp. 411– 426. Bourantas, D. (1989), “Avoiding dependence on suppliers and distributors”, Long Range Planning, Vol. 22 No. 3, pp. 140–149. Buchanan, L. (1992), “Vertical Trade Relationships: The Role of Dependence and Symmetry in Attaining Organizational Goals”, Journal of Marketing Research, Vol. 29 No. February, pp. 65–75. Cahill, D.L., Goldsby, T.J., Knemeyer, A.M. and Wallenburg, C.M. (2010), “Customer Loyalty in Logistics Outsourcing Relationships: An examination of the moderating effects of conflict frequency”, Journal of Business Logistics, Vol. 31 No. 2, pp. 253–277. Caniëls, M.C.J. and Gelderman, C.J. (2007), “Power and interdependence in buyer supplier relationships: A purchasing portfolio approach”, Industrial Marketing Management, Vol. 36 No. 2, pp. 219–229. Casciaro, T. and Piskorski, M. (2005), “Power imbalance, mutual dependence, and constraint absorption: A closer look at resource dependence theory”, Administrative Science Quarterly, Vol. 50, pp. 167–199. Choi, T.Y. and Wu, Z. (2009), “Triads in Supply Networks: Theorizing Buyer - Supplier - Supplier Relationships”, Journal of Supply Chain Management, Vol. 45 No. 1, pp. 8–25. Chung, J.-Eu. (2012), “When and How Does Supplier Opportunism Matter for Small Retailers’ Channel Relationships with the Suppliers?”, Journal of Small Business Management, Vol. 50 No. 3, pp. 389–407. Corsten, D. and Felde, J. (2005), “Exploring the performance effects of key-supplier collaboration: An empirical investigation into Swiss buyer-supplier relationships”, International Journal of Physical Distribution & Logistics Management, Vol. 35 No. 6, pp. 445–461. Cousins, P.D. and Crone, M.J. (2003), “Strategic models for the development of obligation based inter-firm relationships: A study of the UK automotive industry”, International Journal of Operations & Production Management, Vol. 23, pp. 1447–1474. Das, T.K. and Teng, B. (2002), “Alliance Constellations: A Social Exchange Perspective”, Academy of Management Review, Vol. 27 No. 3, pp. 445–456.

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2. Dependence in Buyer-Supplier Relationships – Present State and Future Perspectives

Abstract

Purpose: Buyer-supplier relationships are characterized by dependence between the partners. Although dependence is considered to be a crucial factor in long-term dyadic relations, research on buyer-supplier dependence (BSD) appears to be isolated and scattered across different research domains and across single findings within the domain. Design/methodology/approach: This paper conducts a systematic review of the literature to integrate these contributions into a coherent framework as a basis for future studies. Findings: The present state of BSD research can be divided into the sub-areas of dependence sources, forms, effects, and mediating influences as well as the actor’s perceptions and management measures. These categories present a comprehensive overview on the field and serve as a basis to suggest selected research areas for future studies. Originality/value: Prior overviews on BSD are limited to minor areas of the domain by focusing on single issues and selected actor perspectives, thus neglecting major findings and interrelations between them. This systematic review tries to depict the entire scope of the domain by interlinking and structuring distinct sub-areas to serve as an orientation framework for future studies. Paper type: Literature review.

Keywords: Inter-organizational dependence; buyer-supplier relationships; industrial marketing, supply chain management; systematic literature review

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 T. Mandt, Dependence in Buyer-Supplier Relationships, Edition KWV, https://doi.org/10.1007/978-3-658-24252-7_2

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2.1. Introduction Buyer-supplier relationships (BSRs) describe long-term repetitive exchanges (Håkansson, 1982) between two partner firms that are located at two consecutive stages of the value-chain (Dussauge and Garrette, 1999), which enable organizations to focus on their core competencies (Dyer and Singh, 1998) while simultaneously addressing their constant demand for resources, such as products, services, employees, financial support, or informatory advice (Ring and Van de Ven, 1992). Academic research intensively examined BSRs and has identified commitment, trust, loyalty, and dependence as the most crucial constructs that characterize relationships (Andaleeb, 1996; Kumar et al., 1995; Morgan and Hunt, 1994). Thereby, dependence is acknowledged to have an overarching meta-role influencing other relational constructs (Zhou et al., 2007). It further differs from these other constructs, which are positively connoted for relationships (Morgan and Hunt, 1994), by preceding both positive and negative relational outcomes (Zhou et al., 2007), such as vulnerability or opportunism but also more efficient processes or competitive advantages through mutual adaptation (Andaleeb, 1996; Anderson and Narus, 1990; Buchanan, 1992; Rindfleisch and Heide, 1997; Steensma and Corley, 2000). Dependence is considered to be “the glue that binds partners together” (Bonner and Calantone, 2005, p. 54) and is commonly understood as the extent to which a partner firm contributes to the achievement of objectives in a way for which few alternatives exist (Buchanan 1992; Emerson 1962; Frazier 1983). Extant research has put efforts into understanding dependence more deeply, for which the vertical dyadic BSRs have served as “a logical starting point” of investigation (Zhou et al., 2007, p. 310). Thus, buyer-supplier dependence (BSD) has been examined for its sources, such as superior supplier resources skills (Corsten and Felde, 2005; Kim and Wemmerlöv, 2015) or restricted supply market options (Kim et al., 2015), for its characteristic forms, such as unilateral dependencies or bilateral interdependencies (Roemer, 2004), as well as for its influences on relationships (e.g. Huo et al., 2015; Kim and Henderson, 2015; Mallapragada et al., 2014), such as supply integration, relational value, or vulnerability. Although extant research discusses BSD in this kind, the described contributions on dependence sources, forms, or effects are examined in isolation respectively. Moreover, prior investigations appear to be scattered and fragmented in nature across research fields. While business-to-business marketing scholars predominantly focus on relational aspects, such as bonding (Chang et al., 2012), relational norms (Joshi and Arnold, 1998), or loyalty (Scheer et al., 2010), scholars from the supply chain management literature add views on cost impact (Narasimhan et al., 2009), innovation potential (Corsten and Felde, 2005), or supplier management (Carr et al., 2008). This is further accompanied by strategic management scholars that amongst others discuss governance issues, such as contractual safeguards (Buvik and Reve, 2001), opportunism (Provan and Skinner, 1989), or joint decision 20

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making (Cai et al., 2009) in BSD. Despite these findings, this existing research on BSD lacks a synthesized and holistic overview of extant findings across different research domains and findings which might serve as an orientation point and common ground for future studies to enhance more integrative studies on BSD. Thus, it is the aim of this paper to integrate existing contributions on BSD into a holistic framework capturing and presenting distinct sub-areas and prior findings comprehensively. By making use of a systematic literature review technique (Borgatti and Foster, 2003; Tranfield et al., 2003; Wassmer, 2010) this article follows a call for a synthesis of dependence literature (Scheer et al., 2010) and screens a total of 98 studies published between 1984 and 2016. Although there exist prior overviews on BSD research, these contributions limit themselves to a minor part of the entire BSD domain by focusing either on conceptual dependence forms (Tangpong et al., 2015) or on management measures for dependent actors (Habib et al., 2015), which neglects major findings and discussions within the field. Based on the present research, this systematic literature review analyzes the current state of research on BSD and provides a systematic overview that structures prior contributions into the sub-areas of dependence sources, forms, and effects, as well as the actor’s perceptions and management measures. It contributes by identifying key areas for future research that might be promising for the field. The article begins by providing a short overview on the understanding of the dependence construct and buyer-supplier relationships, before describing its methodological approach and the present state of BSD research. In concludes with arguing for potential focus areas, which might serve as a basis for future studies.

2.2. Dependence in buyer-supplier relationships 2.2.1. Theoretical explanations for the existence of dependence The underlying rationale of dependence is predominantly backed by two theoretical pillars. On the one hand, the transaction cost logic provides an explanatory framework for understanding the emergence of bonding effects that result in dependence situations (Rindfleisch and Heide, 1997). Frequent and specific transactions in an uncertain and complex setting raise the costs associated with a transaction (Williamson, 1981). In result, the distinct opportunities with regards to organizational settings on the market-hierarchy continuum become differently attractive (Makadok and Coff, 2009). Many firms choose relational partnerships in order to minimize transaction costs for recurring tasks or products (Dyer and Singh, 1998). Mutual adaptation between partners may decrease transaction costs, but at the same time increase the costs for switching to alternative opportunities (Geiger et al., 2012; Rindfleisch and Heide, 1997). Hence, the transaction cost approach argues that such switching costs may lead to inter-organizational dependencies as the costs

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of searching for a new partner exceed those that are connected with a continuation of the existing exchange (Caniëls and Gelderman, 2007; Harrison et al., 2012). Next to the transaction-cost rationale, resource-dependence theory (RDT) provides a second theoretical pillar for understanding BSD. RDT argues that firms need to rely on external resources in order to handle an uncertain environment (Pfeffer & Salancik, 1978). As the externally provided resources resemble the basis for conducting a business successfully, firms inevitably rely on these distinct resources (Casciaro and Piskorski, 2005), which prepares the ground for the emergence of partner dependence. The explanatory core of these two theoretical pillars can also be found in widely used definitions of dependence. Scholars define dependence as the mediating influence of one or both partners on one another in pursuing desired goals (Emerson, 1962). Dependence thus describes the critical contribution of a partner firm for which there exist few alternatives (Buchanan, 1992). This leads to the necessity of maintaining this specific relationship in order to achieve the aspired goals (Kale, 1986). From this point of view, the existing relationship can be described as being superior to any potential alternative relationships (Anderson and Narus, 1990). It is this understanding of dependence on a relationship towards a partner firm which is applied in this article.

2.2.2. Buyer-supplier relationships As pointed out in the definitions above, dependence frequently emerges in inter-organizational settings. Inter-organizational forms of interaction between companies can be observed in multiple ways. They can be differentiated along their direction (vertical, horizontal, or diagonal), as well as their intensity according to the market-hierarchy continuum (arm’s length relationships – closely integrated relationships). Furthermore, research distinguishes between the number of involved actors when discussing either dyadic, triadic or network relationships. In dyadic partnerships the probability of becoming dependent on a close exchange partner is amplified and particularly severe and consequential. Thus, these are well-suited to examine dependencies and also structurally different from e.g. triads, which are rather suited to investigate relations between two alternative linkages (AÅ ÆB vs. BÅ ÆC), whereas dyads enable an investigation between two actors in isolation (Choi and Wu, 2009). The focus of this review is on dyadic BSRs, as these represent the basic exchange setting between firms (Iacobucci and Hopkins, 1992) that provide complementary relational inputs (Gulati, 1995) on a more intense level of trust and cooperation (Rindfleisch, 2000), knowledge sharing (Mowery et al., 1996), and also conflict (Bengtsson and Kock, 2000) as in multilateral relationships, thus depicting a starting point to examine dependence more intensely.

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BSRs can be observed in different fields. While supply chain scholars frequently discuss outsourcing to a service provider in detail (Razzaque and Sheng, 1998), marketing research rather discusses channel partner relationships (Kumar et al., 1998) to both suppliers (Corsten and Felde, 2005; Turner et al., 2000) as well as customers (Harrison et al., 2012; Munksgaard, 2010), thus covering both sides of a firm’s boundaries. BSRs are specifically characterized by their evolution by recurring transactions between partners over time (Dwyer et al., 1987; Schurr, 2007; Wilson, 1995). In the course of this evolution, particularly the information and knowledge exchange increases, as well as the mutual integration of processes and joint investments by the partners (Dwyer et al., 1987; Wilson, 1995). As a result, BSRs endure over an extended period of time in contrast to single transactions via the market. In doing so, shared costs, the usage of synergy effects, and the access to complementary resources yield cost decreases and relational rents in producing an output or service (Dyer and Singh, 1998; Wilson, 1995). Scholars in the field of buyersupplier (BS) research, acknowledge dependence, next to commitment, trust and loyalty, as an indispensable construct for achieving successful long-term partnerships (Wilson, 1995). Thus, dependence plays a key role in BS literature, resulting in a wide array of insights. Also managerial practice supports the relevance of BSD as numerous examples can be observed within supply chain relationships, retail channels, IT-sourcing arrangements, or service relationships. Therefore, this review sets out to systematically consolidate the theoretical insights in order to develop an overview of extant BSD research.

2.3. Systematic literature review In order to develop a comprehensive picture of existing research on BSD, this paper conducts a systematic review approach (Borgatti and Foster, 2003; Dorn et al., 2016; Provan et al., 2007; Tranfield et al., 2003; Wassmer, 2010). This procedure is structured into three phases and results in first observations of the field.

2.3.1. Review approach An initial scoping phase was conducted to determine the search interval and appropriate search terms for this review (Tranfield et al., 2003). The first contributions on BSD got into discussion in the 1980s (Dwyer et al., 1987; Håkansson, 1982). Hence, the first reactions o this contribution were taken as a starting point, resulting in a search interval from 1984 until February 2016. The list of appropriate search terms is presented in Table 2.1. These were entered into the databases EBSCO, ABI/INFORM ProQuest and the Thomson Reuters Web of Science (Menz, 2012; Wassmer, 2010). Three databases were used to ensure that all relevant contributions were found. The search was limited to the subject areas of “business and management”. Potential outlets were limited to peer-reviewed academic 23

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journals in English, excluding practitioner oriented publications, editorials, or conference papers. This resulted in a total number of 4.269 hits. Applied search terms in the data collection Alliance* (dependen* OR interdependen* OR lock-in) AND Buyer-seller Buyer-supplier Collab* Cooperat* Dyad* Firm Interfirm Interorg* Inter-org* Mutual Organisation* Organization* Outsourcing Partner* Relation* Supplier Table 2.1: Applied combination of search terms in the data collection process

Based on this initial collection the sample reduction phase had to narrow down the number of articles according to commonly used principles. Figure 2.1 visualizes these steps. At first, the list was cleaned up by taking out double-hits and contributions from journals stemming from unrelated disciplines, such as natural-, or political sciences and law. After this stage the sample counted for 2.784 hits. Second, all titles and abstracts were checked. Studies were eliminated from the review sample, if they did obviously not fit to this review’s focus (Müller-Seitz, 2012; Provan et al., 2007). Among these were contributions on multi-partner relationships, information systems, internationalization processes, or organizational cultures. A large part of the eliminated studies found their way into the sample due to the morphological connection of the word ‘dependent’ to e.g. ‘dependent variable(s)’ which are part of many titles and abstracts of studies from diverse disciplines. After checking titles and abstracts 455 hits were left. Third, these articles were screened to check for their relevance to this review’s research question (Dorn et al., 2016; Müller-Seitz, 2012; Tranfield et al., 2003). As Table 2.2 summarizes, articles included into this review had to (a) focus on long-term vertical dyadic BSRs, thus excluding contributions on dependence in e.g. triadic or network relationships. Besides, articles had to (b) fit to the BSD domain, meaning that studies were discarded that e.g. only refer to RDT as supportive 24

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Keyword-search (peer-reviewed business and management journals )

Research focus: Is the article centered around BSD?

4.269

100

Exclusion of double-hits and not business/ management contributions:

Study quality: Is the article‘s journal of appropriate quality?

2.784

82

Title & abstract check: vertical dyadic BSR dealing with dependence?

Are there frequently cited studies not yet in the sample?

455

98 Figure 2.1: Data reduction process

argument (e.g. to bridge an argumentation for a differently focused research question) without adding insights to the BSD discussion. Many articles seemed to touch the issue of BSD in minor arguments, but rather treated BSD as a side-effect in their discussion, thus also failing to add insights to BSD. Thus, the process followed Tranfield et al. (2003) by determining the value of a study for this review based on the relevance of its research question compared to this review’s aim. Studies were excluded in which BSD did not explicitly take a key role in its research question or aim. Articles had to (c) add to existing knowledge by considering dependence as a key moderator or mediator, by testing at least one major hypothesis covering BSD, by discussing a central construct in a conceptual study, or by containing BSD as a core part of an explanatory model in case of a qualitative study. After this inspection the sample was reduced to 100 articles. In order to avoid a single-author bias in excluding studies, a representative number of selected cases was discussed with different colleagues at our department and with experts at a conference. As a last reduction step, (d) an appropriate quality of the studies has been ensured by checking for a journal’s recognition among the scientific community. To do so, three jour-

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nal ratings were considered regarding a journals quality (Brekalo and Albers, 2016). Journals had to yield either a five-year impact factor of at least one in Thomson Reuters’ journal citation report 2013, or a SJR score of at least one in the SCImago journal rank 2013 (SJR), or a B-rating in the German VHB-JOURQUAL-3 ranking.

(a)

Inclusion criteria

Rationale

Vertical buyer-supplier dyad

Basic inter-organizational setting, most prone to develop and experience dependencies; basis for insights into triads or networks

Long-term relationship

Dependence is considered to develop over time

(b)

Dependence in focus of the research Include studies discussion BSD in-depth instead of using dependquestion and aim ence to make other arguments

(c)

Adding-value to the dependence What are the key insights in detail? More in-depth examination discussion than significance test

(d)

Journal quality

(5 yr. IF >= 1, SJR >= 1, VHB >= B)

Ensure recognized quality standards as of the scientific community

Table 2.2: Inclusion criteria as applied in the review process

If a journal could not yield one of these criteria, its articles were excluded from the sample, leaving a final amount of 82 articles. Table 2.3 presents a list of the journals contributing articles to this review. As a final step, further sources that were initially not included in the review but consistently cited by many studies as being important to the field, were added to the review (e.g. Anderson & Narus 1990; Cannon & Perreault 1999; Ganesan 1994). Moreover, two studies that have been published after this review’s timespan in focus, but during the work on this paper, were added to the review as they met all inclusion criteria. These led to a final sample size of 98 included studies. Complementing the scoping and sample reduction phase, the data extraction phase consolidated the research questions, methods, and findings of the articles in the sample. Building on these consolidated insights, the remainder of this paper aims to give insights into the current state and future perspective of BSD research.

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2.3.2. Initial observations Analyzing the current knowledge on BSD, extant research falls into five distinct areas. First, prior studies can be grouped into a procedural sequence beginning with examinations on the (1) sources and causes leading to BSD. This is followed by a description of the (2) dependence construct itself, before leading to a group of studies that takes the (3) effects of dependence in a relationship into perspective. These three main research areas are complemented by studies that look into the involved (4) actors’ perceptions of BSD on a metalevel as well as by studies concluding (5) management measures based on the extant knowledge. While some of the most influential contributions stem from the early 1990s (Anderson and Narus, 1990; Buchanan, 1992; Ganesan, 1994; Gassenheimer and Ramsey, 1994; Provan and Skinner, 1989), the majority of the contributions as found in this review, has been published from the early 2000s on. A slight increase in publications within the BSD domain is observable in Figure 2.2, indicating the relevance of the topic.

Search results per year (01/1984 - 02/2016) 14 12 10 8 6 4 2 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0

Figure 2.2: Number of search hits as of year of publication in the review sample

Next to the increase in publications, the topic’s relevance can also be observed by the wide scope of journals and research domains in which they are published. The journals predominantly stem from the general and industrial marketing literature which provides the largest amount of contributions. The supply chain and strategic management domains – as of the publishing journals – lack behind with smaller amounts of contributions adding to the BSD discussion. This distribution across the three major fields is also represented 27

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(amongst others) by the inputs of Industrial Marketing Management (17), Journal of Marketing Research (6), International Journal of Physical Distribution & Logistics Management (6), as well as the Journal of Business Research (7). Spread across research domains 3,1%

1,0% 1,0%

General Marketing

3,1%

B2B / Industrial Marketing 25,5% 19,4%

SCM Management Retail

19,4%

Operations Research 27,6%

Organization Theory Transportation

Figure 2.3: Spread of review contributions across research domains (Classification into research areas based on the allocation of VHB’s journal ranking)

These research domains put different emphasis on the five sub-areas of dependence causes, forms, effects, and mediating influences. Thus, B2B-marketing influences can be found in each of the five research sub-areas with a clear focus on the dependence sources, forms, and effects. Thereby, special focus is set on the relational level between buyers and suppliers, such as bonding (Chang et al., 2012), relational norms (Joshi and Arnold, 1998), or loyalty (Scheer et al., 2010). The other way around, logistics and supply chain management literature rather focusses on quantifiable effects of BSD by discussing e.g. performance or financial impacts (Corsten and Felde, 2005; Zhang and Huo, 2013). In turn, there is no contribution from this field discussing particular dependence forms and only two contributions dealing with dependence sources (Cousins and Crone, 2003; Kähkönen et al., 2015). As a third research area contributing to BSD knowledge, strategic management literature is focusing on the influence of BSD on interfirm integration and partner involvement (Cai et al., 2009; Pennings et al., 1984), governance (Buvik and Reve, 2001), longterm orientation (Chung, 2012), and opportunism (Provan and Skinner, 1989). The following sections will summarize these distinct focus areas into a description of BSD research as a whole.

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Journal list Academy of Management Journal

Journal of Marketing Research

Administrative Science Quarterly

Journal of Marketing Theory and Practice

Decision Sciences

Journal of Operations Management

European Journal of Marketing

Journal of Purchasing and Supply Management

European Management Journal

Journal of Retailing

Industrial Marketing Management

Journal of Small Business Management

International Journal of Operations & Production Management

Journal of Supply Chain Management

International Journal of Physical Distribution & Logistics Management

Journal of the Academy of Marketing Science

International Journal of Production Economics

Journal of the Operational Research Society

International Journal of Production Research

Long Range Planning

International Journal of Research in Marketing

Management Decision

Journal of Business & Industrial Marketing

Marketing Letters

Journal of Business Logistics

Organization Studies

Journal of Business Research

Psychology & Marketing

Journal of Business-to-Business Marketing

Supply Chain Management: An International Journal

Journal of Management Studies

Strategic Management Journal

Journal of Marketing

Transportation Research: Part A

Table 2.3: List of journals represented in the final review sample

Taking a time-oriented perspective, it becomes clear that earlier research on BSD between 1984 and the later 1990s almost exclusively dealt with the effect of BSD. Beginning around the year 2000, the research focus shifted to a more intense examination of dependence sources and later on also to dependence forms. The perceptions of BSD as well as the management measures are rather niche-topics in the field. Table 2.4 depicts this shift in research foci over time by pointing to both the total numbers and shares of research foci per time-interval. Finally, a couple of dominant research contexts became obvious during the review process. Closely connected to the domain of the journals in the field, BSD is usually examined in retail-, IT-infrastructure-, industrial-supply- or service contexts. So far, supply chain management contexts lack behind in numbers. Within these empirical fields, scholars predominantly collected and analyzed data by means of surveys and quantitative analysis. A minority conducts key-informant interviews to design a survey in an informed manner. 29

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Few studies completely rely on such interview data by employing qualitative case studies. Those who do so, however, yield in-depth insights (Harrison et al., 2012; Krause and Ellram, 2014; Schmitz et al., 2016).

Interval (years)

Total contributions* per interval

Dependence… Sources

Forms

Attitudes

Mgmt. measures

7 (0,64)

2 (0,18)

2 (0,18)

Effects

19841989

2

2 (1,00)

19901994

11

19951999

11

20002004

11

3 (0,27)

1 (0,09)

6 (0,55)

1 (0,09)

20052009

34

4 (0,12)

6 (0,18)

19 (0,56)

4 (0,12)

1 (0,03)

2014

27

9 (0,33)

2 (0,07)

13 (0,48)

1 (0,04)

2 (0,08)

20152016

13

7 (0,54)

1 (0,09)

1 (0,09)

9 (0,82)

6 (0,46)

109 *contributions as key findings stated in the abstracts of extant literature (one paper can have more than one contribution)

Table 2.4: Number of studies in the review sample per year and focus

2.4. Present state of BSD research The following sections will present each of the five identified research areas of (1) dependence sources, (2) forms, (3) effects, (4) perceptions, (5) as well as (5) management measures in detail. Figure 2.4 illustrates the extant research in a coherent framework.

2.4.1. Dependence causes The first group of extant studies focuses on the causes that lead to dependence between buyers and suppliers. The findings of these studies can be grouped into the four categories of so-called access criticality, economic ties, mutual fit, and cooperative entity.

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First, within the category of access criticality extant studies point to the situation of the external supply market from a buyer’s perspective. Scholars describe the simple limitation of alternative sourcing options that a buying firm might face in the market (Ganesan, 1994; Kim et al., 2015), which connects to Buchanan’s (1992) reference to both Emerson (1962) and Pfeffer and Salancik (1978) describing dependence as “the extent to which a trade partner provides important and critical resources for which there are few alternative sources of supply” (Buchanan, 1992, p. 65). Examples of such situations can be found in the aviation industry, where airlines typically have only two sourcing options (e.g. Boeing, Airbus) for mid-sized intra-continental aircrafts. Besides such market characteristics, scholars also point to the criticality of a specific resource as an input factor for a buying firm (Hammervoll, 2005; Schmitz et al., 2016). A manufacturer might thus rely on a critical component in producing their final product or on an important service to keep its production facility running. Finally, the access criticality differs according to the type of product which is at the core of the exchange. Hence, dependence is found to be stronger in service relationships as compared to relationships that exchanges goods (Scheer et al., 2015), leading to the implication that services are more critical to access in a required quality in the market. As a second category of dependence sources, authors describe the mutual fit as the degree of complementarity and mutual resemblance, as being a major source of inter-firm dependence. Here, scholars point to the complementarity of supply and demand in the sense of a perfect fit between a suppliers skills and the required resources of a buyer (Laaksonen et al., 2008; Schmitz et al., 2016), resulting in mutual goals the partners pursue (Turner et al., 2000). Furthermore, a supplier’s capabilities are described as major source of BSD. For instance, its technological skills (Corsten and Felde, 2005), operational competencies (Kim and Wemmerlöv, 2015; Scheer et al., 2010), overall process knowledge (Schmitz et al., 2016), and performance (Chung, 2014) are frequently mentioned. As opposed to that, other studies highlight the convenient situation for a buyer to rely on the well-known incumbent supplier. Next to a buyer’s retreatment from conducting outsourced services (Schmitz et al., 2016), especially its conflict avoidance or feeling of being morally obligated towards a supplier (Harrison et al., 2012) are found to hamper a buyer’s willingness to separate from a supplier. Interestingly, the mutual fit is also characterized by cultural context in which a BSR is embedded. For instance, a prior study finds effects of dependence in a Chinese context contrasting to those in other regions (Zhuang and Zhou, 2004), thus enhancing mutual fit and consequently dependence in certain settings. Besides access criticality and mutual fit, existing studies find economic ties pointing to financial barriers caused by the external market situation that might lead to dependencies between buyers and suppliers. These articles predominantly highlight the existence of switching barriers that emerge over time as buyers and supplier interact. Especially oftentimes conducted relation-specific investments and assets (Buvik and Reve, 2001; Chang et 31

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al., 2012; Cousins and Crone, 2003; Laaksonen et al., 2008) as well as the connected termination and switching costs tie partners together. Moreover, the simple business volume partners interchange is regarded as a cause for dependencies. Thus, substantial purchase volumes become important for suppliers in such a way that it is difficult to separate from its buying opponent (Laaksonen et al., 2008) due to financial reasons (Cousins and Crone, 2003). Lastly the overall economic situation can result in dependencies. As such, Krause and Ellram (2014) found an influencing effect of the economic situation, more precisely of economic downturns that might strengthen BSD (Krause and Ellram, 2014). As a final category of reasons that cause dependencies, extant research focusses intensively on what can be subsumed as the cooperative entity buyers and suppliers might build over time. Cooperative entity is different from mutual fit, as it does not point to a comparison between buyer and supplier, but looks in more depth into the living of the actual exchange. This describes most importantly a relational atmosphere, consisting of high levels of trust and closeness (Barnes, Naude, et al., 2005) and cooperative interaction (Kähkönen et al., 2015; Scheer et al., 2015). This results into elaborated cooperative norms (Harrison et al., 2012), of which different appearances (high or low) are discussed to impact dependence (Joshi and Arnold, 1997, 1998). Provan and Gassenheimer further examine the strength of relational norms as a mediator between dependence and commitment in a BSR (Provan and Gassenheimer, 1994). Altogether these different relational characteristics make up a supply relationship consisting of a high relational value (Geiger et al., 2012) and quality (Scheer et al., 2015) for both partners, which leads to satisfaction in the exchange (Harrison et al., 2012). This relational atmosphere is described to be complemented by the willingness of buyers and suppliers to open and bridge their company borders. Hence, scholars find measures like open-book accounting (Alenius et al., 2015), supplier involvement in product development processes, as well as mutual learning (Kähkönen et al., 2015) as factors leading to BSD. Opened boundaries are also described to support the emergence of BSD, by pointing to the mental value of the feeling to have a joint cooperative history (Schmitz et al., 2016). In total, these aspects lead to oftentimes described bonding effects (Chang et al., 2012) that complement the category cooperative entity. Summing up extant research describes the four categories of access criticality, mutual fit, economic ties and cooperative entity as the predominant factors that lead to BSD, which are depicted in the following. 2.4.2. Dependence forms Dependencies between buyers and suppliers are differentiated according to their symmetry. Asymmetric or unilateral dependence is present if either only one partner in the BSR is dependent upon the other or if the degree of dependence significantly differs between the partners (Buchanan, 1992; Gulati and Sytch, 2007).

32

Figure 2.4: Current state of research on buyer-supplier dependence

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

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Although extant research does cover situations in which the buyer is dependent upon the supplier (Lonsdale, 2001; Petersen et al., 2008), the majority of contributions discusses the supplier’s dependence upon the buyer (Carr et al., 2008; Habib et al., 2015). Asymmetric dependencies are sometimes more finely differentiated either according to the dominant or weaker party respectively, such as buyer-dominance or supplier-dominance. It is this specific form of dependence which is in focus in the recently published review on BSD (Habib et al., 2015), thus depicting only a limited part of the entire BSD domain. On the opposite, scholars also report on situations in which both partners are equally dependent on one another, which is described as mutual, symmetric, or bilateral dependence as well as interdependence (Buchanan, 1992; Caniëls and Gelderman, 2007). More precisely, Scheer et al. (2010) refer to the main cause for a dependence situation by naming asymmetric dependencies benefit- or cost-based-dependence (Scheer et al., 2010). Asymmetric and symmetric dependencies are detailed out by single contributions on e.g. their extent (i.e. intensity), or the relational level as to which buyer and supplier are dependent. Here, different intensities range from slight (inter)dependence to a lock-in situation (Narasimhan et al., 2009). In a similar vein, Caniëls and Gelderman connect to Kraljic’s purchasing portfolio matrix in testing differing kinds of dependence levels in their study (Caniëls and Gelderman, 2007),which have also been tested as an antecedent condition of trust (Clark et al., 2010). Furthermore, a first approach exists in measuring and evaluating the degree or intensity of dependence between two actors (Svensson, 2002). The distinction between symmetric and asymmetric dependence is taken one step further by Gulati and Sytch (2007) who introduce joint dependence – which is sometimes also called total dependence (Dabhilkar et al., 2016) – as the sum of the dependence levels of both partners. Lastly, these different forms can be differentiated according to the sources that have caused a dependence situation, such as resource- (e.g. technical aspects, knowledge, or production factor), financial-, strategic- or outcome-related (e.g. performance, or quality) dependence relations (Hammervoll, 2005).

2.4.3. Dependence effects The most intensively studied area are the effects and consequences that dependencies cause in BSRs. Hence, this sub-area is divided into diverse categories called adaptation and innovation, maintenance, relational governance, influence and control as well as opportunities and threats.

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Adaptation and innovation encompasses the change of processes, structures or outcomes towards the need of the partner firm, which might include innovative outcomes specifically designed for or by a particular BSR. Such tendencies are described extensively by prior contributions. Scholars especially point to the integration of products, processes or services of a supplier into a buyer’s operations (Carr et al., 2008; Pennings et al., 1984; Petersen et al., 2008), such as the direct delivery of core components into a production line (Vijayasarathy, 2010; Zhang and Huo, 2013). Over time this is described to blur organizational boundaries between buyer and supplier (Baraldi et al., 2014), who is found to build up specific knowledge and learning (Jean et al., 2012). This integration is usually described as being accompanied by customized adaptations of an input factor towards the needs of a partner firm (Hallen et al., 1991; Mukherji and Francis, 2008). In that sense, dependence secures the invested adaptation costs for a supplier as the buyer is likely to source from it in the future. In a few cases, authors relate dependence even to mergers and acquisitions (Casciaro and Piskorski, 2005). In line with an increased likelihood of integration, literature further points to the increased willingness of buyers and supplier to mutually invest into the relationships by new products or technologies that might increase the performance of the dyadic exchange (Krause and Ellram, 2014; Scheer et al., 2015; Yeniyurt et al., 2013). The aim of such investments is described as co-innovation attempts of the partners (Corsten and Felde, 2005; Yeniyurt et al., 2013). These attempts are supported by specific training measures that suppliers are granted in the light of BSD (Carr et al., 2008). Dependence does not only result in adaptation and innovation tendencies, but also leads to maintaining ongoing relationships (e.g. Ganesan, 1994; Izquierdo and Cillán, 2004; Narasimhan et al., 2009; Provan and Gassenheimer, 1994) due to repeated exchanges (Krause and Ellram, 2014). Relationship maintenance describes the effects between buyer and supplier that keep the relationship in existence. It is explained by two major reasons: On the one hand, the described adaptations and innovations lead to loyalty between buyer and supplier (Scheer et al., 2010). This loyalty is the result of mutual attachment between the partners that pursue long-term orientation strategies (Lin et al., 2013), which are considered to result from dependencies (Chung, 2012). This is accompanied by an increased relational behavior (Yilmaz et al., 2005), fairness and loyalty (Jambulingam et al., 2011) in interdependent partnerships which is manifested in its positive impact on the establishment of key-supplier relationships (Wu and Wu, 2015). On the other hand, relationship maintenance is ascribed to a selection bias of the less dependent party (Ryu and Eyuboglu, 2007). Dependence is found to impact attentiveness of buyers towards suppliers (Bonner and Calantone, 2005), which become more attractive as future sourcing options. This might be connected to a finding by Scheer et al. arguing that buyers become insensitive towards competitive offerings in the case of dependence (Scheer et al., 2010). Lastly, relationship maintenance is also enforced by the external environment which is described in the study

35

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of Sezen and Yilmaz that point out enforced solidarity of external stakeholders towards continuing a dependent BSR (Sezen and Yilmaz, 2007). Maintained relationships because of BSD also affect the governance of the cooperation. i.e. the way in which the exchange is organized and managed. Many scholars point to the effect of an increased information exchange and communication level that results from dependence (e.g. Cai et al., 2009; Fang and Cai, 2014; Gulati and Sytch, 2007; Kim and Wemmerlöv, 2015; Ryu et al., 2007; Simpson and Paul, 1994). A large body of literature also focusses on the effect of relationalism. This encompasses first and foremost an increased level of trust (e.g. Andaleeb, 1996; Kumar et al., 1995; Mallapragada et al., 2014; Rajagopal and Rajagopal, 2009) and commitment (e.g. Chang et al., 2012; Geyskens et al., 1996; Huo et al., 2015; Razzaque and Boon, 2003), which is oftentimes mentioned in extant studies. This goes in hand with findings on lower conflict levels (Gundlach and Cadotte, 1994), higher socialization (Petersen et al., 2008), reduced use of opportunistic actions (Provan and Skinner, 1989) and the willingness to make a compromise and provide mutual support (Lin et al., 2013). The governance in dependent BSRs is also found to be conducted mutually by emphasizing the value of joint planning and problem solving (Cai et al., 2009) as well as decision making (Kim and Wemmerlöv, 2015). Lastly, governance in dependence relations focusses on rewards (Hoppner et al., 2014), compliance (Joshi and Arnold, 1997) and adherence to jointly set agreements (LaBahn and Krapfel, 1994). Closely related to relational governance, dependence is also described to have an effect on the influence attempts and control behavior among the parties, which point to typical reactions of actors in BSD situations. Existing contributions emphasize the partner’s intent to monitor its partner in dependence relations. More precisely, monitoring is described as controlling e.g. suppliers (Kim, 2002) or introducing a legal contract to safeguard the individual inputs (Buvik and Reve, 2001; Cai et al., 2009). Furthermore, dependence is discussed to result into the use influencing strategies (Anderson and Narus, 1990; Lai, 2009). Influences are depicted in the form of coercion, strong stances (Andaleeb, 1995) and threats and or legal pleas towards the partner firm (Simpson and Paul, 1994). As a final category within the so far researched effects of BSD, authors point to both opportunities and threats as potential outcomes of dependence relationships. Opportunities lie especially in a positive influence of BSD on the financial performance (Corsten and Felde, 2005; Kim and Wemmerlöv, 2015) and cost level (Narayanan and Narasimhan, 2014) of involved firms. Terpend and Krause connect to this by referring to a buyer’s dependence influencing the relation between incentives and supplier performance (Terpend and Krause, 2015). Furthermore, dependence is discussed to positively influence not only a firm’s purchasing capabilities, but also its entire performance (Van Bruggen et al., 2005; Kim and Henderson, 2015). However, next to these positive effects many studies describe dependence as a negative outcome of close BSRs (e.g. Barnes et al., 2005) and highlight 36

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

threats that result from a dependent cooperation. Such studies emphasize at first an increased vulnerability (Clark et al., 2010; Lee et al., 2015; Svensson, 2004a, 2004b) of dependent parties towards the more powerful party, which might behave opportunistically (Joshi and Arnold, 1998) by exerting unfavorable commercial practices (Maglaras et al., 2015). This is confirmed by Chung, who finds dependence to moderate opportunism (Chung, 2012). Dependence is frequently described as a situation in which the more dependent party lacks autonomy restrictions and strategic flexibility in its decision making (Bourantas, 1989). Lastly, the impact of BSD on performance is still at debate. In contrast to prior findings, Gulati and Sytch find a reduced performance level for buyers in settings of mutual and asymmetric dependencies (Gulati and Sytch, 2007).

2.4.4. Perceptions of and attitudes towards dependence The above described sub-areas on BSD represent the core of extant research on BSD. Few authors take a meta-perspective towards this core by taking the view of an involved actor on the dependence issue as a whole. These perceptions differentiate between studies and between different actors that are investigated. Considering the attitudes and perceptions towards dependence is important, as extant research finds an actor’s way of dealing with BSD to vary (Munksgaard, 2010) which impacts the degree to which the described sources lead to dependencies as well as the degree to which dependence effects might occur based on the partner’s reactions (Ford et al., 2011). Davis and Mentzer report on a buyer’s view on dependence by describing an increased tolerance towards a supplier’s service quality in a BSR under conditions of dependence (Davis and Mentzer, 2006). Connecting to this, Cousins and Crone go one step further in describing the perception of dependence as being a joint power source for the entire relationship (Cousins and Crone, 2003). Other authors point to the finding that a buyer’s decision making uncertainty is reduced if a dependence advantage over its supplier is perceived (Gao et al., 2005). In the same line, the dependence of a supplier is perceived as satisfying, while on the other hand a dependence of the buyer himself is perceived as less favorable (Rajagopal and Rajagopal, 2009). This negative perspective is underlined by evaluating BSD as a situation of weakness (Rajagopal and Rajagopal, 2009) and loss of control (Cousins and Crone, 2003) which bears conflict potential in a BSR (Zhou et al., 2007). These sometimes opposing perceptions are addressed by Munksgaard who sheds light on factors that influence contrary perceptions of BSD. It reveals the influencing factors of actor similarity, culture and size comparability, technology usage, the relational atmosphere as well as the degree of network overlap that might cause these two-way perceptions and influences which strategic actions will be taken by the involved actors (Munksgaard, 2010). Such perceptions are generally discussed to affect the effectiveness of a cooperation (Gassenheimer et al., 1998) or enhance the likelihood of punitive actions (Kumar et al., 37

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1998) taken towards the partner firm. The next section will connect to such management approaches towards BSD in more depth.

2.4.5. Dependence management As a fifth and final research area within the domain of BSD, present research reports occasionally on management measures towards handling dependencies. It is this sub-area of BSD in which a recent systematic review provides insights into the responses of a weaker party towards BSD, which highlight the relevance of this topic (Habib et al., 2015). The contributions in this sub-area can be divided into four major recommendations. First, scholars advocate to react to dependence by increasing the switching costs as introduced before. This is recommended to be done by an increased level of collaboration (Habib et al., 2015) or by building up cooperative capabilities, such as teamwork skills, within one’s firm to prepare employees for a closer exchange (Cousins and Crone, 2003). Besides, integrating the respective operations one depends on is recommended dependence situations (Cousins and Crone, 2003; Lai et al., 2013). Moreover, the setup of relational norms, values and governance structure in order to cope with BSD are endorsed (Lai, 2009; Narayanan and Narasimhan, 2014). This should prepare the basis for a more efficient and effective exchange under conditions of dependence over time (Barnes, Naudé, et al., 2005). Few scholars even recommend the set-up of joint teams as well as flexible and open communication structures (Andaleeb, 1996). This can go even further as also the set-up of a joint venture as the closest way of dependence interaction is recommended (Pfeffer and Salancik, 2003). Alternative recommendations rather tend to direct measures towards balancing dependencies by e.g. searching for alternative partners (Geiger et al., 2012) or by adapting business processes to reduce the importance of the externally provided input (Davis and Mentzer, 2006; Joshi, 1998). Furthermore, RDT recommends to find alternative resources that can substitute the existing ones and thereby reduce a dependency (Pfeffer and Salancik, 2003). The authors move on by suggesting an insourcing of the externally provided good or service (Pfeffer and Salancik, 2003). A final balancing measure is mentioned in a renegotiation of a BSR’s terms and conditions to secure a resource access one depends on over time (Buvik and Reve, 2001). This is complemented by finding compromise in mutually agreeable solutions in BSRs (Habib et al., 2015). Lastly, also the exit of the less dependent partner from the BSR is reported (Habib et al., 2015; Kumar et al., 1998).

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2.5. Future research suggestions on BSD This article provided an overview on existing BSD research. Prior studies have focused on the sources, form and effects of BSD, its influences by and on other relational construct as well as the actor’s perceptions and managerial approaches towards handling dependencies. This enumeration makes clear, that this field of study is broad. Thus, prior reviews focused on isolated areas and perspectives in the domain (Habib et al., 2015; Tangpong et al., 2015). Although this review tries to provide a comprehensive picture of this research field, future research approaches might want to zoom into single areas on a more detailed level. Nevertheless, depicting a comprehensive picture of the field results in the opportunity to point at blank spots in the domain and to direct scholar’s attention. The following areas are thus recommended for future investigations.

Interplay of dependence sources and effects The presented framework of existing contributions on BSD is structured into distinct parts. The majority of prior research on BSD can be easily grouped into these five areas which highlights the focus of extant studies on investigating either single factors leading to BSD or the effect of BSD on single constructs. What is lacking, however, are integrative studies that take the interrelation between sources and effects more closely into account (Schmitz et al., 2016). Broadly speaking, the chicken-and-egg problem between sources and effects is not yet sufficiently examined. More precisely, is mutual fit as a dependence source existing in the first place, or is it a result of adaptation and innovation which is a dependence effect? How does the creation of a cooperative entity, which is described as a BSD influence, relate to the relational governance topics that extant literature describes as dependence effects? It is likely, that the interrelations between sources and effects of BSD are not as simple and linear as depicted in this review’s summarizing framework. The interrelations are more complex and might follow a distinct sequence of causes and effects that create new instances causing even stronger dependencies and then again new or more prevalent consequences. It will be the task of future studies to investigate such (circular?) cause-and effect chains.

Ubiquitous presence of the trust-dependence-commitment triangle An example for the described interrelations between sources and effects is the ubiquitous appearance of the relational constructs trust and commitment in connection with dependence (e.g. Gao et al., 2005; Laaksonen et al., 2008; Yilmaz et al., 2005). Trust and commitment are intensively discussed in the general cooperation literature and specifically in business-to-business (B2B) relationship settings. In this systematic review, trust and

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commitment appear as both sources and effects of BSD both directly and indirectly impacting the construct. Moreover, dependence, trust and commitment in BSRs are found to mediate each other (Izquierdo and Cillán, 2004; Provan and Gassenheimer, 1994; Razzaque and Boon, 2003; Yilmaz et al., 2005). Hence, scholars could move beyond existing studies that examine trust, dependence, and commitment in isolated studies by taking these three relational cornerstones jointly into discussion in order to shed light on their triangular interplay in dynamic BSR settings.

Integrated view on dependence effects Taking a closer look at the effects and consequences of BSD one can notice on the one hand positive outcomes as well as collaborative and integrative tendencies. On the other hand, scholars also found negative outcomes as well as opportunism and protectionism as consequences of dependence relations. Although these findings might seem contradictory in the first place, they oftentimes stem from different dependence forms (mutual or asymmetric), perspectives (stronger or weaker actor) or contexts (industries, service- vs goodbased relationships, cultural settings) that prior studies were taking. In result, existing literature provides a scattered picture of effects and consequences of BSD that needs to be consolidated and cleaned up. Hence, meta-analytic studies or focused systematic literature reviews on these diverging findings in the domain might yield a clearer picture of allocating specific dependence forms or contexts to specific outcomes and effects.

Behavioral dependence perspectives This literature overview points to first contributions that take a holistic perspective on BSD by examining the perceptions of the involved actors on BSD. It becomes clear that depending on how actors perceive dependencies, they are more likely to react or result in respective ways. One first study began to examine the influencing factors on these perceptions (Munksgaard, 2010), while earlier studies pointed to the connection between perception of BSD and the resulting behavior of the actors in the ongoing relationship (Ganesan, 1994; Gassenheimer et al., 1998; Kumar et al., 1998). However, research on the interrelation and effect of dependence perceptions on dependence evaluation, its outcomes or the actor’s behavior is scarce and needs to be further developed. Moreover, future research could elaborate on the implications of BSD on managerial actions depending on different perspectives in the dyad.

Exploration of individuals as boundary-spanners in dependence relationships Closely connected to the described behavioral dependence perspectives is the role of individuals as boundary-spanners (Clark et al., 2010). BSRs between two organizations are 40

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

typically managed by selected persons or teams at the intersection between the two companies (Vijayasarathy, 2010), such as purchasing and sales departments, production managers and logistics service providers, or third-party component manufacturers and engineering departments. Thus, exchanges between firms are most of the times concentrated within single teams or individuals. Hence, it would be interesting to investigate the role, behavior, and perception of such boundary-spanning employees or cross-company teams in shaping dependencies between a buying and a supplying organization. Questions arise as to how dependencies are transferred, communicated, and managed by a contact person into an entire organization. With whom do these employees identify over time? What is their power in steering, e.g. the cooperative portfolio, of an organization? To what extent do buyers and suppliers rely on a few cross-company employees that work closely together? Future research might shed light on these and related questions and their implications for BSRs.

Dynamic perspectives on a continuously evolving construct Existing studies on BSD commonly take a static perspective at a distinct point in time. As opposed to that, a dynamic perspective on a given BSR taking a long-term view on the development of a dependent relationship and the connected changes due to this situation appears necessary, as dependence in BSRs develops over time as a result of repetitive interactions between two partners (Caniëls and Roeleveld, 2009). Hence, the current state of static examinations stands in contrast to the inherently dynamic nature of dependence. Long-term examinations of BSRs might thus deliver more detailed insights on how the described factors interrelate. Interesting questions are potential shifts in the dependence relation between buyer and supplier over time. Are there changes between mutual and asymmetric dependencies? In how far do subsequent management measures influence consequences of dependencies in the long term? Do perceptions of BSD shift over time? These and further question are yet to be covered in this research field.

Context-specific discussions variations BSRs are prevalent in many different business and research areas. Existing studies predominantly stem from the business-to-business marketing arena and the channel marketing literature. While some of these contributions are also used as basic references in other domains, literature on BSD might benefit from integrating the knowledge from different backgrounds (supply chain management, general management). Besides, especially supply chain management scholars focusing on e.g. logistics outsourcing relationships might benefit from integrating existing findings from the B2B-marketing field into their studies. Next to the integration of knowledge from diverse research areas, studies on BSD oftentimes focus on retail channels or manufacturing supply relationships. First, paying 41

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attention to different contexts that are prone to close BSR and evolving dependencies, such as relationships with IT-solution providers (Lonsdale, 2001), might be worthwhile to investigate for similarities and differences with regards to existing findings on BSD. Second, Zhuang & Zhou pointed to different perceptions of BSD in a Chinese cultural context (Zhuang and Zhou, 2004). Future studies might want to connect to their finding in questioning further dependence findings and their transferability to diverse cultural contexts. Third, Scheer et al. recently found stronger dependencies in service relationships than in relationships based on the exchange of goods (Scheer et al., 2015). Hence, it is necessary to take a more differentiated look onto dependence in service dyads and their conformity with prior findings in the domain.

Methodological and theoretical advances BSD research largely relies on survey-based studies and quantitative examinations. This provides two possibilities for future research: On the one hand this might serve as a sound basis for a meta-analysis across existing findings as described above which could give insights into the significance of existing findings on a larger scale and across different contexts. On the other hand, the domain requires qualitative studies building on case-study examination and grounded theoretical techniques to dig deeper into single aspects. Especially questions around behavioral perceptions, boundary-spanning interactions and their effect on the managing BSD appear to require these techniques. Qualitative research might also support the need for long-term observations of BSD in order to reveal dynamic developments over time. Next to these methodological advances, also the more intense application of theory to the discussion on BSD is requested by extant studies (van Weele and van Raaij, 2014). As briefly touched in this paper, several theoretical lines of thought provide a perspective of dependence. Besides TCE and RDT, also the relational view (Kähkönen et al., 2015), social-exchange theory (Narasimhan et al., 2009), as well as agency theory (Handley and Benton, 2012) are applied in a BSD setting. It would thus be interesting to focus more closely on a comparison of the explanatory logics, underlying mechanisms, effects or recommendations that these different backgrounds provide. Such an examination might serve as the basis for BSD research to follow these lines of thought more intensely and targeted in future research.

2.6. Conclusion This paper started out to synthesize the so far isolated and scattered contributions on BSD across different research areas and findings into a comprehensive framework depicting the status quo of this domain. It aimed to move beyond existing literature reviews on 42

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limited and narrow sub-areas of BSD, in order to capture the domain’s broad scope. This resulted in presenting the dependence causes, forms, and effects as well as dependence perceptions and management measures. In doing so, this paper could bridge isolated research contributions that stem from marketing, supply chain management and strategic management. Based on that, this review contributes by suggesting future research avenues to scholars in the field. As extant research falls short on examining an inherently dynamic construct in longitudinal studies, it has been specifically argued for investigating the underlying dynamics between dependence sources, effects, perceptions and measures over time. This might be complemented by shedding light on the influence of individual’s behavior in shaping dependencies for their organizations. Despite these contributions, this review is limited by its aspiration to provide an overview on the broad scope of the BSD domain. This restricts the level of detail in each of the presented sub-areas. Tangpong et al. and Habib et al. already integrated extant BSD research in more focused reviews (Habib et al., 2015; Tangpong et al., 2015), which remains also to be promising for e.g. the sources that lead to BSD. Moreover, this paper was not able to compare statistical influences that have been tested across multiple studies before, which seems to be promising for future meta-analytic approaches. Finally, BSD remains an interesting and promising research field which addresses recent managerial issues in the supply base of purchasing, supply chain, and supplier- or customer-relationship managers in business-to-business relationships.

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3. The Emergence of Dependence and Lock-in Effects in Buyer–Supplier Relationships – A Buyer Perspective7 Abstract

The industrial marketing literature frequently points to dependence in buyer–supplier relationships (BSRs) as an essential construct in understanding the development of strong, long-lasting partnerships. Although the antecedents of dependence have been discussed, extant research lacks an understanding of the explanatory mechanisms of how dependence – or even lock-in situations – actually evolve. In this article, we examine the emergence of these aspects in BSRs by analyzing the example of a logistics outsourcing relationship. Using a grounded theory approach in a real-life case involving a German mechanical engineering company and its service provider, we identify four interrelated mechanisms (convincing, tying, complementing and lock-in) that explain dependence and lock-in from a buyer’s perspective. Based on our empirical findings, we develop a conceptual model that points to the theoretical importance of the interconnected influences and sub-processes between transactional, mental, and operative bonding effects. Our results inform managerial practice on how to plan and manage BSRs. The model enhances existing research on dependence in BSRs and can serve as a starting point for further investigations into buyersupplier dependence (BSD) and lock-in in dyadic business relationships. Keywords: buyer dependence; lock-in; buyer–supplier relationships; logistics outsourcing; grounded theory

7 This article is co-authored with Bastian Schweiger and Jost Daft. It is published in Industrial Marketing Management (2016), Vol. 55, pp. 22–34, DOI: https://doi.org/10.1016/j.indmarman.2016.02.010 © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 T. Mandt, Dependence in Buyer-Supplier Relationships, Edition KWV, https://doi.org/10.1007/978-3-658-24252-7_3

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3.1. Introduction The research on buyer–supplier relationships (BSRs) emphasizes distinct relational characteristics as crucial for successful cooperation. Commitment, trust, intense inter-firm exchanges, relational investments, or partner and resource compatibility are found to foster positive relational outcomes (Morgan & Hunt, 1994), such as mutual long-term planning or increased operational efficiency. Interestingly, these characteristics are simultaneously found to constitute negative relational outcomes, in particular the dependence of one party on the other (Bendapudi & Berry, 1997; Fang, Chang, & Peng, 2011). Although these relational characteristics seem to result in two different sides of the same coin, research has predominantly focused on one side, namely the positive impact of relational characteristics on relational performance. To close this gap, Slone et al. (2010) and Stank et al. (2011) called for investigations of negative impacts of being too close to partner firms. This is especially necessary in the course of long-term partnerships, which are particularly prone to the dark sides of BSRs (Grayson & Ambler, 1999). Among the effects that cause negative relational outcomes, dependence or even lock-ins are considered to be particularly crucial elements in BSRs (Zhou, Zhuang, & Yip, 2007). In the buyer–supplier literature, scholars have found and discussed sources that lead to dependence or even lock-in situations (Arthur, 1989), such as relational bonding (Hammervoll, 2005), resource integration (Håkansson & Snehota, 1995), and relational investments (Bendapudi & Berry, 1997) that lead to high switching costs (Geiger et al., 2012). Although research has elaborated on the sources of dependence, current knowledge on the topic seems to be rather isolated and scattered, as studies have predominantly centered around single influences and effects of dependence, while the interplay between these effects has remained largely unexplored so far. Moreover, empirical evidence and explanations of these influences is still limited (Caniëls & Gelderman, 2007; Geiger et al., 2012; Hammervoll, 2009). More specifically, the underlying mechanisms that lead to dependence in BSRs remain unclear. Therefore, the purpose of this study is to identify and explain the mechanisms leading to dependence and lock-in in BSRs based on the empirical observation of a real-life case. The study aims to provide an understanding of the underlying mechanisms and their interrelations in order to shed light on the specific process of dependence-emergence from a buyer’s perspective. Considering the buyer’s perspective is particularly worthwhile, as dependence on the supplier resembles an undesirable outcome that needs to be understood in detail to recommend appropriate prevention measures. In order to address our research objective, we apply a grounded theory approach by investigating the case of a long-term relationship between a German mechanical engineering company, which we call GMEC and its major logistics service provider, which we call Machine Logistics Inc. (M-Log) in the following. Within this research setting, we follow the recommendations of industrial marketing scholars, who promote the grounded theory methodology to explore underlying 52

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motivations, behaviors, and decision-making in situations with complex inter-personal interactions, as is the case in BSRs (Gummesson, 2003; Thomas, Esper, & Stank, 2011; Wagner, Lukassen, & Mahlendorf, 2010). Our study contributes to the existing literature on BSRs by investigating the issue of dependence and lock-in in an empirical setting. By conducting an in-depth case analysis, our model reveals four distinct theoretical dimensions (convincing, tying, complementing, and lock-in) that constitute a buyer’s dependence on its supplier. The study is novel in that we develop an explanatory model to expand understanding of the mechanisms that lead to dependence and lock-in in BSRs. We conclude by providing starting points for future research. The paper is structured as follows: we begin by introducing BSRs and the dependence issue as discussed in the recent literature, before depicting our empirical setting and methodological approach. Subsequently, we present our findings of four theoretical dimensions and their sub-categories, which constitute our conceptual model on the emergence of dependence and lock-in in BSRs. We conclude with implications for theory and practice that can serve as starting points for further investigations into partner dependence and lockin in dyadic business relationships.

3.2. Dependence and lock-in in buyer–supplier relationships In response to demanding markets, as well as increasing product and service complexity, firms collaborate with external parties as value-adding entities to make use of their specialized capabilities and resources for non-core activities. Thus, the buying company is able to utilize its own competencies and resources for core activities. Researchers have observed that single assignments between a buyer and supplier can evolve into intense relationships over time (Dwyer, Schurr, & Oh, 1987; Schurr, 2007; Wilson, 1995). Extant literature has investigated outsourcing partnerships, service relationships, or procurement and customer partnerships as frequently observed forms of such intense relationships. A central construct in explaining why cooperation between a buyer and a supplier can develop into an intense and enduring exchange is the emergence of dependence. Emerson (1962) defined dependence as the need to rely on a partner’s contribution in pursuing one’s own goals. More specifically, dependence is present if the outcomes of a specific relationship to a partner are superior to the outcomes of potential alternative relationships (Anderson & Narus, 1990). This understanding of dependence is predominantly explained and supported by two theoretical lines of thought. First, the transaction cost approach argues that increased switching costs create bonding effects between partners (Rindfleisch & Heide, 1997). In line with this, Geiger et al. (2012) pointed to dedicated assets achieving

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their value only in a distinct BSR that requires relation-specific investments, such as dedicated knowledge or assets, which further increase the firm’s switching costs towards leaving the partner, ultimately resulting in dependence situations (see also: Bendapudi & Berry 1997). Second, resource-dependence theory (RDT) points to firms’ need to rely on external resources in order to handle uncertain environments (Pfeffer & Salancik, 2003). In Hillman et al.'s (2009) review on RDT, the authors explained that power relations emerging from resource exchanges create dependencies from the weaker party. Based on these lines of thought, scholars in the BSR domain have studied sources, forms, and effects of dependence. The sources that lead to dependencies have attracted particular attention from scholars in the past. Their findings can be grouped into relational sources, partner-inherent sources, and market-related sources of dependence. Relational sources encompass reasons that underlie the partnership between buyers and suppliers. For instance, a closely integrated relationship is likely to become dependent because of the partners’ mutual adaptation, close exchange relationship, or joint investments (Casciaro & Piskorski, 2005; Corsten & Felde, 2005; Laaksonen, Pajunen, & Kulmala, 2008). Partner-inherent dependence sources encompass specific capabilities, or knowledge, as well as access to tangible and intangible resources that are linked to the specific partner (Cannon & Perreault, 1999; Laaksonen et al., 2008; Lonsdale, 2001). This category of dependence sources is closely linked to the arguments of Pfeffer and Salancik (2003), as described in their understanding of RDT. A third category of sources lies within the introduced definitions of dependence. Marketrelated sources of dependence describe the lack of alternative options or sources in the market to replace the incumbent buyer or supplier (Ganesan, 1994; Handley & Benton, 2012; Harrison, Beatty, Reynolds, & Noble, 2012). Besides these sources, scholars have conceptualized different forms and intensities of dependence. Buchanan (1992) distinguished between asymmetric dependence, where either the supplier or the buyer is dependent on its partner, and symmetric dependence, where both are equally dependent on each other. These forms of dependence vary in their intensity from slightly dependent relationships to heavily dependent lock-in situations (Narasimhan, Nair, Griffith, Arlbjørn, & Bendoly, 2009). Although, the term “lock-in situation” is used in parallel to the term “dependence” (e.g., Cox et al. 2003; Lonsdale 2001; Narasimhan et al. 2009; Harrison et al. 2012), in fact it describes the heaviest degree of dependence, in which a partner has no alternative than to maintain the currently employed relationship (Harrison et al. 2012). It is evident that the specific forms and the intensity of dependence and lock-in affect the relationship between the partners. Barnes et al. (2005) referred to the increase in information exchange, while others emphasized mutual adaptations (Heide & John, 1990) or higher relational satisfaction (Andaleeb, 1996), as well as increased relational performance (Buchanan, 1992) as positive influences of dependence on BSRs. On the other hand, the 54

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loss of strategic flexibility, as well as the shifting of power and its connection with the risks of opportunism (Cox et al., 2003; Harrison et al., 2012) entail negative connotations. In general, the power construct is inseparably connected to the dependence construct (Caniëls & Gelderman, 2007; Handley & Benton, 2012). In his seminal contribution Emerson (1962) describes dependence and power as the opposite of one another, i.e. if company A is dependent on company B, B has power over A. Power is also described as the ability to influence an actor’s behavior to such an extent, that the actor behaves differently than initially intended (Cox, Ireland, Lonsdale, Sanderson, & Watson, 2002). Scholars distinguish between structural power on the one hand and behavioral power on the other hand: Structural power refers to the mere power of an actor based on resource control and possession, whereas behavioral power is understood as the opportunity to influence opponent’s decision making outcomes (Caniëls & Roeleveld, 2009). Both kinds can be exerted in a mediated and competitive way or in a non-mediated, relational way by the powerful party in managing the BSR (Handley & Benton, 2012). Not surprisingly, the sources and forms of dependence and power are comparable. Cox et al´s (2002) work on power sources comes to similar factors as the above described examinations on dependence sources. Relation specific investments, for instance, are discussed as a source for both (Cox et al., 2002; Ganesan, 1994), showing the close linkage of the two concepts in BSRs research. However, comparing the descriptions of power and dependence it becomes clear, that power emphasizes a firm’s resource control (Pfeffer & Salancik, 2003) as well as its behavioral influence over a partner firm (Caniëls & Roeleveld, 2009; Kumar, 2005), whereas relational dependence focusses on a partner’s importance to achieve desired goals in a specific relationship that is superior to any alternative option (Buchanan, 1992; Emerson, 1962). Hence, especially the notion of behavioral power used in a competitive and mediated way equips the power concept with a slightly different notion. This is fostered by contributions relating power predominantly with negative relational outcomes, such as opportunistic behavior (Provan & Skinner 1989), vulnerability (Geyskens, Steenkamp, Scheer, & Kumar, 1996), or conflict (Zhou et al., 2007). It is this linkage and notion of power-dependence relations which may cause scholars to link dependence to what are frequently called the “dark sides” of BSRs, which need to be handled and addressed appropriately (Mitrega & Zolkiewski, 2012). Dark sides of BSRs are considered to impede value creation by establishing negative relational characteristics, such as relational inertia (Villena, Revilla, & Choi, 2011). Therefore, it is essential to understand how dark sides, such as BSD, emerge. Research has shown that no single factor leads to dependence and lock-in in isolation; instead, studies have usually reported on a broader set of factors that influence the emergence of these phenomena (Barnes, Naudé, & Michell, 2005; Håkansson & Snehota, 1995). Nevertheless, investigations appear isolated and only loosely connected, as they predominantly focus on specific causes of dependence 55

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or enumerate reasons for dependence (Hammervoll, 2005), without elaborating on the interrelation mechanisms that combine and interact with these single dependence sources. Hence, it is important for scholars and practitioners to uncover the underlying interrelations, processes, and dynamics among these factors to avoid unconsciously drifting into a dependence situation. Thus, this study aims to shed further light on to this issue.

3.3. Empirical setting and methodology 3.3.1. Approach and case selection We employed a single-case-study design to uncover the less-examined phenomenon of how dependence and lock-in situations appear in BSRs. Case studies are a suitable approach to answer “how questions” of an unexplored research problem since they enable data collection from different sources to build a rich empirical description of the topic under investigation (Yin 2009; Eisenhardt & Graebner 2007). We examine the relationship between GMEC and its logistics service provider M-Log, which we chose for various reasons: First, the case of a close logistics relationship is highly suitable for investigating the issue of dependence and lock-in due to its multi-faceted and integrated nature on both strategic, as well as operative, inter-organizational levels (Marasco, 2008; Mentzer et al., 2001; Skjoett-Larsen, 2000). Complex logistics outsourcing relationships take place on strategic, administrative, and operative levels in an integrative manner, thus affecting both partners in substantial parts of their business. Second, within this specific logistics outsourcing context, our case appears to be unique due to the long-lasting relationship between GMEC and M-Log (high above-average duration in the industry), as well as the mutual development of their relationship over time. Both long-lasting relationship and mutual development are considered to be drivers of interfirm dependence (e.g., Baraldi et al. 2014; Bonner & Calantone 2005). The outsourcing relationship between GMEC and M-Log has been established for more than 20 years. During this time period, the collaboration has frequently intensified and expanded in different business areas. Finally, our case was chosen due to the formalized nature of the firms’ contractual partnership. Extant research has described the presence of relational contracts as a means for handling the existence of interfirm dependence (Provan & Gassenheimer, 1994), indicating that our case is well suited for investigating our research question. In sum, the relationship between GMEC and M-Log represents a unique case of a buyer’s dependence on its supplier. Unique cases are appropriate to examine underexamined research areas and elaborate well-grounded theoretical insights by studying dynamics that cannot be explored using other research designs (Eisenhardt & Graebner, 2007; Eisenhardt, 1989; Yin, 2009).

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3.3.2. Case context Since 1992, the logistics outsourcing relationship between GMEC and M-Log has advanced constantly in terms of the scope and complexity of the service package, as well as the infrastructural investments. GMEC operates globally, with roughly 3,000 employees in its German factories. M-Log bundles diverse logistics services for GMEC, such as operating their warehouse for parts and finished goods, serving the main production plant on a just-in-time basis with raw materials, providing all on-site logistics flows, assembling buyer-specific products, organizing the entirety of outbound shipments to international customers, as well as operating a packaging production facility on GMEC’s site. All of these services are individually adapted to the needs of the buyer. The relationship itself is based on long-term contracts (usually seven years in duration). The underlying contract specifies the details of this cooperation, such as the scope of services, its duration, agreed performance levels and contractual penalties. A core of five key employees from GMEC and two from M-Log are in constant and close communication, while additional employees are involved in regular collaborative activities, such as project teams and every-day tasks. In addition, weekly operational and strategic meetings with key employees cover current issues, problems, and future tasks and projects, and serve as the basis for discussion. Decision-making is located either within the project teams or at the respective middle-management level in the case of daily and project issues, while contract or commercial negotiations are located at the top-management level, with involvement from selected mid-level managers.

3.3.3. Data collection During a collaborative project with GMEC, the authors encountered the presented case setting at the intersection of both companies. The interest and support of key employees of both companies made it possible to collect a rich set of data from three sources: observations, interviews and documents. The data-collection process lasted 10 months, from April 2012 to January 2013. Table 3.1 represents our preliminary observations of the case and the associated data sources and timeline.

Observations Our data collection started with participant observation. Between April and August 2012, one of the authors was able to participate in and contribute to the collaboration at the GMEC site. He was working in a joint project team of six employees (three employees from GMEC and three from M-Log) that collaborated on the optimization of a productionrelated service. He supported the team as an assistant, conducting the analysis of daily operations, monitoring the workflow, and preparing meetings. Participation in project 57

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meetings provided deep insights into the relationship and contact between employees, the extant power relations, inter-personal interactions, the financing of investment, and the informal behavior of staff. This involvement made it possible to collect substantial data on the relationship documented in protocols and notes during and after each project meeting. Additionally, the author wrote memos about events, conversations, and informal meetings.

Semi-structured Interviews The second data source stems from 12 semi-structured interviews conducted between November 2012 and January 2013 with key employees of the relationship (Appendix A). Three interviews were conducted with M-Log managers and nine with GMEC employees (the imbalanced number is proportional to the total number of responsible employees from each side). A total of four M-Log employees and seven GMEC employees are responsible for managing the relationship in different organizational functions. We interviewed three of the four key employees from M-Log and five out of the seven GMEC managers. In addition, four interviews were conducted with two first-level managers, an assistant, and one IT specialist from GMEC, respectively. We ended the interview phase when we perceived that statements of our informants became repetitive and additional interviews would not provide new evidence. At this stage theoretical saturation was reached (Glaser & Strauss, 1967; Strauss & Corbin, 1998). On average, the interviews lasted 60 minutes. All the interviews were guided by a semi-structured questionnaire that served as a checklist throughout the conversations (Appendix B). Prior to the interviews, each participant was asked to give his or her approval for the interview to be audio recorded; ten agreed and two declined. All the interviews and author notes were transcribed verbatim. Our interview language was German; thus, all quotes that appear in the subsequent section were professionally translated into English. During the interviews, each participant was asked a similar set of questions, although requests were made for further information on interesting points that emerged during the conversation, or minor adaptations to reflect the person’s position and responsibilities (Bernard & Ryan, 2010; Pratt et al., 2006). Moreover, the interview guidelines were adapted in order to fill gaps in the data that could not be clarified in detail beforehand.

Internal and External Data Sources As a third data source, internal and external documents were collected. Internal protocols, meetings minutes, and presentations were added to the dataset. Furthermore, desk research was conducted using German media databases on the relationship between GMEC and M-Log. The search yielded a total of 23 articles and press announcements on the relationship and its progress between 1992 and 2013, delivering rich information on critical milestones, developments, and statements. 58

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Preliminary observation

Data source (as entered into the model)

Time

Organizational setting  Recognition of the relationship’s core elements and scope  Identification of relevant and decisive actors in relationship’s strategic planning and everyday collaboration

Participant observation, Informal conversations, Interviews G1, G2, G7, G9, M2

04–06/2012; 11/2012– 01/2013

Desk research, Informal conversations, Participant observation, Interviews G2, G5, G6, G8, M1

06–08/2012; 10/2012; 11/2012; 01/2013

Interviews G1, G2, G6, G7, G8, G9, M1 Participant observation

04/2012– 01/2013

Interviews (all), Participant observation, Informal conversations

05/2012– 01/2013

Formal setting

 Understanding the contract and its scope

Documented history  Relationship development since its establishment, with special consideration for service scope and expansion, and mutual project history

Tacit/reported history

 Development of interfirm collaboration and relationships between employees  Understanding everyday working basis on operational and strategic levels

Company integration  Analysis of contractual interfirm integration  Comprehend financial interrelations  Understanding mutual operative processes/IT/team integration

Partnership evaluation

 Understanding of buyer’s satisfaction and related supplier’s perception  Comprehend cooperative functionality  Questioning tacit personal assessments

Relational outlook  Capabilities to reintegrate services as to required knowledge, resources, and financial power  Planned adaptations of the relationship regarding service extensions, reductions, or shifts  Pondering on development of the contract  Understanding market for alternatives

Interviews G2, G3, G5, M2, M3, G7, G9 Desk research

05 & 08/2012; 11/2012– 01/2013

Table 3.1: Preliminary observations and data sources

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3.3.4. Data analysis The issue of the lack of a theoretical grounding of unexplored phenomena is well known in industrial marketing research. To develop new theories in business-to-business and industrial marketing, scholars have recommended the grounded theory methodology (Gummesson, 2003; Wagner et al., 2010), since it allows for the discovery of understudied phenomena (Glaser & Strauss, 1967), as is the case for dependence and lock-ins in BSRs. The grounded theory methodology comprises “systematic, yet flexible guidelines for collecting and analyzing qualitative data to construct theories from the data themselves” (Charmaz 2014, p. 1). It is especially appropriate for gaining an in-depth understanding of processes in which interpersonal interaction and behaviors or interpretations of individuals play a key role (Strauss, 1987; Suddaby, 2006; Wagner et al., 2010), as is again the case in our study. The grounded theory approach enabled us to uncover the complex mechanisms leading to dependence and lock-in in BSRs, and thereby enrich the limited theoretical knowledge on this topic. To develop a conceptual model that explains these mechanisms we followed the techniques of constant comparison and theoretical sampling (Glaser & Strauss 1967; Suddaby, 2006). We constantly collected, compared, and analyzed the data, where our data selection was guided by the emerging theory rather than by a predefined sample size or a determined sequence of data collection. Triangulation of the different data sources ensured the validity of our findings (Eisenhardt 1989; Huberman & Miles 1994). The collected data were assigned to the Atlas.ti software, which was used as an analysis tool throughout the entire research process. The data-analysis process itself was oriented towards Pratt et al. (2006) and Pratt’s (2008) three-step grounded theoretical approach, while memos on emerging ideas and data comprehension supported the coding process as an intermediate step (Charmaz, 2014; Pratt, 2008; Pratt et al., 2006). With our approach, we acknowledge the call of Wagner et al. (2010) to apply coding procedures in industrial marketing research: “Without the coding procedures, industrial marketing case studies might never move beyond the point of thick description and researchers might fail to develop any new theory” (Wagner et al. 2010, p. 7).

Step 1 In the initial phase, the different data sources were coded line by line (Bernard & Ryan, 2010; Charmaz, 2014; Pratt, 2008; Pratt et al., 2006). Recurring expressions were coded either by summarizing terms or assigning the intention of a statement as open codes. Concise expressions and statements of the interview partners in everyday language, so-called “in vivo codes”, were used to incorporate the specific language of this working environment (Charmaz, 2014). In summary, 619 first-order codes were assigned after the initial coding. However, there were several redundancies or synonyms that were able to be 60

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merged, while other codes that did not contribute to the research topic were abandoned, such as “participant’s prior employer”, or “product description” (Charmaz, 2014; Pratt et al., 2006); this led to a final total of 471 first-order codes after the first step of the data analysis. The remaining codes were then grouped into provisional codes (Pratt et al. 2006). Codes that did not fit well with the actual data were reconsidered and adapted accordingly (Souitaris, Stefania, & Liu, 2012). An iterative process of cross-checking the emerging first-order codes with the data sources ensured that they fitted the data in a constant comparative method (Glaser & Strauss 1967; Pratt et al. 2006; Charmaz, 2014). At the end of the first step, 35 first-order codes formed the basis for further analysis.

Step 2 In the second step, we consolidated the first-order codes into second-order categories (Bernard & Ryan, 2010; Pratt, 2008; Pratt et al., 2006) by grouping them into more abstract theoretical categories according to their fit within a thematic frame. For example, firstorder codes that referred to factors that prevent the exit of the buyer from the relationship, the entry of a new supplier to replace the incumbent, or similar statements, were consolidated in the second-order category entitled Barriers. Due to the clustering of first-order codes, the data analysis entered the axial coding phase, in which the analysis went beyond the case study and the actual data, with the aim of developing the theory at a higher level of abstraction (Glaser & Strauss, 1967). This second step in the analysis process revealed 12 second-order categories. Again, the data sources were reviewed after this second step in order to examine the fit between the theoretical categories and the dataset (Glaser & Strauss, 1967).

Step 3 In the third step, the second-order categories were further aggregated into theoretical dimensions (Pratt, 2009; Pratt et al., 2006). Underlying relationships and connections between the categories were discovered and the categories were sorted accordingly (Pratt, 2008). First impressions of the developing structure were discussed and revised among the authors; individual adaptations were undertaken iteratively until a coherent framework emerged. While this framework-building process was detached from the actual data on a higher theoretical and abstract level, the aggregated theoretical dimensions and the authors’ understanding of these dimensions’ interrelationships were then reviewed again after this final step in front of the data sources to examine the framework’s suitability in relation to the collected sources (Glaser & Strauss, 1967). To ensure plausibility of the interpretation, and to ensure the study’s accuracy, the data structure was presented and discussed with professors and doctoral students of the department, as well as with other research groups. 61

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3.4. Findings Our data analysis revealed four theoretical dimensions, each consisting of different categories that contributed to explaining the emergence of dependence and lock-in situations relating to our case. Figure 3.1 depicts the resulting data structure along the threestep analysis.

3.4.1. Convincing The first dimension, Convincing, depicts the basic step in becoming dependent on a supplier. In essence, Convincing describes the fit between the buyer’s expectations (Demanded price/performance ratio (PPR)) and the Supplier’s performance, while taking further Affirmations into account to persuade the buyer of the ongoing cooperation. First, the Demanded PPR combines two important aspects when it comes to the longterm outsourcing of logistical services. It expresses the expectations of a buyer as a ratio between price and performance. According to our data, a supplier must be quality-, but also cost-oriented. As such, cost orientation seems to be a dominating decision criterion in determining whether a supplier should be employed, while simultaneously the accuracy and reliability of logistical services are equally crucial. “Someone enters with a dumping price somewhere and goes bankrupt. [...] It is a fact that one cannot show everything via the price, but one has to look, of course, at whether something works out and how this can be verified.” (G4, 2012). More specifically, our data expresses quality as being even more valued than cost orientation. In line with this, the expression “low-cost avoidance” in our first-order themes describes the opinion of GMEC’s key employees that “low cost means low performance” in BSRs. Second, Supplier’s performance describes the observed and measured quality level of a supplier in meeting its buyers’ demands. Besides the quality level, our data also describes the supplier’s capability to flexibly adapt operations and processes towards changing buyer requirements as an important part of performance. Connected to this, the buyer’s perception of the overall logistical competence of its supplier, as well as its ability to solve unexpected problems and disturbances, are subsumed under this category. “What counts for us is that M-Log can provide a high-quality service and adapt with the utmost flexibility to our requirements, which are constantly changing as a result of our broad product range […].” (GMEC Press, 2011)

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Figure 3.1: Analysis steps and resulting data structure

The third category describes Affirmations, which provide additional value and a positive recognition of the service relationship from the buyer’s perspective. Affirmations confirm the selected supplier as the right choice, giving a feeling of “doing the right thing” in maintaining the established partnership. Among others, this evaluation results from proactive behavior in handling and improving individual services, as well as from positive external feedback, such as from the buyer’s customers, on the ongoing relationship.

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“Also, one can maybe say ‘intrinsically motivated’, so to look on one’s own at what can be done better, by means of their [M-Log’s] own systems and such. So it is not only the case that the buyer says you have to look at that, or do a kaizen workshop there, or do this better, but that one works pro-actively on certain topics.” (G9, 2013)

3.4.2. Tying As a second theoretical dimension, we identified Tying in the data, which refers to the creation of mental bonds with the partnership on the buyer side. Our interview data shows that mental bonds are especially observable by the buyer’s employees at the operational level, who reacted particularly reluctant to the hypothetical consideration of changing suppliers. Thereby, Joint history and enduring relation describes the past and current collaboration that has been imprinted onto these employees’ minds. Moreover, common progress that has been made during different projects in the past further strengthens the buyer’s perception of the current cooperation. In addition, planned upcoming activities or projects contribute to forming a joint future orientation, which brings the ongoing partnership into line. “[…] we will have […] a regular strategic meeting at the management level with M-Log starting next year. We do not only want to talk about the operative every-day business, but also we want to discuss some more future-, or let’s say middle- to long-term-oriented topics, such as where will GMEC develop and where do – consequently – demands for M-Log arise, so that we can exchange our views from an early stage on.” (G7, 2012) “[…] I don’t believe that there is a logistics contract in Germany that has existed for 20 years.” (G2, 2012) Next, the category Closeness and trust can be seen as the result of the firms’ long and joint history. Our data describe Closeness and trust in terms of having a robust partnership, which is strengthened by inter-personal relationships, as well as strong signs of appreciation of the buyer towards its supplier. “I cannot say we have a private relationship, but it’s still on a personal level. Due to this, we can put certain situations – which can also be critical and which are not entirely normal – back on the normal track. So that is actually very good and very positive in the collaboration with M-Log.” (G3, 2012) Moreover, the enhancement of fairness measures and attempts to create win-win situations contribute to this category on a more operational level. Hence, Closeness and trust depicts the importance of constant information exchange, as well as resilience and tolerance between the partners with regard to occurring problems. 64

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“I know the people there; I know that I can rely on them, so why should I get a new one on board?” (G7, 2012)

3.4.3. Complementing Our third aggregated theoretical dimension is called Complementing, and refers to the degree to which a supplier adapts and integrates its services to the processes and increasing needs of the buyer. Thus, the Integrated supplier compensates the operational issues that arise from the Needy buyer, which yields into a perfect fit between the partners. Our case depicts a Needy buyer that operates extensive and complex services which need to be managed. However, our data describes the buyer as being limited in its financial opportunities due to the overall economic situation, as well as in its competencies because of a lack of logistical expertise and further organizational shortcomings. “[…] often our contact persons are not qualified for our requests because there are so many contact persons that have a focus on their tasks, which look totally different.” (M3, 2013) “But with these things you can always see […] how flexible M-Log is. I do not know whether we at GMEC would be able to do that in such a manner.” (G1, 2012) In turn, the Integrated supplier counteracts the buyer’s inability to handle the logistical processes by providing an exclusively adapted service package, logistical know-how, and a willingness to address its buyer’s shortcomings in an individualized manner. “In our many years of cooperation and as a result of the constant review of the processes and the endeavor to achieve optimum supply quality, our integrated logistics solutions have become an integral part of the GMEC production processes. […] the service we provide is a perfectly tailored fit.” (M-Log Press, 2011)

3.4.4. Lock-in Our fourth theoretical dimension, Lock-in, identifies commonly stated aspects that ultimately prevent a separation from the incumbent supplier. We found that Lock-in describes different kinds of Barriers that prevent a supplier exchange. Moreover, the head start that a Dominant incumbent has compared to potential alternative providers as well as the buyer’s Risk aversion towards a supplier exchange further contribute to Lock-in. The interplay between these three categories inevitably leads to a lock-in of the buyer with the existing relationship.

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In more detail, Barriers prevent a separation from the incumbent supplier due to the presence of both specific exit barriers for the buyer and entry barriers for any potential new supplier. “[…] of course, this is the great advantage of M-Log compared to its competitors. Because the competitor […], even though he sees and understands all of this, can only do two things. First, he can forego margins. Or second, he has people who do not earn 10 euros per hour, but 5 euros per hour. However, we rule that out because in the tender we predetermine clearly what has to be considered as a basic requirement in the calculation.” (G2, 2012) Moreover, Barriers describe mutual sunk-costs of the buyer and its supplier of settingup and adapting the relational structures in the past, such as established communication channels or inter-organizational structures. “In my opinion, this [reliance on M-Log] can even go so far that I accept certain price differences for maintaining established structures, processes, communication channels, and so on. […] This [maintenance] would overcompensate price differences.” (G7, 2012) The Lock-in dimension is further comprised of the Dominant incumbent, which refers to the head start of the incumbent supplier in relation to any alternative option of conducting the services in question. This head start is promoted by the advantages of the incumbent supplier with regards to its experienced knowledge of the buyer-specific situation, which is in turn a major disadvantage for any newcomer who needs to build up these insights and skills. “In our many years of cooperation and as a result of the constant review of the processes and the endeavor to achieve optimum supply quality, our integrated logistics solutions have become an integral part of the GMEC production processes. We have in-depth knowledge of the buyer’s needs.” (M-Log Press, 2011) “[…] and with all the experience that M-Log has, they just know how to do it. There are some processes you just cannot document. […] Some things they simply have in their heads and then I do not know whether it would be so easy to say, ‘Okay, I will take a different provider’, […]. Whether this would work out without any problems? I leave that undecided.” (G1, 2012) In addition, the inferiority of insourcing the processes, as well as the necessary integration and ramp-up costs for alternative solutions, induce companies to stay with the incumbent.

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“We quickly checked whether it makes sense to quit the service contract and conduct the service on our own. We would build a warehouse in a greenfield approach and do the activities on our own. However, we came to the conclusion, […] due to diverse reasons, also with regard to costs, to not do that.” (G3, 2012) “You can hardly transfer the entire package back in-house. Why have we outsourced in the past? Because the labor agreement of the mechanical engineering industry is not affordable for us. As such, you will not succeed with in-housing due to cost reasons.” (G4, 2012) Finally, Risk aversion emphasizes the frequently mentioned risks connected to leaving an established supplier. The interviews highlighted the buyer’s concerns regarding the substantial switching effort that would be connected to the search for, and implementation of, a new supplier. When shifting the logistical process towards a new and unknown supplier, the interviewees feared a loss of quality and reliability, as well as increased costs and a loss of mutual investments. “A provider exchange […] is always connected to frictional losses. You need to shift and convert the entire thing, you need to move your inventories, build up a new infrastructure, IT and so on. […] You have to think and discuss very intensively, whether you want to take such a risk.” (G7, 2012)

3.5. Towards a conceptual model of the emergence of dependence and lock-in situations in buyer–supplier relationships 3.5.1. Dynamics leading to dependence and lock-in Our data suggests distinct categories and dimensions, which provide the basis for our approach towards an explanatory conceptual model of the emergence of dependence and lock-in in BSRs (shown in Figure 3.2). Following the logic of Pratt et al. (2006), our model is based on a higher level of abstraction from the data as the generalized result of our analysis process. Thus, it is a first attempt at developing a theory of the given topic (Eisenhardt, 1989). Building on our categories and dimensions, we describe the development of dependence in BSRs as the result of an interplay between three interrelated dimensions that engage in a mechanism leading to a lock-in over time. More specifically, we describe dependence as emerging from the mutually influencing dimensions Convincing, Tying and Complementing, which raise the degree of the buyer’s dependence up to a final Lock-in state. This is supported by the interrelated categories constituting sub-processes within each dimension. Figure 3.2 presents a progressively grey-shaded, tapered box that resembles an increasing degree of dependence as the circular influences proceed. This is fostered by the 67

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repetitive circular interplay between Convincing, Tying and Complementing, describing a BSR evolving into BSD and a lock-in situation. As the basic requirement for starting a BSR, our model describes Convincing as satisfying the buyer’s demands at a reasonable price. This general agreement about the basic conditions of their relationship serves as a starting point for further engagement, which constitutes the mechanisms observed. The buyer’s expectations (Demanded PPR) are measured against the Supplier’s performance and further Affirmations towards the ongoing relation, such as the incumbent’s attitude or additional external feedback. Based on the satisfying evaluation of past and present cooperation (Joint history and enduring relationship), the partners conduct their everyday business, projects, and future planning. If these experiences are positive and convincing, the partners develop, in the Tying phase, a relation based on Closeness and Trust, which is particularly characterized by the development of mental ties towards the relationship on the buyer’s side.

Figure 3.2: Model on the emergence of dependence and lock-in in BSRs

As a consequence of Tying, the buyer tends to hand over further activities to the established supplier (Integrated supplier). In turn, the buyer withdraws from these activities, which leads to the loss of specialized knowledge, capabilities and even resources (Needy buyer). Hence, Complementing depicts the replacement of the buyer’s activities through a 68

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deeper integration of the supplier’s services. As the supplier’s activities are closely integrated into the buyer’s processes, the buyer is again convinced and affirmed by the supplier’s offer. This strengthens Convincing and starts the influencing circle all over again. The process of Convincing, Tying, and Complementing takes place in a self-reinforcing manner, acting as a circular effect. This circular nature refers to the buyer’s perception of the supplier that convinces the buyer of being the right partner, and also continuously occurs during later stages of the relationship, by means of Complementing and Tying. Over time, the continuous interplay of these aspects leads to a Lock-in state, which is entered as the highest degree of dependence. The transition point from dependence to lock-in cannot be fixed in general. According to our definition of lock-in, we suggest that the buyer enters Lock-in if the dependence mechanism has been reached based on the buyer’s individual interpretation, leaving the buyer with a lack of alternative options in the given situation. Thus, in the Lock-in state, different forms of Barriers emerge and prompt the buyer to maintain the ongoing relationship. This effect is further manifested in the Risk aversion of the buyer towards losing the competencies or resources that the supplier has accumulated over time. Hence, alternative options, such as supplier exchange or insourcing, turn out to be inferior in comparison to the incumbent supplier (Dominant incumbent) with regards to cost and performance. We will take a closer look at the sub-processes constituting each of our dimensions in the following sections.

3.5.2. Convincing Convincing describes the positive effect of the supplier’s performance level together with further supplier evaluations of the buyer’s expectations regarding price and performance. The Supplier’s performance is a basic element in each BSR. The delivered service quality is described in our data as the supplier’s performance level, its overall competencies and the ability to flexibly adapt towards changes. These elements are considered as positively influencing the buyer’s satisfaction. In addition, unexpected Affirmations, such as the supplier’s reputation and positive external feedback on (or proactive improvement measures of) the supplier, further stimulate the Demanded PPR. In line with these two categories, Buchanan (1992) highlighted a buyer’s dependence on the supplier’s delivery of extraordinary services. Unexpected Affirmations delight the buyer (Oliver et al. 1997) and evoke additional satisfaction with the services, leading to an increased willingness to repurchase the service (Zeithaml et al. 1996). Furthermore, scholars have found that the reputation of the examined supplier is favorable for the buyer’s attentiveness to the relationship (Bonner & Calantone, 2005), which is in line with the expressions in our data. Lastly, participation in improvements processes has also been identified as a basic element of long-term relationships and a

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source of mutual dependence (Baraldi et al., 2014), which we find as an Affirmation towards having a good supplier in our data. Taking the Supplier’s performance and Affirmations together, the buyer evaluates the purchased service on the basis of its joint fit with its Demanded PPR. Here, Convincing suggests that well-performed supplier activities directly influence the buyer’s satisfaction and repurchasing behavior (Geiger et al. 2012). While the costs of a service package are essential decision criteria for decision-makers in industrial companies (Langley et al., 2013; Stank et al., 1999), a good performance level is considered to be especially crucial as it avoids disruptions and adds value to a buyer’s processes (Stank et al., 1999). The literature confirms that a good level of supplier performance is also a driver of long-term relationships (Scheer, Miao & Garrett, 2009; Wilson, 1995), which positively influences the dimension Convincing. In summary, Convincing leads to a continuation of the BSR, thus fostering Tying.

3.5.3. Tying Based on Convincing cooperation, the partners start to plan for future developments within the relationship. In doing so, the buyer and the supplier build up and maintain a Joint history and enduring relationship. In the literature, Joint history and enduring relationship is found to be an inhibitor of supplier exchange (Harrison et al., 2012). Various episodes and projects occur over the course of the history between a buyer and supplier that shape the collaboration (Schurr, 2007). Connecting to our second factor in this dimension, Schurr (2007) explained that a series of such episodes in a relationship’s History creates Trust between the partners. Extant literature has further promoted the importance of Closeness and trust as a basic element of relationships, which ties a buyer and a supplier together (Laaksonen et al., 2008; Wilson, 1995). In line with the literature, Closeness and trust is characterized by the history of collaboration or fairness measures, such as the creation of win–win situations, which highlight the importance of ‘gain-sharing’ between partners as a success factor for longterm logistics relationships (Mohr & Spekman, 1994; Narasimhan et al., 2009; Schurr, 2007). Tying positively influences the buyer’s perception of the relation, which is perceived as even more valuable due to the Convincing impressions of a past History and Close collaboration. This relation in our data is consistent with the research on organizational dependence (Schreyogg & Sydow 2011; Sydow et al. 2009), which contains parallels with the cognitive lock-in research (Johnson et al., 2003; Murray & Häubl, 2007). Thus, over time, a buyer becomes accustomed to a product, thereby increasing the product’s cognitive value and switching costs compared to competing products (Johnson et al., 2003). Murray 70

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and Häubl (2007, p. 77) described cognitive costs as expenses that are “[…] associated with consuming or using different alternatives […]. More specifically, the costs associated with thinking about and using a particular product decrease as a function of the amount of experience a consumer has with it.” As a result, the repeated commission of a supplier will lead to increased switching costs, thereby raising the likelihood that the buyer will purchase the incumbent product again (Johnson et al., 2003). Adapting this logic to BSRs, our model describes the benefit of continuing to assign services to the incumbent supplier, supported by the Joint history and enduring relationship as well as Closeness and trust, as opposed to an alternative cooperation agreement.

3.5.4. Complementing Following the development of basic satisfaction with the supplier, which leads over time to a closely tied relationship, our model describes the rational step for the buyer to withdraw from the outsourced activities in order to integrate the supplier’s activities most effectively by avoiding redundancies and increasing the efficiency of the outsourcing decision. As in our model, extant studies have also described trust and openness as predecessors of integrated activities (Corsten & Felde, 2005; Laaksonen et al., 2008). Hence, the supplier takes over these activities and designs them according to the buyer’s individual needs, leading to further integration of the supplier’s processes (Integrated supplier). This increased integration into the buyer’s processes causes dependencies towards the provider (Håkansson & Snehota, 1995). The Integrated supplier gains beneficial insights into the buyer’s needs, enabling the supplier to focus on its activities and address them most efficiently (Cannon & Perreault, 1999). In contrast, the buyer’s abandonment of the activities causes information asymmetries in relation to the supplier, as well as a reduction of process know-how over time (Lonsdale, 2001). Meanwhile, the supplier provides sustainable advantages for its buyer due to flexible, custom-tailored services (Stank et al., 1999). Our item Integrated supplier is characterized by an exclusive service provision, which is considered to be a major determinant of lock-ins (Narasimhan et al., 2009). This is fostered by information asymmetries for the benefit of the supplier towards the buyer (Lonsdale, 2001), as a result of the buyers withdrawal from the processes. Thus, the buyer increasingly relies on the supplier’s contribution and is in need of its competencies (Needy buyer). Due to synergy effects in relation to the tasks that the supplier already performs, it is observable in our case – and reasonable to assume – that further activities connected to the already assigned activities are also handed over to the supplier over time (Lonsdale, 2001). Consequently, the buyer and its supplier will be Complementing each other in terms of the dedicated adaptation of the service product towards the needs of the buyer, resulting in the difficult-to-terminate interconnection of the supplier’s activities with the buyer’s core processes. This in turn leads to 71

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the increased complexity of the outsourced service package. Prior studies have acknowledged an increase in the complexity of outsourced activities in association with a deeper integration of services to influence the buyer to become dependent on the supplier (Browne & Allen, 2001; Zhang & Huo, 2013). As illustrated in Figure 3.2, we suggest a circular influence between the three dimensions. A BSR in which the supplier is increasingly Complementing the buyer has a direct influence on the buyer’s expectations (Demanded PPR) regarding the relationship. Furthermore, the ability of the supplier to integrate into the buyer’s processes influences the Affirmations in Convincing. In summary, the circle illustrated in Figure 3.2 starts all over again, developing into a spiral effect of increasing dependence over time.

3.5.5. Lock-in The transition point between an increasingly high level of dependence in the depicted circle on the one hand, and entrance into the Lock-in state on the other hand, is difficult to determine. Due to their specific relationship characteristics, their industry and market conditions, or because of the process or service specificities, some BSRs might enter into a Lock-in state earlier than others. Hence, we describe the transition as a slinking process over time, flowing into a Lock-in which is in our case characterized by three categories. In our model, a Lock-in manifests itself through the interplay between Barriers, Risk aversion, and a Dominant incumbent. Thereby, Barriers reflect the buyer’s exit barriers, a potential newcomer’s entry barriers, or relation-specific efforts that would be lost when exchanging the incumbent supplier (Harrison et al., 2012). Our argument regarding Barriers supports those proposed by Williamson (1981) and Lonsdale (2001), who mentioned the impact of such barriers in effectuating lock-in situations. Thus, efforts in setting up the specialized relationship, its structures, and processes prevent a separation from the supplier, as the buyer is locked into the relationship due to the specificity of the current service relation (Heide & John, 1988; Lonsdale, 2001). Following a transaction-cost logic, the switching costs are raised by the associated costs of being provided by a new supplier that is not yet specialized to the needs of the buyer, as opposed to the Dominant incumbent (Lonsdale 2001; Rindfleisch & Heide 1997; Williamson 1981), with regards to accumulated customer-specific know-how, process knowledge, and adapted competencies. Resulting from these “hard facts” expressed by Barriers, the buyer’s behavior is characterized by Risk aversion towards concerns regarding the performance level of a newcomer, as well as uncertainty regarding the ultimate financial effort required to exchange the supplier (Lonsdale, 2001). Furthermore, our case illustrates the uncertainty of the buyer towards a new supplier’s competence level. In particular, the time and learning efforts required until the incumbent supplier’s performance level is reached impose risks for the 72

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buyer, which it is desirable to avoid. Lastly, our interviewees noted the required establishment of interpersonal communication channels and of a functioning working basis as a potentially risky transition phase. Taking together the Barriers and the Risk-averse buyer, the supplier is described as a Dominant incumbent. Its deep integration into the buyer’s processes causes the accumulation of process- and asset-specific knowledge of the service requirements that need to be provided (Lonsdale, 2001). This knowledge creates the basis for information asymmetries in favor of the incumbent supplier, which increase as the BSR endures (Lonsdale, 2001). Based on this, the Dominant incumbent benefits from a head start over competitors in a buyer’s tendering or benchmarking process. This is in line with Dwyer et al.’s (1987, p. 14) statement that “the buyer’s perception of the effectiveness of the exchange relation […] is a significant mobility barrier and a potential competitive advantage” insulating the supplier from competition. Thus, a potential newcomer will not have access to this knowledge, and must include a risk factor for unforeseen costs into its offering, thus providing a less competitive basis. Similarly, insourcing is not an option due to the above-described knowledge asymmetry or financial drawbacks with regard to advantages in labor costs in the service sector, which is in line with recent industry trends (Langley et al., 2013). Overall, the incumbent supplier leaves the buyer with a lack of alternative options for provision of the outsourced activities. To summarize, Risk aversion and a Dominant incumbent can even heighten the Barriers for a supplier change, which finally results into a Lock-in situation.

3.6. Discussion 3.6.1. Theoretical implications We studied the emergence of dependence and lock-in effects in BSRs by examining a real-life case. In doing so, we draw attention to the negative effects and dark sides of close long-term relationships, as they have been comparatively underrepresented in the recent literature (Grayson & Ambler, 1999; Slone, Dittmann, & Mentzer, 2010; Stank, Dittmann, & Autry, 2011). Our findings and the suggested conceptual model contribute to the existing research on BSRs in different ways. First, buyer–supplier research has so far provided isolated insights into the mechanisms of dependence-emergence in business relationships. At the same time, the specific situation of a lock-in has not been discussed in the buyer–supplier setting. We identify four theoretical dimensions that constitute a buyer’s dependence on a supplier. Within these dimensions, we point to the importance of the interconnected influences between transactional, mental, and operative bonding effects and relate them to the development of lock-in effects 73

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in a buyer–supplier setting. Our conceptual model summarizes the mechanisms in an explanatory approach to enlarge our understanding of the emergence of dependence and lockin in BSRs. We thereby respond to Villena et al.’s call (2011) to investigate how a BSR evolves into an established relationship that reaches the point of having a dark side. As we gathered data on the entire relational history, our model may serve as a first attempt to understand the development of dark sides using the example of BSD. We thereby hope to provide a basis for further discussion on these issues. Second, we shed light on single sub-processes that constitute buyer dependence. As our data contains experiences of employees participating in a long-lasting BSR, our model illustrates the effects of buyer dependence that occur over time. Thus, we depict how a buyer in a long-term cooperation mentally binds itself to a supplier due to positive experiences and external affirmations. This results in a fear of losing competencies and of losing employee knowledge of that particular supplier, which induces even further outsourcing and integration of activities to that supplier. Hence, we can explain how such a cognitive lock-in (Johnson et al., 2003; Murray & Häubl, 2007) can cause deeper process integration, which has only been assumed in prior studies (Petersen, Handfield, Lawson, & Cousins, 2008). We hope to motivate further studies on this interesting relation to understand the importance of mental bonds and their influence on dependence and lock-in in BSRs in more depth. Furthermore, our model describes the risks of withdrawing from externally supplied activities with regards to the preservation of detailed process knowledge and resource endowments. As both solely remain with the supplier, the buyer maneuvers itself into a position in which he is in need of that particular supplier’s help. Thus, the model explains the connection between the withdrawal from processes and the composition of exit barriers for the incumbent solution, as well as entry barriers for alternative solutions. Finally, we suggest a creeping transition from a buyer’s dependence into a lock-in, which is caused by an increasing level of dependence due to a spiraling effect among Convincing, Tying, and Complementing. We thereby acknowledge that a fixed transition point between relying on a partner (i.e. being dependent) and being forced to stick with a partner (i.e. being locked in) is hard to distinguish. A closer examination of this “point of no return” remains a topic for further research. It is this situation at the point of no return where the relational power might shift from the buyer to the supplier. Scholars have long lauded that power asymmetries might lead to deficient relationships as the more powerful party might make use of it (Caniëls & Roeleveld, 2009). However, we do not find this connection in our data. Instead our data revealed a collaborative nature of the relationship and an eye-level atmosphere between GMEC and M-Log, although the buyer is locked-in by the supplier. Hence, our model also extends our current understanding by challenging this negative view and by suggesting to further investigate the relation between power situations and collaborative

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atmospheres in BSRs as well as a differentiated reflection on the importance of power as an influencing factor in long-term relationships. Third, we employed a grounded theoretical approach to analyze our dataset and develop a conceptual model. In doing so, we answer calls for the more intense use of qualitative research methods in general and grounded theoretical studies in particular within business-to-business and industrial marketing (Gummesson, 2003; Wagner et al., 2010). Thus, the present study contributes by complementing the methodological approaches in the buyer–supplier research, and should motivate the application of qualitative methods in future studies. Lastly, our case connects to logistics relationships. With our dimensions Convincing and Tying, we confirm and extend findings regarding logistics relationships and customer loyalty research (Deepen et al. 2008; Stank et al. 1999; Wallenburg et al. 2011). In connection with this, the Complementing dimension confirms the insights of supply chain integration discussions (Zhang & Huo, 2013). Hence, we hope that the results of our study will serve as a starting point for a deeper understanding of dependence and lock-in effects in logistics relationships.

3.6.2. Managerial implications Our model can serve as a first attempt to guide practitioners in understanding the buyer’s development into dependence or lock-in situations in BSRs. The insights from our data imply different aspects from a buyer’s perspective with regards to the four dimensions of our model, which can serve as a basis of discussion from which to recommend appropriate prevention measures. Convincing shows that for an appropriate evaluation of the supplied performance level, it is necessary to have a detailed definition of the expectations and needs as a sound evaluation base within the relationship. This raises the challenge for buyers to specify the actions required, as well as their expectations, in as much detail as possible before a contract is signed. Furthermore, in order to avoid relying solely on individual perceptions, measurement tools for monitoring the actual performance level of a supplier must be implemented. Within our data, we found hints that effective contract management and frequent tendering processes can act as countermeasures by realistically evaluating the incumbent’s performance level through benchmarking processes. Positive relational episodes from the past have resulted in Tying, which comprises important relational factors for BSRs (Rajesh et al., 2011). The emergence of Tying can lead to dependencies and cognitive lock-ins (Johnson et al., 2003; Murray & Häubl, 2007), which exacerbates this task. However, it is important to maintain a critical distance in order

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to avoid overly strong mental bonds, and to sustain a rational view of collaboration by, for example, shortening the duration of contracts and engaging in regular renegotiation loops. When the buyer withdraws from its outsourced activities as the result of a deeper integration of the supplier into its processes, this leads to Complementing. Handing over these processes implies that the buyer adapts its organization in order to realize the savings that outsourcing offers. However, dependence and lock-ins can result. Therefore, resistance to outsourcing further activities that may belong to core competencies (or are very close to them) is dangerous and should be avoided. Again, we find hints in our data that by maintaining the ability to insource the respective activities (that is, the necessary capabilities and know-how, as well as some basic infrastructure), some dark sides of a long-term BSR can be avoided. On the one hand, this is the case since the buyer creates a potential substitute product, as opposed to the supplier’s services (Narasimhan et al., 2009). On the other hand, the buyer maintains a discussion at eye-level with its supplier based on the retained know-how and capabilities. The described Risk aversion of a firm combines with the Barriers to changing the supplier to jointly create Lock-in. Thus, the buyer must balance the reliance and associated cost savings that come with employing an incumbent supplier against the opportunity to maintain access to critical resources, or to lower entry barriers for a potential newcomer.

3.7. Conclusion Although the antecedents and impacts of dependence have been introduced in industrial marketing research, the literature lacks understanding of the mechanisms of dependence-emergence. By analyzing a case setting in the German mechanical engineering industry, we aimed to enlarge the understanding of the underlying mechanisms and their interrelations that explain the emergence of dependence and lock-in from a buyer’s perspective. In order to do so, we used a grounded theory approach to examine our case data, where we found four interrelated mechanisms (Convincing, Tying, Complementing and Lock-in) that explain the development of dependence and lock-in. By generalizing our empirical findings, we developed an initial conceptual model that highlights the mechanisms of the emergence of dependence and lock-in in BSRs. The model also acknowledges and integrates the isolated dependence factors explored by former studies. However, our study is constrained by certain limitations. From a methodological perspective, the generalizability of our results is limited since we examined the unique nature of a single BSR case in the German mechanical engineering industry (Eisenhardt, 1989; Pratt et al., 2006). The qualitative research design of our investigation cannot statistically validate our findings (Pratt et al., 2006). Contentwise, we examined the topic from a

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buyer’s perspective. Generally, dependence may also occur on the supplier side exclusively, or on both sides simultaneously (inter-dependence). Additionally, we did not address appropriate countermeasures for dependence. These topics remain a matter for future research in multiple and diverse settings. Nevertheless, we shed light on initial approaches and initiatives to avoid strong dependence and lock-in situations, which may open new avenues to explore this pertinent topic in more depth. Our analysis therefore offers an interesting starting point for further investigations and carries substantial potential for valuable implications in theory and practice. Finally, we wish to motivate further research within the scope of our topic. With regard to our model, testing the detected dimensions within a broader and more diversified context could provide additional support and insights, and validate our results. Quantitative approaches to test the strength of different dimensions are conceivable. In particular, a closer examination of Tying and other bonding processes appears interesting. We also suggest that future investigations consider the transition point between dependence and lock-in in more depth. Furthermore, our analysis of lock-in effects in BSRs can serve as a starting point for further exploratory studies, for instance on appropriate countermeasures to prevent the emergence of dependence.

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SOURCE CODE

G1

M1

G2

G3

G4

G5

G6

G7

M2

M3

G8

G9

NO.

1

2

3

4

5

6

7

8

9

10

11

12

TOP-LEVEL

ASSISTANT

MID-LEVEL

TOP-LEVEL

MID-LEVEL

FIRST-LEVEL

FIRST-LEVEL

FIRST-LEVEL

MID-LEVEL

MID-LEVEL

GMEC

IT-SYSTEMS

GMEC

GMEC

LOGISTICS AND SUPPLIER DEVELOPMENT SENIOR VICE PRESIDENT LOGISTICS

M-LOG

M-LOG

HEAD OF OPERATIONS

HEAD OF BRANCH OFFICE & CUSTOMER GMEC

GMEC

GMEC

PRODUCTION PLANNING

HEAD OF LOGISTICS DEVELOPMENT & CORPORATE LOGISTICS

GMEC

GMEC

GMEC

M-LOG

GMEC

COMPANY

ORDER TO DELIVERY MANAGEMENT

HEAD OF ORDER TO DELIVERY MANAGEMENT

HEAD OF TRANSPORT, PACKAGING, & CUSTOMS

HEAD OF MATERIAL FLOW MANAGEMENT

LOGISTICS AND SUPPLIER DEVELOPMENT

FIRST-LEVEL

MID-LEVEL

DEPARTMENT

MANAGEMENT LEVEL

33

47

79

79

58

60

46

43

43

53

46

45

DURATION (MINS)

JAN. 15, 2013

JAN. 10, 2013

JAN. 9, 2013

JAN. 9, 2013

DEC. 17, 2012

DEC. 12, 2012

DEC. 6, 2012

DEC. 4, 2012

DEC. 4, 2012

NOV. 30, 2012

NOV. 26, 2012

NOV. 19, 2012

DATE

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Appendix Appendix A: List of Interviews

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Appendix B: Interview Guideline

A:

B:

C:

D:

84

Interview partner’s role in cooperation and GMEC/M-Log’s history 

Interview partner’s role description



Personal impression of the cooperation



Satisfaction with the cooperation



Milestones and important episodes in the cooperation

Buyer–supplier cooperation design and characteristics 

Most important factors for successful cooperation



“No-gos” for a successful cooperation



M-Log’s characteristics, service provision, and special capabilities



Daily cooperation with the supplier



Supplier’s integration into, and collaboration regarding, daily issues



Contract negotiation process

Potential supplier exchange 

Information on alternative forms of service provision



Tendering process: Prerequisites and challenges



Provider exchange process and necessary adaptations



Potential entry barriers

GMEC’s dependence on the supplier 

Importance of M-Log and its services



Insourcing as alternative option



Potential exit barriers of GMEC



Future outlook on the cooperation

4. Managing Distinct Buyer–Supplier Dependencies – A Typological Differentiation Abstract

Dependence is considered to be a key relational construct in buyer–supplier relationships. Existing research has highlighted its impact on dyads and suggested strategic recommendations regarding how to cope with buyer–supplier dependencies (BSD). However, these recommendations seem to be contradictory, as some scholars recommend dependence avoidance while others promote its strategic value for the partners involved. The present paper argues that the decision on which strategic measure is the best choice in individual dependence situations depends on the specific type of BSD. The paper builds on resource-dependence theory (RDT) and the relational view (RV) to discuss four groups of dependence management strategies and their fit to eight characteristic forms of BSD, which are derived in detail. Afterwards, strategies are allocated to specific dependence forms. Thereby, this conceptual study contributes in two areas: it incorporates RDT and RV into the discussion on BSRs, and it also suggests a comprehensive typology of dependence situations, which serves as a basis for future research in the domain. Finally, the paper proposes an organized picture of dependence management strategies for practitioners. Keywords: inter-organizational relationships; buyer–supplier relationships; dependence; typology; resource-dependence theory; relational view.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 T. Mandt, Dependence in Buyer-Supplier Relationships, Edition KWV, https://doi.org/10.1007/978-3-658-24252-7_4

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4.1. Introduction Buyer–supplier relationships (BSRs) are characterized as dyadic long-term exchanges that evolve over time (Dwyer, Schurr, & Oh, 1987) as the result of repeated, vertical interactions between a buying and a supplying organization (Håkansson, 1982). These repetitive interactions are enabled by mutual commitment, trust, and dependence, which are considered to be crucial relational constructs (Day, Fawcett, Fawcett, & Magnan, 2013; Morgan & Hunt, 1994). Interestingly, the former two constructs are widely acknowledged as positive and desirable for BSRs (Morgan & Hunt 1994), whereas the latter construct of buyer–supplier dependence (BSD) is unequally described in the extant literature (Gassenheimer et al. 1998). On the one hand, scholars have discussed the potentially negative connotation of BSD as being a liability (Buchanan, 1992), high risk (Corsten & Felde, 2005), and a threat to a firm’s survival (S. C. Andaleeb, 1996). On the other hand, other studies have pointed out positive effects of BSD, such as collaborative success (Heide & John, 1988), and resource access or cost reductions (Cousins & Crone, 2003). Building on these divergent perspectives, scholars have provided contrasting recommendations about appropriate interpretation and handling of dependence relationships, such as either counteracting and decreasing their dependence (Casciaro & Piskorski, 2005; Pfeffer & Salancik, 2003) or intensifying these exchanges (Anderson & Narus, 1990). Since these recommendations appear to be contradictory at first sight, practitioners are left with little guidance on how to best cope with BSD. So far, extant research has not provided a more detailed and clarifying discussion about which strategic approaches are recommendable. Thus, the aim of the present paper is to connect to existing strategic recommendations on BSD and to answer the research question about what the most appropriate management approaches to cope with BSD are. Although prior strategy recommendations have provided contrasting approaches, this paper argues that each strategic direction between either enforcing or dissolving BSD might be appropriate, as long as it is applied in the right situation. Therefore, it is necessary to differentiate between typical forms of BSD and to argue for an allocation of suitable management recommendations to the respective dependence forms. In order to do this, the perspectives of resource-dependence-theory (RDT) and the relational view (RV) are taken as theoretical lenses and argumentative support. The remainder of the paper is structured as follows. It starts by defining the construct of dependence in BSRs, before introducing underlying theories. It then develops a structured set of four strategies and review descriptions of conceptual types of BSD. Given that extant research has fallen short of comprehensively integrating the necessary characteristics of dependence magnitude, symmetry, and degree of relationalism into a holistic typology, idiosyncratic types of BSD are derived based on these dimensions. This typology serves as a discussion base to select appropriate strategic measures for each individual dependence form. Thereby, this paper contributes to the extant literature by integrating prior 86

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discussions on managing dependence into a comprehensive framework. It also follows calls to embed discussions on BSRs in RDT and RV. This finally leads to the introduction of avenues for future research in the management and development of buyer–supplier dependence.

4.2. Theoretical foundations 4.2.1. Resource dependence theory Resource dependence theory (RDT) has become increasingly important for scholars wishing to explain the behavior of organizations in inter-organizational relationships (Hillman, Withers, & Collins, 2009). RDT is mainly influenced by the seminal work of Pfeffer and Salancik (1978), who discussed the behavior of organizations that are not self-sufficient in providing themselves with the necessary resources to survive (Paulraj & Chen, 2007). Nevertheless, organizations are simultaneously striving to maximize their autonomy as much as possible (Albers, 2005). Thus, organizations enter exchange relationships in order to gain access to the resources they require (Pfeffer & Salancik, 2003). As the purchased resources are not under the control of the focal organization, the organization faces uncertainty with regard to a continued resource access, and therefore its survival in the future (Hillman et al., 2009). In reaction to this environmental uncertainty, organizations take actions to manage these exchange relationships, which represent dependence situations (Casciaro & Piskorski, 2005). More specifically, RDT offers three basic management measures for handling dependencies. In particular, RDT primarily recommends absorbing organizations that offer the required resources by acquisitions (Pfeffer & Salancik, 2003). If this is not possible from a legal, economic, or political perspective, RDT recommends engaging in so-called power-based actions, with the aim of increasing the dependence of the resource-providing organization on itself, which means balancing or inverting dependence relations (Albers, 2005). As a final and explicitly called second-best option, Pfeffer and Salancik recommend to cooperate with crucial exchange partners by engaging in longterm supply or cooperation agreements, either with the resource-provider, or on a horizontal basis with other customers of the resource provider in order to increase purchasing power towards the resource-provider (Hillman et al., 2009). These suggested approaches serve as a logical basis for many of the subsequent studies on BSD. In sum, RDT’s connection to the discussion of BSD is inherently explained by its assumption that organizations are not self-sufficient in striving for survival and profit generation.

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4.2.2. Relational view In contrast to RDT, the relational view (RV) does not focus on the behavior of organizations striving for autonomy, but rather questions sources for gaining sustainable competitive advantages (van Weele & van Raaij, 2014). The RV assumes that organizations are embedded in a network of interrelations to other organizations (Dyer & Singh, 1998). As an extension to the resource-based view, the RV states that cooperations between firms can be seen as sources of so-called relational rents. Relational rents are understood as “[…] supernormal profit jointly generated in an exchange relationship that cannot be generated by either firm in isolation and can only be created through the joint idiosyncratic contributions of the specific alliance partners” (Dyer & Singh, 1998, p. 662). These rents can be gained by cooperating with other organizations in three ways: The first is by jointly investing into relation-specific assets; that is, assets that are of exclusive value in and for a specific cooperation (Dyer & Singh, 1998). Second, relational rents can also be gained by combining scarce complementary resources or capabilities of the cooperating actors (King, Covin, & Hegarty, 2003). Finally, Dyer and Singh (1998) emphasize the value of knowledge-sharing routines and effective governance as sources for such supernormal profits. In essence, the RV postulates the value of cooperation as a strategic tool to achieve sustainable competitive advantages by generating relational rents (van Weele & van Raaij, 2014). The connection of RV to the issue of BSD can be explained by the need for and the status of these relational rents as supernormal profits for the business model of a buyer or supplier.

4.3. Buyer–supplier dependencies 4.3.1. Buyer–supplier relationships Buyer–supplier relationships (BSRs) are defined as dyadic long-term exchanges that evolve over time (Dwyer et al., 1987) as the result of repeated vertical interactions between a buying and a supplying organization (Håkansson, 1982). Common examples for BSRs are outsourcing relationships, in which, for example, a service provider offers transportation services to a company, channel relationships between an OEM and a retailer, as well as supply relationships between a component manufacturer and an OEM. Such vertical exchange relationships, in which companies at subsequent stages of a value chain interact, differ from horizontal relationships, in which companies at the same stage of a value chain interact, regarding their necessity and development from a focal firm’s perspective. Vertical relationships often develop gradually based on repetitive transactions that serve firms in supplying with and disposing of resources that are necessary to survive. In contrast, horizontal relationships are set up at a distinct point in time with the aim of improving a firm’s operations in a specific area. 88

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Håkansson and Snehota (1982) conceptualized such vertical BSRs by differentiating between two acting organizations and the individuals who work within these organizations. The organizations interact on a short-term basis by exchanging products, services, financials, or information on an organizational or individual level (Håkansson, 1982). The repetition of these exchanges gradually creates long-term relationships in which the partners adapt towards each other and institutionalize their exchanges (Dwyer et al., 1987), for example, by setting up cooperative agreements (Håkansson, 1982). These long-term relationships between the organizations and their individuals are surrounded by the atmosphere of the exchange, which describes the interpersonal cooperative style, the trust relationship (Morgan & Hunt, 1994), and the mutual expectations of the partners (Håkansson, 1982). Moreover, the atmosphere contains a description of the power and dependence relation between buyer and supplier, which highlights the central meaning of the dependence construct for the overall BSR. Finally, BSRs are embedded in a specific business environment that is characterized by the structure and dynamics of the market, its international orientation, position in the value chain, as well as its social habits (Håkansson, 1982). Since it was first described, this so-called IMP model (Figure 4.1) has been discussed intensively in the literature and has served as a basis for numerous studies and analyses. The present study understands BSRs in the above-described way and uses central cornerstones of the model in its further argumentation.

Environment Market structure, dynamism, internationalization, channel position, social system Atmosphere Power/ dependence, cooperation, closeness, expectations

Organization

Exchange episodes

Shortterm

Organization

Interaction process Individual

Longterm

Re Relationships sh

Individual

Figure 4.1: The IMP-Model (Håkansson, 1982)

4.3.2. Inter-organizational dependence The phenomenon of dependence has frequently been described as occurring in close and intense BSRs (Barnes, Naude, & Michell, 2005; Caniëls & Gelderman, 2007; Dwyer 89

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et al., 1987; Ganesan, 1994; Hammervoll, 2005; Harrison, Beatty, Reynolds, & Noble, 2012; Narasimhan, Nair, Griffith, Arlbjørn, & Bendoly, 2009; Turner, LeMay, Hartley, & Wood, 2000). Emerson (1962) defined dependence as the need to rely on a partner’s contribution in pursuing one’s own goals. More specifically, dependence is present if the outcomes of a specific relationship are superior to the outcomes of potential alternative relationships (Anderson & Narus, 1990). Over time, the gap between an ongoing and any alternative relationship with regard to relational outcomes – such as synergy effects, process interrelations or switching efforts – can increase to such an extent that the set of alternative options is restricted to one single supplier (Schmitz, Schweiger, & Daft, 2016). Due to this, the switching costs in relation to alternative options overcome the benefits of any change (Murray & Häubl, 2007). If this is the case, a fixed state called a lock-in situation is present, such that the buyer feels unable to leave the relationship (Harrison et al., 2012). This agrees with the previous contributions by defining dependence as a state in which a buyer relies upon a supplier to such an extent that the buyer would not be able to yield comparable results without the relationship to the particular supplier. Furthermore, a lockin is defined as the highest possible point on a continuum of dependence, in which a buyer has no alternative but to maintain the currently employed relationship with the supplier. In this respect, the understanding of lock-in is best described as a rigid situation in which the buyer is forced to proceed with the ongoing relationship (Harrison et al., 2012). Dependence and lock-in have been the focus of former investigations in BSRs (Lonsdale, 2001; Narasimhan et al., 2009; Turner et al., 2000). Scholars have commented on the relational constructs of commitment, trust, and bonding effects as sources of dependence (Bendapudi & Berry, 1997; Hammervoll, 2005; Johnson, Bellman, & Lohse, 2003; Murray & Häubl, 2007). Furthermore, external market conditions, the specific knowledge and skill-set of the supplier, as well as financial and technological reasons, have been reported as dependence facilitators (Arthur, 1989; Bendapudi & Berry, 1997; David, 1985; Lonsdale, 2001).

4.3.3. Handling buyer–supplier dependencies Extant research recommends different managerial measures for buyers and suppliers regarding the management of BSD. Depending on the intention to change a dependence situation, and depending on the intended impact of potential management measures, scholars recommend characteristic reactions towards BSD, which can be grouped into four broad categories. Figure 4.2 structures these four strategic measures by differentiating between management actions that either reduce or enhance dependence situations, respectively. On the other hand, it differentiates between the extent of single intended measures. 90

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This results in the four characteristic strategies of “Exit”, “Balance”, “Expand” or “Secure”, which are presented in detail in the following sections.

high Impact of intended measure low

EXIT

EXPAND

BALANCE

SECURE

Reduce dep. magnitude

(at least) maintain dep. magnitude

Intended direction of effect on dependence magnitude Figure 4.2: Strategies to handle buyer-supplier dependencies

4.3.3.1. Exit The upper-left quadrant of Figure 4.2 is called Exit. Exit describes the recognition of a buyer or supplier that the dependence within their relationship is disadvantageous. This might be because of a lack of benefits resulting from the exchange, or due to negative dependence effects, such as inertia or major inefficiencies (Gelderman & Van Weele, 2003; Geyskens, Steenkamp, Scheer, & Kumar, 1996). In these cases, prior research recommends engaging with alternative partners (Buchanan, 1992; Emerson, 1962) or refraining from the exchange partner (Emerson, 1962). This might be done by conducting services on one’s own, striving for the integration of a certain resource or production step, or by developing one’s products for alternative markets. The aim is to free up dependence relations. Nevertheless, it is important to mention a definitional difficulty: Lock-in situations, for example, are defined as having the strongest degree of dependence, in which a party has no option but to maintain an ongoing relationship with its exchange partner. Thus, Exit might not be a feasible or viable option for some actors in dependence relationships, as searching and building up alternative partners, or conducting activities on one’s own might come with substantial investments, losses, or performance reductions.

4.3.3.2. Balance The collective management measures subsumed under Balance are connected to a negative evaluation of dependence situations (Barnes et al., 2005; Izquierdo & Cillán, 2004) 91

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and recommend counteracting dependencies (Casciaro & Piskorski, 2005). BSD is frequently considered to depict a high risk for dependent firms that become vulnerable to opportunistic behavior based on power imbalances (Anderson & Narus, 1990; Eggert, Ulaga, & Hollmann, 2009; Heide & John, 1988). Besides, an increased level of conflict and bargaining processes is mentioned (Casciaro & Piskorski, 2005). Based on this picture of BSD, extant studies recommend counteracting dependencies by initiating changes in the dependence structure with the aim of balancing the relationship between the partners (Emerson, 1962). In order to do this, a decrease in the importance of a partner’s resources is recommended. This can be done by such means as actively searching for alternative partners (Geiger et al., 2012; Gelderman & Van Weele, 2003), or by finding alternative resources that substitute the existing one’s (Pfeffer & Salancik, 2003). In reverse, one partner might attempt to narrow down the alternative options of resource supply or sales opportunities for its partner on a respective market, aiming to enhance the importance of one’s own contribution to an exchange partner (Pfeffer & Salancik, 2003). Next, Emerson (1962) recommended that suppliers form coalitions with the customers of a more powerful buyer to circumvent the buyer. He further recommends increasing one’s own bargaining power by adapting to a buyer’s customer’s needs. This closer bonding with end users might actually reduce the dependence towards a buyer to the advantage of a supplier. Similarly, a spread of the demand risk across more buyers might limit the dependence towards a specific customer. Alternatively, scholars recommend buyers to team up with further customers of a dominant supplier in order to increase the negotiation power as a group towards a specific supplier. Another balancing strategy is introduced by Pfeffer and Salancik (2003), who discussed options to alter organizational dependencies by expansion or diversification. That way, a firm would reduce the relative business share generated with a particular customer or product. Besides, the authors point to the options of negotiating about mergers as well as insourcing as dependence balancing measures (Pfeffer & Salancik, 2003). The aim is to integrate the control over the resource access or the sales potential that is currently provided externally (Hillman et al., 2009). As a minor safeguarding option, the negotiation of contracts (for example, to secure resource access or sales volume in the future) is also discussed as a balancing measure (Buvik & Reve, 2001). Next, scholars point out the effective nature of marketing or political actions as a dependence balancing instrument (Pfeffer & Salancik, 2003). Thus, lobbying for the importance of one’s products or purchasing volume towards a partner firm enhances the status and perception of a weaker party by the dominant actor (Pfeffer & Salancik, 2003).

4.3.3.3. Secure Opposing strategies understand BSD as a chance for the involved parties. In this opinion, dependence serves the basis for long-term-oriented BSRs (Ganesan, 1994). This long92

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

term orientation reduces uncertainty for the buyer and the supplier (Clark, Scholder Ellen, & Boles, 2010). Bonner and Calantone (2005) claimed that BSD might serve as a starting condition for higher profitability and performances that are based on reciprocal behavior. Accordingly, the studies recommend managers to accept dependence situations in the first place (Ganesan, 1994; Gelderman & Van Weele, 2003). With the increased security of an enduring relationship, it is recommended to build up cooperative capabilities, such as teamwork skills, within one’s firm in order to prepare employees for a close and integrated cooperation (Cousins & Crone, 2003). Furthermore, it is advocated to increase the coordination with the buyer or supplier one does depend on, in order to increase cooperative efficiencies (Casciaro & Piskorski, 2005). By doing this, it is especially important to measure and document the performance of the partner and to control for its behavior, to avoid being dependent on an abating or opportunistic partner (Cousins & Crone, 2003). Next to fostering integration with the partner and to monitor its performance, scholars recommend that dependent parties protect the ongoing relationship from being terminated. To do this, research recommends raising the switching costs of the partner one depends on by promoting the importance of one’s contribution to the BSR (Ganesan, 1994). This is closely connected to the lobbying recommendation, which can be found as a dependence balancing measure. For instance, further development of the resources that a buyer purchases might raise its switching costs, thus safeguarding a supplier’s future sales, if done to such an extent that the input resource becomes critical for the buyer’s final product (Habib, Bastl, & Pilbeam, 2015). This might also be connected to conducting smaller investments into relation-specific assets that safeguard an exchange (Heide & John, 1988). An example of this could be the development of a specific packaging for milk in such a way that it enables a longer shelf-life or more convenient handling. Such approaches can be complemented by the promise to enlarge the offering to a buyer by further resources, services, or larger purchasing volumes in the future (Gelderman, Semeijn, & De Zoete, 2008). Lastly, Casciaro and Piskorski (2005) pointed to attempts to formalize a relationship as a safeguarding measure for dependent actors in BSRs. Taken together, these recommendations for handling BSD aim to strengthen cooperative skills at the same time as monitoring and protecting the ongoing relationship.

4.3.3.4. Expand As a final category of BSD management strategies, Expand comprises approaches that aim to have a high impact on deepening an exchange relationship. These studies also refer to the above-mentioned positive evaluation of dependencies (Bonner & Calantone, 2005; Chang, Wang, Chih, & Tsai, 2012). Through these strategies, buyers and suppliers in dependence relationships are encouraged to enhance all levels of the cooperation.

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Thus, studies have pointed out the positive influence of mutually adapting their strategies (Heide & John, 1990; Morgan & Hunt, 1994). The basis for this is an increased information exchange and a deepened interaction (Barnes et al., 2005; Håkansson, 1982). Joint teams and the alignment of routines and cultures may contribute to building up interfirm and interpersonal trust. Lacoste and Johnsen (2015) recommend to build up dependence to selected partners as a means to foster innovative solutions and thus competitive advantages (Lacoste & Johnsen, 2015). Therefore, relaxing organizational structures and boundaries by increasingly involving the partner in decision making processes is considered to be a factor of success (Baraldi, Proença, Proença, & de Castro, 2014).

  

Terminate relationship Engage with alternative partners Produce good/ conduct service on one’s own

        

Find alternative sources of supply or demand Develop or detect substitute goods/ services, customers Merge with partner’s alternative supply/ demand options Form coalitions with other customers of a supplier/ suppliers of a buyer Closer bonding with end-users Spread supply/ demand risk across more suppliers/ buyers Expand or diversify product portfolio Merge with partner Lobbying for importance of provided relational input

Secure

       

Accept dependence relation Build up cooperative capabilities Increase coordination with partner Document and measure partner performance Raise switching costs for partner Further develop input resources to raise importance Relation-specific investments Formalize ongoing exchange

Expand

       

Mutually adapt strategies Increase information exchange and interaction Integrate administrative, operational, and strategic processes Set up cross-company teams Align routines and culture to a flexible and open cooperation Relax organizational structures and boundaries Shared relation-specific investments Set-up a joint venture

Exit

Balance

Table 4.1: Summary of BSD management measures

This can be further enhanced by implementing flexible and open cooperative structures as well as building up relational norms and values that are recommended to be accompanied 94

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

by a reduction of formalization within the exchange (S. C. Andaleeb, 1996). Behavioral changes are promoted to foster a close fit to the respective partner. Besides these softer aspects, scholars frequently point to the importance of mutual investments in order to formally deepen a BSR. From an operational perspective, the integration of mutual processes has been particularly found to create complementarities between partners, which finally enhance dependence situations. This can go as far as the set-up of a joint venture which includes all of the aspects described above and which are recommended by Pfeffer & Salancik (1978) in their RDT approach (Hillman et al., 2009). Considering the four approaches to handling BSDs – Exit, Balance, Expand, and Secure – it becomes clear that certain solutions contradict each other. While some authors have aimed to strengthen the current BSR, despite present dependencies, others have recommended balancing measures or break-outs from the BSR. However, providing practitioners with this set of existing strategic recommendations could cause confusion. What is lacking is a differentiated allocation of the single measures to the specific conditions and characteristics of a dependence situation. Despite first attempts, the research lacks a detailed differentiation of BSDs that integrates separately discussed dimensions of dependence. Thus, the following section seeks to structure dependencies in preparation for a detailed allocation of managerial actions later on.

4.3.4. Structuring distinct BSDs Extant research on BSDs contains different approaches to structure dependence situations. Based on definitional elements of inter-organizational dependence, scholars have most frequently relied on three dimensions to differentiate between various dependence forms. Most frequently, the degree of dependence that exists between buyers and suppliers is the major dimensions characterizing distinct dependence situations. Scholars either simply differentiate between high or low dependence magnitude (Andaleeb, 1995; Caniëls & Gelderman, 2007; Habib et al., 2015; Tangpong, Michalisin, & Melcher, 2008; Tangpong, Michalisin, Traub, & Melcher, 2015), or emphasize a more detailed view on the intensity of a dependence situation by differentiating between relational value and switching costs that jointly describe the intensity of a dependence situation (Scheer, Miao, & Palmatier, 2015). Next to dependence magnitude, extant studies have predominantly discussed the distribution of dependencies between two partners (Roemer, 2004). The so-called symmetry examines whether dependence is one- or bi-directional. Dependence can either be present at both sides of dyad (that is, partners are interdependent or symmetrically dependent) or

95

96

 Interpersonal level  Orientation & goals  Reciprocity  Formalization

 Trust X

X X

X

X

X

X

Scheer et al. (2015)

X

X

Roemer (2006)

X

Habib et al. (2015)

X

X

X

X

X

Tangpong et al. (2008)

Table 4.2: Structural approaches towards the dependence constructs across extant literature

X

X

X

Asymmetry

Relationalism  Relational norms

X

X

X

X

X

Cox (2000/2003)

Magnitude  Relationship value  Switching costs Symmetry

Caniëls & Roeleveld (2009)

Caniëls & Geldermann (2007)

Andaleeb (1996)

DEPENDENCE CONSTRUCT

TOBIAS MANDT

X

X

X

X

X

X

Tangpong et al. (2015)

X

X

X

X

X

X

X

X

X

X

X

X

Mandt (2017)

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

only one actor is dependent on its partner without the partner being dependent on this actor in return, which is called asymmetric dependence. Besides dependence degree and symmetry, a few other authors have argued for considering the relational level between buyers and suppliers as a distinctive factor in a dependence situation (Habib et al., 2015; Tangpong et al., 2008). The relationalism of a dependence situation particularly refers to the relational ambience within a dependent BSR. This is the case, as characteristic atmospheric manifestations of dyadic exchanges are found to either directly create BSD or influence its perception and thus the meaning of a dependence situation for the actor in focus. The following sections will explain these three constructs in detail. In order to allocate appropriate strategic recommendations to actors in dependent BSRs, It is argued that the specific type of dependence determines which strategic implications can be derived. However, extant contributions have fallen short of paying attention to all of the above mentioned dimensions jointly, as prior studies have either focused on a single dimension, such as symmetry or dependence magnitude (Roemer, 2004; Scheer et al., 2015), or combined only two distinct dimensions, such as dependence degree and relationalism (Habib et al., 2015; Tangpong et al., 2008). Nevertheless, to guide practitioners in their ways of coping with dependencies, every influencing dimension must be included. In order to derive such types of dependencies comprehensively, all three dimensions will be taken into consideration simultaneously. The following sections introduce them in more detail and they will the serve as a basis to derive distinct types of BSD.

4.3.4.1. Dimensions to structure dependencies Dependence magnitude Dependence magnitude describes the degree to which dependence is present in a BSR. Depending on the manifestation of its inherent components, the magnitude can vary from marginal over moderate dependencies to a high dependence magnitude, which are the socalled lock-in situations. In order to determine the dependence level, the existing research has discussed different components. Comparing the definitions of dependence, as mentioned above, authors have described crucial elements that determine the dependence magnitude. First, scholars have pointed to a firm’s need for its partner to achieve its predetermined goals (S. C. Andaleeb, 1996). Second, the degree of dependence is influenced by the criticality of the resource or service that is currently provided by the partner firm (Andaleeb, 1995). This is closely related to the availability and perception of valid alternatives compared to an incumbent partner (Aminoff & Tanskanen, 2013; Clark et al., 2010). It may be 97

TOBIAS MANDT

the case that a firm will simply be unable to find a proper partner firm that entirely covers its predecessor’s capabilities, knowledge, and resources. Hence, external inputs close to a firm’s core processes or strategic projects are more critical than supporting activities or supplementing resources. Fourth, the larger the business share that a firm devotes to the cooperation with its partner, the greater the intensity of dependence (Kumar, Scheer, & Steenkamp, 1995). Lastly, the amount of estimated switching costs and efforts (Anderson & Narus, 1990) as well as the level of relation-specific assets influence a firm’s dependence (Aminoff & Tanskanen, 2013). In particular, replacing a respective buyer or supplier involves search, negotiation, and initiation costs. The efforts in searching for an adequate successor, as well as the learning and adaptation efforts, are especially important. These factors were summarized and structured by Scheer et al. (2015), who introduced the two components of relationship value and switching costs as drivers of the magnitude of a dependence situation. First, the authors pointed out the idiosyncratic value that a firm currently receives from a BSR. Second, they highlighted the replaceability of this value by potential alternative offerings in the market. Lastly, the potential loss of value in case of a relationship termination complements the construct ‘relationship value’. Next to ‘relationship value’ the ’switching costs’ influence the intensity of dependence. Herein, Scheer et al. (2015) summarized the costs associated with disengaging (for example, contract penalties, fees, etc.), and replacing (set-up costs, etc.) an incumbent exchange partner in favor of transitioning (for example, search and learning costs) activities or supplies to a different exchange partner. Questioning the manifestation of relationship value and switching costs from a buyer and a supplier perspective jointly results in the magnitude of dependence. Depending on the individual characteristics of each component and the overall sum across all factors, the dependence magnitude may vary from slightly dependent situations to lock-in situations.

Dependence magnitude

Relationship value

Switching cost

 Value currently received from a BSR  Replaceability of value by competitive alternatives  Loss of value  Disengagement costs  Transition costs  Replacement costs

Table 4.3: The dependence magnitude dimension (Scheer et al., 2015)

98

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

Dependence symmetry Dependencies are typically differentiated between symmetric and asymmetric dependence (Buchanan, 1992). Cases of symmetric dependence are bi-directional and usually called interdependence situations, in which buyer and supplier dependent on each other (Geyskens et al., 1996). In asymmetric cases, dependencies are uni-directional, with one partner depending more on the other than vice versa (Buchanan, 1992). In BSRs one can differentiate between asymmetric dependencies to the account of either one party, more precisely between supplier dependence and buyer dependence. In cases of supplier dependence, the dependence intensity of the supplier exceeds the dependence intensity of the buyer. The opposite applies in cases of buyer dependence. To determine whether symmetric or asymmetric dependence is present, it is necessary to compare the current relational value and switching costs that influence the intensity of dependence for both partners. If the criteria hold true for both, symmetric dependence (interdependence) is present, and vice versa.

Relationalism As a third dimension for describing BSDs, relationalism is decisive for a distinction of dependence situations. This dimension covers relational characteristics that are widely discussed in extant BSR literature: In their seminal work, Håkansson and Snehota (1982) pointed out the importance and influence of atmospheric characteristics on the core exchange between buyers and suppliers. As dependence is a key element of such exchanges, relationalism must also impact different dependence situations. This relation is also supported by a wide array of studies within the domain (e.g. Izquierdo & Cillán, 2004; Laaksonen, Pajunen, & Kulmala, 2008; Razzaque & Boon, 2003). Table 4.4 summarizes the key characteristics of the ‘Relationalism’ dimension, consisting of relational norms, trust, interpersonal level, orientation and goals, mutuality, and formalization. Relational norms describe shared values and expectations about the behavior of a partner firm in a cooperation (Heide & John, 1992). More specifically, norms can be split into the three main levels of flexibility, information exchange, and solidarity (Heide & John, 1992). In BSRs, flexibility describes each partner’s willingness to adapt to its partners’ supply, demand, processes, environmental impacts, or predefined terms and conditions in cases of unforeseen variances that affect the cooperation (Joshi & Arnold, 1998). Besides, information exchange describes the constant, complete, and transparent sharing of information relevant to exchange partners (Cousins & Crone, 2003). Finally, solidarity directly addresses a frequently discussed threat of dependence situations; namely, the presence of opportunistic behavior (Joshi & Arnold, 1998). Hence, it describes the partner’s

99

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behavior being directed at the interest of the relationship while omitting to strive for unilateral gains only (Provan & Skinner, 1989). Taken together, this conceptualization discusses manifestations of relational norms, ranging from non-existence to elaborated relational norms that may accompany and shape dependence situations. Next to these norms, ‘Relationalism’ contains the element of trust. Trust is considered most frequently in BS discussions and describes “the belief that another company will perform actions that will result in positive outcomes for the firm, as well as not take actions that would result in negative outcomes for the firm” (Anderson & Narus, 1990, p. 45). According to Laaksonen et el. (2008), trust can be structured into contractual, goodwill, and competence trust (Laaksonen et al., 2008). In detail, contractual trust describes, for example, a buyer’s assumption that a supplier will act as detailed out in mutual agreements, whereas goodwill trust focuses on elements such as the supplier’s intention to perform according to these agreements (Laaksonen et al., 2008). Lastly, competence trust describes the belief that a partner is generally able to perform in jointly discussed ways (Laaksonen et al., 2008). Extant research on BSD frequently points to the interrelation between the two constructs dependence and trust. Thus, it is found that trust influences the effects of dependence on the actors in BSRs as well as their perception towards the future relational orientation (Izquierdo & Cillán, 2004). Third, ‘Relationalism’ contains the interpersonal level describing social bonds between buyers and sellers. Previous studies have considered social bonds or friendship relationships that might develop between actors of both parties over time as drivers for relationship maintenance and partner dedication (Baraldi et al., 2014; Barnes et al., 2005; Chang et al., 2012; Morgan & Hunt, 1994), thus being likely to develop or being caused by dependence relations (Bendapudi & Berry, 1997; Petersen, Handfield, Lawson, & Cousins, 2008). Furthermore, the intensity and the handling of conflicts are components of the interpersonal level. Harrison et al. (2012) discussed how individuals in dependence situations are reluctant to engage in confronting and conflicting situations, such as a supplier termination, and prefer to continue relationships instead (Harrison et al., 2012). If conflict is present, partnerships characterized by social bonds or friendship cope better with it than relationships that are merely based on transactional exchanges (Harrison et al., 2012). Furthermore, conflict is discussed as being inevitable in close BSRs, especially if they are characterized by dependence (Zhou, Zhuang, & Yip, 2007). In sum, the interpersonal level encompasses social bonds and conflict as characterizing elements of BSD, which are both found to be either direct results of dependence, or to influence the way dependence is perceived and managed over time. Fourth, the strategic orientation and individual goals of both buyers and suppliers in relationships are important influencing factors for the manifestation of relationalism. Moreover, a mutual fit between the future orientation and strategic goals of the BSR influences relationship commitment (Heide & John, 1992; Morgan & Hunt, 1994; Turner et al., 100

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

2000; Wilson, 1995) and thus relationship dependence. For instance, if a supplier engages in strategically securing its customer demand and the customer strives to strategically safeguard its resource access, both follow the mutual goal of ensuring long-term profits and operability. BSRs that are characterized by a relational rather than transactional atmosphere can be described by their direction and degree of reciprocity. Reciprocity describes the extent to which exchange partners adapt towards each other’s organizational (infra)structures, operational processes, or technological equipment, in order to optimize their repeated exchanges. Next to ignoring such adaptations at all, adaptations can be done either jointly from both sides in a bilateral manner, or in a one-sided, unilateral way. Reciprocity is considered to be an indicator for dependence in BSRs (Baraldi et al., 2014), leading to an increased likelihood of, for example, relational investments (Krause & Ellram, 2014). Due to reasons of process optimization and efficiency adaptation, reciprocity is closely linked to integration, which describes the management of intertwined inter-organizational processes across firm borders. Like adaptation (Mukherji & Francis, 2008), the integration of supplies or processes is considered as a driver and indicator of BSD (Vijayasarathy, 2010; Zhang & Huo, 2013). Lastly, ‘Relationalism’ contains the construct of formalization. Formalization describes the extent to which the interaction in a BSR is defined and regulated on a contractual basis. It further describes the usage of transparent measures to direct a partner’s behavior in desired ways, such as incentive systems. Lusch and Brown (1996) found that actors in asymmetric dependence relations make use of explicit contracts as safeguarding or control instruments, whereas actors in symmetric dependence relations might have a tendency to use relational norms as governance mechanisms (Lusch & Brown, 1996). Hence, the presence of a formal contract is an indicator in describing distinct dependence situations. The same logic applies for the usage of monitoring in dependence relations, which is found to be used in situations of increased dependence magnitude (Narayanan & Narasimhan, 2014; Ryu, Arslan, & Aydin, 2007). Moreover, formalization contains the use of incentive systems. Like formal contracts, pre-defined incentive systems are tools for directing a partner’s behavior into desired directions. Recent studies have found incentives to effectively improve supplier performance under dependence conditions (Terpend & Krause, 2015). Taken together, the presence of contracts, monitoring activities, or incentives represent formal arrangements to safeguard critical relationships and depict a characteristic element of dependence relationships. The dependence magnitude, symmetry, and relationalism dimensions collectively describe the dependence phenomenon including all relevant and conceptualizing elements that have been discussed in extant literature. These include the predominantly discussed reasons, drivers, and appearances of BSD, such as inter-personal levels, procedural (Mutuality/Relationship value), technical (Relationship value, Switching costs), economic 101

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(Formalization, Switching costs), cooperative (Relational norms, Trust) and strategic influences and effects (Orientation & Goals, Mutuality). These are covered in the conceptualization of the BSD construct. Based on that, the following sections will derive the characteristic types of BSD.

Relational norms

Trust

Interpersonal level

Relationalism

Orientation & Goals

Reciprocity

Formalization

 Flexibility  Information exchange  Solidarity

(e.g. Cousins & Crone, 2003; Heide & John, 1992; Joshi & Arnold, 1998; Tangpong et al., 2008)

(e.g. Anderson & Narus, 1990; Contractual Izquierdo & Cillán, 2004; Competence Laaksonen et al., 2008; Goodwill Tangpong et al., 2008) Social bonds (e.g. Bendapudi & Berry, 1997; Habib et al., 2015; Harrison et Friendship al., 2012; Morgan & Hunt, Level/ handling of 1994; Petersen et al., 2008) conflict  Longevity of future orientation  Status of BSR in co(e.g. Heide & John, 1992; Morgan & Hunt, 1994; Turner operative portfolio et al., 2000; Wilson, 1995)  Direction of goals and expectations towards the BSR

     

 Uni- or bilateral adaptation  Mutual integration of processes/ structures

(e.g. Baraldi et al., 2014; Krause & Ellram, 2014; Mukherji & Francis, 2008; Vijayasarathy, 2010; Zhang & Huo, 2013)

 Contract-based BSR  Partner monitoring  Incentive systems

(e.g. Lusch & Brown, 1996; Narayanan & Narasimhan, 2014; Ryu et al., 2007; Terpend & Krause, 2015)

Table 4.4: The relational dimension

4.3.4.2. Distinct BSD Types Buyer–supplier dependencies are manifold in their appearance. Consolidating the three dimensions serves as a basis to derive exemplary dependence forms. Nevertheless, this paper argues for a hierarchy within these three dimensions. The first and basic aspect when discussing BSDs concerns the question ‘who depends on whom?’ This question considers the direction of dependence between two partners. Based on that question, one might ask ‘to what extent does dependence exist?’ addressing the dependence magnitude. This is followed by ‘how does this influence the relationship?’ as a third step. Following this logic, 102

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

it is argued that the dependence symmetry and magnitude are the two most decisive dependence dimensions. Table 4.5 combines both, leading to four different dependence magnitude versus dependence symmetry constellations. Each constellation can be characterized by two manifestations of relationalism. This structure leads to eight types of dependence, which are detailed in Table 4.6 and characterized in the following sections. These eight forms will serve as a basis to answer the research question regarding how distinct dependence types can be managed appropriately.

R:

moderate

high

NR:

Dependence

magnitude

R:

low

moderate

NR:

Systemic

Symbiotic

dependence

dependence

Monopolistic

Governmental

dependence

dependence

Emotional

Friendly

dependence

dependence

Providing

Commodity

dependence

dependence

asymmetric

symmetric

Dependence symmetry Table 4.5: A systematic structure of dependence types

Providing dependence The first characteristic type of dependence is called ‘Providing dependence’, which describes relations between buying companies and providers of connections to basic resources, such as electricity, water, gas, or telecommunications. Providers in these industries face large customer bases, with each customer contributing minor amounts to their overall business. In turn, the buyers of these resources usually have one provider for each good. Although switching from one electricity provider to another, for example, comes with a few, manageable switching costs, the overall dependence magnitude in such BSRs is low. Thus, it tends to have a (low) asymmetric distribution, to the disfavor of the buyer. From a relational perspective, such ‘Providing dependencies’ are characterized by the absence of relational norms, which goes in line with a lack of social bonds, friendship, or conflict tolerance. Instead, they are contract-based to detail out the conditions of the provision of access to these standardized resources. A moderate level of competence trust is 103

TOBIAS MANDT

important for buyers, as a continuous and reliable supply of such resources is essential for professional firms.

Emotional dependence The second distinct type of BSD is emotional dependence. It describes the phenomenon, usually known in business-to-consumer contexts, of the attachment of a buyer to a specific product or brand because of emotional reasons towards that brand, such as positive associations or routinized habits. ‘Emotional dependencies’ describe a buyer’s attachment to buying products from a specific supplier. Recent studies have emphasized the existence of this phenomenon in an industrial buying context (Pedeliento, Andreini, Bergamaschi, & Salo, 2015). Thus, ‘Emotional dependence’ depicts an asymmetric dependence form that disfavors one partner. Furthermore, this kind of dependence is characterized by an overall low level of dependence magnitude, which goes hand in hand with the lack of formalization and relational norms. Besides, BSRs containing emotional dependencies come with no social bonds, as the relationship is characterized by anonymity. It is solely the tendency to buy from a company carrying a certain reputation that leads to a high level of competence trust and occasional adaptations to justify the purchase. This transaction at arm’s length leads to contrary goals with between buyers and suppliers regarding the price of the good.

Commodity dependence Commodity dependence describes interactions between a supplier of commodity retail products, such as salt, sugar, or fresh herbs. This type of dependence is characterized by a moderate magnitude of dependence. In such exchanges, both partners possess potential alternatives in the market and the business share that is devoted to the relationship is rather low. Commodities themselves cannot be considered as critical input resources from a buyer’s perspective. From a supplier perspective, it can be assumed that commodity suppliers in retail industries need to have a broad customer base in order to gain sufficient profits. Hence, switching costs are present for both parties, but on a low to moderate level. This leads to a symmetric situation of dependence between suppliers and buyers. The relational dimension between firms can be described as a practiced routine, since recurring exchanges to fill up inventories can be expected. This is also connected to a minimal need for information exchange, which is confined to factors such as order quantities. This is supported by flexible arrangements based on a framework contract, which serves as a basis for interaction and the handling of conflict. On one hand, reciprocal adaptations are not necessary due to the simple and standardized nature of the goods; on the other hand, they are not economically reasonable due to the comparably low status of commodities in an

104

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overall product portfolio. In total, the practiced exchange impedes the buildup of higher trust levels, as the transactional character dominates the BSR.

Friendly dependence Friendly dependence has low-dependence magnitude. In fact, the relationship value of the BSR is even limited for both partners, as the market offers sufficient available alternatives, and the business share that is spent on the relationship is small. In turn, switching costs are not present. Buyers and suppliers in a friendly dependence situation are bound by strong social bonds. As these evaluations hold true for both partners, mental dependencies are symmetric. Examples of friendly dependencies are two firms in which single employees are either close friends or relatives in their private life. Common examples are small craft businesses conducting minor repair jobs for a buyer based on personal connections between individuals. The key issue is interpersonal loyalty and friendship that causes a buyer to refuse to hand over the job to a different company in order to protect personal relations from being damaged. The supplier refuses to deny smaller jobs, although elements like time and resources might be better invested into more lucrative orders. Against this background, the trust level in such BSRs is high and elaborated relational norms are present. Nevertheless, there are no strategic matches in corporate goals or any kind of mutual long-term orientation, which neglects the necessity of reciprocal adaptations or formalization.

Monopolistic dependence Monopolistic dependence describes a moderate-to-high form of BSD. Monopolistic dependencies occur in markets in which a supplier provides a product or service that resembles a quasi-standard in an industry. Thereby, monopolistic dependencies can exist on both sides of a dyad. For instance, a railway network provider is an important partner for logistics companies, especially ones that are focused on railway transportation. On the other hand, firms that work in small industrial niches, such as high-tech or aviation environments, might face monopolistic buying structures. Hence, this form of BSD is inherently asymmetric and comes with high replacement costs, whereas the current relationship value for weaker parties in such dyads is high. However, the switching costs are moderate from an objective view, as the stronger parties in monopolistic dependencies are assumed to have available options in the market, which leads to lower disengagement or transition costs in total. The stronger party dominates the exchange that the weaker party must accept due to external market conditions. On the one hand, this indicates the contrary expectations and goals of both parties. On the other hand, it limits the need for relational norms to necessary information exchanges. 105

Interpersonal level

106

Formalization

Reciprocity

high

none

X

low

low

Emotional Dependence

contract

none

contrary

none

none

none

cooperative

high

elaborated

X

low

low

none

unilateral adaptation

contrary

cooperative

low

minimal

X

moderate

high

contract

unilateral adaptation

bilateral fit

integrative

moderate

elaborated

X

high

high

incentives

reciprocity

contrary

transactional

low

minimal

X

high

moderate

shares

reciprocity

bilateral fit

integrative

high

elaborated

X

high

high

Friendly Monopolistic Systemic Governmental Symbiotic Dependence Dependence Dependence Dependence Dependence

Table 4.6: Forms of buyer-supplier dependence

contract

none

unilateral adaptation none

contrary

practiced

low

minimal

X

moderate

moderate

Commodity Dependence

contrary

transactional transactional

moderate

none

Relational norms

Trust

X

moderate

low

Providing Dependence

Asymmetric

Symmetric

Switching cost dependence

Relationalism Orientation & goals

Dependence symmetry

Dependence magnitude

Relationship value

Dependence construct

TOBIAS MANDT

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The same holds true for the level of trust, which is low. Nevertheless, weaker parties have to secure the resource or demand access and can be assumed to safeguard the exchange by trying to build up social bonds or behave tolerantly in cases of conflict. This goes in line with unilateral adaptation by the weaker party towards the quasi-standard of either its buying or supplying partner. Thus, formalization is not necessary in monopolistic dependencies, as the limited set of competitive alternatives resembles a forced or quasi-collaboration with the dominant party, so much that the securing function of a contract is obsolete.

Systemic dependence The sixth form of BSD, systemic dependence, contains the highest possible degree of dependence, a so-called lock-in situation, in which one party has no other option than maintaining the ongoing BSR. Examples of this kind of dependence include the implementation of company-wide IT systems that support most of a firm’s functions. Such systems have to be bought and installed and also require constant maintenance and adaptation. Systemic dependencies can also be found in third-party logistics relationships supporting a firm’s entire logistical and production processes. These BSRs come with an asymmetric dependence distribution and are of substantial value for the buying firm. Due to its usually high level of unilateral process and structure adaptation, the number of comparable competitive alternatives in the market is limited. This raises switching costs substantially. This high dependence magnitude requires constant exchange of information between buyer and supplier that have to collaborate jointly on the long-term success of the implemented system. In order to secure this required support, a contract will frequently detail, for example, proposed performance levels that an implemented system has to ensure. In many cases this is ensured by installing cross-firm employees of a supplier at the buyer side, dedicated to caring about the system. This might lead to social bonds between employees of both sides. Nevertheless, the level of trust remains moderate, as such systems frequently come with adaptation or implementation problems that negatively affect competence trust. Besides, research has discussed the effect of suppliers to be prone to inertia and to behaving opportunistically if they are of aware of the buyer’s lack of alternative options. This might negatively affect the overall trust level. To secure these kinds of exchanges, they are often based on contracts to institutionalize rights and duties within the partnership. Nevertheless, goals and expectations fit together. In the long run, this either stays the same, with buyer and supplier jointly striving for cost reduction by increasing efficiencies. Potential episodes of conflict are balanced by strong social bonds between the partner firms and individual employees that have emerged over a longer period of time through activities such as conducting and staffing mutual projects and teams.

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Governmental dependence Governmental dependencies describe a symmetric dependence relation of a moderateto-high dependence magnitude. This dependence type can be exemplified by interrelations and cooperation between companies and local authorities. Their exchange in that sense consists of granting permissions and support for properties, construction or infrastructural projects, for instance, which are paid for by commercial taxes. For example the investment in a business park for logistical distribution centers constitutes a major long-term investment for firms, which means that negotiations with local authorities are common. Hence, alternative options for firms are often limited due to a restricted availability of properties in commercially adequate regions. Although alternative options might exist in the market, once invested into such kinds of resources, the switching costs are substantial for companies. Also, from an authority perspective, the migration of an intense tax-payer is frequently indispensable. Despite this intense dependence relation, the relational dimension in governmental dependencies is underdeveloped. Although a minimum level of information exchange exists, the contrary goals with regard to tax regulations or environmental issues, for example, lead to distant relationalism characterized by a lack of trust and social interaction. Nevertheless, the high magnitude of dependence leads to reciprocal adaptations in selected areas of exchange (such as environmental aspects), which might be incentivized by authorities.

Symbiotic dependence The last dependence type is called symbiotic dependence. Symbiotic dependence describes a high dependence magnitude, characterized by substantial switching costs for both partners. An example for this dependence type is the supply of a pre-configured or premanufactured key component for a buyer’s final product, such as the supply of engines to a truck manufacturer. Sequential adaptations and alignments over time are necessary, such as bilateral reciprocal technical and operational adaption, the integration of processes, or customer-individualized product deliveries. This leads to a high relationship value characterized by a very limited number of competitive alternatives in the market from both perspectives. Actors in BSRs of this kind may find alternative suppliers or buyers in the market; however, their number might be limited due to the requirements regarding specific technical, knowledge-based, or other capabilities. As the exchanged products exhibit a key feature of the final product, the potential loss of value in case of a relationship termination is enormous, which increases hypothetical replacement costs. This high dependence magnitude is experienced symbiotically from both sides of the dyad as, for example, the supplier owes a major share of its business to its partner. These intense exchanges are accompanied by a high degree of relationalism. The described type of exchanged requires constant information exchange and flexible adaptation, which leads to elaborated relational 108

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norms overall. As employees of both sides have to collaborate on a frequent and detailed basis, the development of social bonds or friendship is very likely and cross-company teams are common. As a result, the level of trust between the partners is high. Symbiotic dependencies depict a complementary exchange with a high status for both actors, which might require major mutual investments. Thus, the alignment of joint future orientation and goals is a prerequisite. This can be considered to be in line between both partners, as an increase of the buyer’s sales will increase the supplier’s sales. Finally, institutionalizations, such as regular meetings, written agreements or joint development teams, are common characteristics of this type of dependence. This is often accompanied by formalization measures that might even imply the exchange of shares in order to secure decision making rights. In total, symbiotic dependencies are understood as a precursor or potential candidate for setting up joint ventures in the BSR’s future development.

4.4. Managing BSDs The suggested illustration of distinct BSDs and the structured approaches about how to handle different dependencies (Figure 4.2) provide the basis for a more fine-grained discussion of which measures are appropriate for which specific dependence types. Extant research has fallen short of differentiating its recommendations according to specific dependence situations. In order to derive suitable recommendations for each dependence type, it will be built on RDT’s construct of environmental uncertainty as well as RV’s arguments on relational rents to support the following arguments. These recommendations will refer to the groups of strategies as a whole, as depicted in Figure 4.2. Tangible examples will be made, but the specific measure might differ according to specific relational contexts.

4.4.1. Low/ asymmetric dependencies Dependence types of a low overall dependence magnitude and an asymmetric dependence distribution can be divided into Providing Dependencies of a rather low degree of relationalism, as well as Emotional Dependencies equipped with a high level of trust. In Providing Dependencies, the weaker party buys its access to a network from a comparably strong supplier, which faces a large customer base. Nevertheless, the overall dependence level is low and switching costs are moderate. Although exchanging such providers at least comes with search and disengagement cost for the buyer, considering the arguments of RDT, this indicates a low level of environmental uncertainty as the market offers sufficient alternative options. A moderate level of competence trust in the provider indicates the only relational element characterizing such exchanges. However, this is not 109

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sufficient to present major potential for gaining significant relational rents in the sense of RV in the future. The supplier wants to maintain the exchange relationship to continue selling the network access to its customer to absorb further profits. However, a buyer may wish to check the competitiveness of its supplier’s offerings against the alternatives in the market. Consequently, Secure or Balance strategies are recommended to the individual actors, with an emphasis on securing measures for the supplier (e.g. raise switching costs and formalize ongoing exchange), whereas the buyer is recommended to focus on balancing strategies (e.g. search for alternative supply offers and negotiate with supplier). Emotional Dependencies are characterized by buyers that stick to purchasing products or services of a certain brand, as they are psychologically bound to it. Recent studies emphasize this well-known effect from consumer markets in industrial purchasing (Pedeliento et al., 2015). In this sense, the weaker party is the buyer who faces a supplier serving a prestigious or renowned product, leading to high level of competence trust at the buyer’s side. However, the buyer has no rational argument for sticking to this supplier, as specific potential for gaining relational rents is missing and environmental uncertainty is not given due to the market’s offering of competitive alternatives. Thus, switching costs are only of a psychological nature. As a result, strategies to Exit from such restrictive purchasing behavior are favorable. Changing the perspective, the supplier is in a beneficial situation and should Secure such a customer in order to safeguard future sales.

4.4.2. Low/ symmetric dependencies Commodity Dependencies and Friendly Dependencies have a low-to-moderate dependence magnitude, which is symmetrically distributed. Both differ in their degree of relationalism that characterizes these two dependence types. Commodity Dependencies are characterized by a moderate level of dependence magnitude and switching costs. The symmetric nature of commodity dependence implies that neither buyer nor supplier has an advantage over its partner in this regard. Their interaction is based on repetitive purchases of standard goods or services without any deeper integration or interaction. Due to its repetitive nature, a routinized interpersonal level is present and develops further over time. On one hand, commodity goods that are at the core of such exchanges can be assumed to not constitute the most important resource that is purchased by a firm. On the other hand, the constant need for such exchanges requires a minimum level of efficiency. From a supplier’s perspective, a large customer base is important in order to operate sustainably profitable on commodity goods markets. Hence, although a single BSR contributes to a customer portfolio, it does not deliver a substantial share of total sales. From a buyer’s perspective, there are, by definition, alternative providers of commodities in the market. In result, environmental uncertainty for both actors is low and 110

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cooperation should not be intensified according to RDT. On the other hand, the RV considers effective governance resulting from routinized processes, as seen in this type of BSD, as a source for relational rents (Dyer & Singh, 1998). Considering both arguments, strategies to Balance dependencies in such situations are recommended for both actors. This can be done by, for instance, teaming up with further suppliers of a buyer or customers of a supplier respectively, to avoid drifting into a stronger exchange dependence, but simultaneously maintaining the cooperative potential. In contrast, Friendly Dependencies are characterized by overall low degrees of dependence magnitude and switching costs. However, this dependence type is unique in its elaborated relational dimension, which marks the BSR with an intense level of trust, constant information exchange, strong social bonds and a high level of friendship on an interpersonal level. These attitudes have the potential for effective governance as a potential source for relational rents, because elaborated relational norms are frequently considered as a major success factor for BSRs. However, since these exchanges take place occasionally, they do not contribute a high level of value for the partners, and thus do not raise uncertainty for the actors involved. Hence, the recommended strategy for Friendly Dependencies is Secure to maintain a solid base for potentially broadened exchanges in the future. This is also reasonable as the relational maintenance does not come with constant costs in the meantime.

4.4.3. High/ asymmetric dependencies Dependence types that come with a moderate-to-high dependence magnitude and an asymmetric dependence distribution are those that are discussed as being the ones most prone to negative relational outcomes (Crosno & Dahlstrom, 2008). One can distinguish between Monopolistic and Systemic Dependence in this category. Monopolistic Dependencies inherently have a moderate-to-high dependence magnitude, as the market does not offer competitive alternatives for a buyer. This raises switching costs and environmental uncertainty according to RDT, as necessary resources cannot be controlled regarding future access opportunities. Hence, the weaker partners in such situations are advocated to strive for strategies to Balance this type of dependence. By way of an example, this might be done by shaping cooperative exchanges through building up social bonds towards the dominant partner, or by trying to develop substitute products or services on one’s own. This serves as a precaution to the widely discussed threats of lockin situations. On the other hand, a supplier in a monopoly situation has a more or less secure exchange partner, lowering the need to further develop the relational dimension. Thus, it is suggested to choose strategies to Secure the BSD, as this safeguards their future sales volumes. 111

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Systemic Dependencies come with the highest degree of dependence magnitude. Such a lock-in situation affects one partner in a strongly asymmetric fashion. The interpersonal atmosphere between buyer and supplier is highly relational because of their close and intense exchange, which can be traced to knowledge-sharing routines which are discussed as relational rents in the RV. Furthermore, RV discusses relation-specific investments as sources of relational rents. Reciprocity is unilaterally present in systemic dependencies as the seller of a product adapts its product to the needs of its customer, thus raising switching costs. This is safeguarded by formalizing the exchange on a contractual basis. Such an individual monopoly from the buyer’s perspective manifests itself in a partner taking over absolutely critical resource or service contributions, thus also relating to relational rents stemming from resource complementarity. In sum, substantial relational rents are gained for the weaker party in such dependence constellations. This comes at the expense of strategic flexibility, which increases environmental uncertainty in RDT’s understanding. In conclusion, the buyer has an incentive to Expand this type of dependence relation in order to safeguard a critical resource input. For example, one potential measure could be the setup of cross-company teams. Changing the perspective, the dominant party benefits from sustainable revenues and strives to absorb them sustainably in the future. Based on the potential relational rents, measures to Secure the exchange make sense, such as investing into the specific relationship. In contrast to its customer, choosing strategies with a higher impact (expand) would cause unnecessary efforts, and future sales can be regarded as rather safe based on the level of integration into the customer’s processes.

4.4.4. High/ symmetric dependencies The final category of dependence situations consists of BSRs with a moderate-to-high dependence magnitude of a symmetric nature. Therefore, Governmental and Symbiotic Dependencies are fundamentally different in their manifestations of relationalism. Governmental Dependencies describe interrelations between an authority and a firm; for example, regarding infrastructural questions. These kinds of decisions, such as the allocation of properties and their further development, do come with high switching costs for both actors. Nevertheless, company relocations are theoretically feasible, which is the reason for a moderate dependence magnitude overall. However, reciprocal adaptions of both actors in order to realize agreements are common, especially concerning infrastructural investments that are negotiated between firms and authorities. Such negotiation outcomes can be regarded as relation-specific assets and therefore as sources of relational rents. Furthermore, the nature of properties as objects of value allows them to be sold once at a time only. For this transaction, an authority is restricted to a limited base of potential customers, whereas the resource itself is being occupied by a buyer afterwards. Thus, the exchange resources can be described as scarce, raising environmental uncertainty for both 112

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actors. Adding this to the relation-specific asset as source for relational rents, RDT and the RV suggest strengthening cooperative measures in governmental dependencies. Hence, Secure strategies can be recommended to both actors in this forms of BSD because both parties have an interest in safeguarding infrastructural decisions or might even think about further developments. In particular, a joint investment into infrastructural projects as well as an increased coordination between firms and authorities might serve as examples. In contrast, there is no sufficient relational basis and future business potential that would justify Expand strategies. Finally, Symbiotic Dependencies are characterized by the highest degree of both dependence and switching costs, which are symmetrically distributed between buyers and suppliers engaging in very close partnership to operate mutually integrated processes and to share resources. Such a quasi-integrated symbiosis carries substantial sources for relational rents on four different levels. Buyers and suppliers in symbiotic dependencies interact closely and discuss their operations and strategies. In this dependence type, the partners gain relational rents in the form of synergy effects, complementarities, and combined skills, as close partnerships are considered to influence cooperative success. Thus, knowledgesharing routines and effective governance are assumed to be present, as well as mutual investments and resource complementarity based on individual contributions that are geared to each other. From a RDT perspective, such exchange relationships significantly raise environmental resource uncertainty as firms heavily rely on external contributions and inputs by their partner firms, which leads to a reduction of efforts in these activities and, therefore, to an intense dependence on this complementary partner firm. Taking these considerations together, both theoretical streams suggest intensifying symbiotic dependence relationships by choosing Expand strategies, in order to realize further scale economies or cooperative efficiencies and to safeguard future resource access simultaneously. Measures to Expand this dependence, such as a slight dissolution of organizational boundaries by implementing cross-company teams, might lead to an increase in exchanged shares or the set-up of a joint venture over time.

4.5. Discussion The prior argumentation structures and allocates strategies to manage BSD to characteristic types of BSD (Figure 4.3). It serves as a discussion base for BSR-scholars in the domains of purchasing, supply chain- or strategic management, business-to-business marketing, as well as inter-organizational research. These suggestions can be discussed from the perspectives of theory and practice.

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4.5.1. Theoretical implications Considering the diverging recommendations in the extant literature regarding how to handle BSD, the above argumentation proposes that each recommendation might be appropriate if it is applied in the right situation of BSD. Therefore, the paper has elaborated distinct types of BSD and argues for the most appropriate strategies in each individual situation for each individual actor. This argumentation has been embedded in a theoretical frame of reference, consisting of RDT and RV. Both approaches have a clear value for discussing BSD and should be included when discussing topics within the BSR domain (van Weele & van Raaij, 2014). Although both serve as analysis tools to derive managerial suggestions, the influence of the concept’s constructs of relational rents and environmental uncertainty is not equally strong for each dependence type. As such, the argumentation in monopolistic dependencies is mainly driven by RDT arguments, whereas the recommendations for systemic dependencies are predominantly backed on RV rationale. This leads to the impression that RV and RDT are complementary theoretical views rather than alternative approaches in discussing BSR problems. Besides, there might exist further theoretical lenses or practically motivated argumentations that lead to other than the suggested strategic recommendations. Hence, future research might focus on the subject from further standpoints, such as socialexchange theory or a principal-agent perspective. Extant contributions on BSRs have suggested strategies to cope with BSD, as described in section 4.3.3. Some of them are closely linked to RDT and RV in their argumentation. In an attempt to differentiate among opposing propositions, Figure 4.2 structures single measures into the exit, secure, balance, and expand strategies. Although each strategy may appear as isolated and mutually exclusive, in reality managers might also choose single selected measures from two adjacent strategy groups. Thereby, practitioners should pay attention to specific industry backgrounds or relation-specific contexts. In order to allocate strategies, distinct BSD types have been derived and characterized. Thereby, this study uses a combination of the dimensions dependence magnitude (Scheer et al., 2015), symmetry (Caniëls & Roeleveld, 2009), and relationalism (Tangpong et al., 2008), which have been discussed in extant literature, but not used in combination before. In doing so, their hierarchy is important, suggesting dependence magnitude and symmetry as overarching dimensions. It is further argued that relationalism has a direct impact on the BSD type, leading to a distinct dependence form by the same manifestation of dependence magnitude and symmetry. Thus, its consideration is crucial for the BSD discussion. Although Table 4.5 derives eight distinct dependence types with their inherent characterization, these might be differently characterized or understood in their individual contexts, while also other forms might be observable in practice. Nevertheless, this conceptualiza-

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Figure 4.3: Strategy recommendations for characteristic dependence types

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tion is a first comprehensive systematization of BSD types based on a complete inclusion of magnitude, symmetry, and relationalism. Thereby, it enables an allocation of strategies to BSD types and thus serves as a first discussion base. Finally, in recommending strategies to BSD forms and differentiating between stronger and weaker actors in BSD, it becomes clear that the individual recommendations in asymmetric BSDs are contradictory between the parties. Differences such as the suggestions for either secure or expand systemic dependencies provide the actors with theoretical propositions that might either indicate prospective destination routes in their actions or might be brought into negotiations as a discussion base. Connecting to the comments on adjacent measures in each strategy group, the task of the dyad is then to negotiate for the most suitable compromise. In sum, this paper proposes strategies for how to handle distinct BSD. In doing so, it has attempted to argue objectively for different types of BSD and suitable management measures. Nevertheless, these types are not taxonomically backed by empirical data. Moreover, the recommended strategies have not been tested on their potential success. An interesting task for future studies would be to challenge the BSD types against empirical observations and provide support or adaptations. One might also take a closer look into distinct industries, in order to derive industry-specific forms of BSD that incorporate further characterizing context-specific elements into BSD forms. Furthermore, it is worth investigating the measures taken by buyers and suppliers in dependence relations in order to examine their success potential in practice.

4.5.2. Managerial implications The present paper provides guidance for practitioners in finding the appropriate management measures to their type of dependence. The dependence framework increases awareness about the individual dimensions and components of BSD. Dependencies are not the same and depend on the manifestation of the introduced characteristics. Thus, this study helps practitioners to classify their BSDs more accurately. Furthermore, the single constructs and their components might serve as inspirations to think about single relationships and their areas of improvement. The structured two-by-two matrix of extant strategic approaches in Figure 4.2 provides a clear overview on diverging approaches. Although the matrix shows them in a separated way, combinations of managerial actions might make sense, given individual characteristics of a BSR. This might increase practitioners’ awareness on the diversity of approaches in actively shaping BSDs. Thus, suppliers might use these measures to actively lead their customers into a dependence situation, thereby safeguarding their future status and sales

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with the buyer. On the other hand, buyers might use these measures in order to take farsighted precautionary actions in securing their resource supply.

4.6. Conclusion This paper discusses the current literature on buyer–supplier dependencies and, in particular, extant recommendations on how to handle BSD. Prior managerial recommendations appear to have offered a broad variety of strategic measures, ranging from the search for alternative partners to a deeper integration into one’s partner’s processes as reactions towards BSD. The main argument of the present conceptual discussion is that each strategy recommendation might be correct, given that it is applied in suitable dependence situations. These are not identical and can be divided into idiosyncratic forms. In a first step, this paper differentiates between distinct forms of BSD, by integrating dependence magnitude, symmetry, and relationalism as characteristic dimensions formerly used in isolation. Eight distinct BSD forms can be derived and characterized before arguing for the most suitable strategies on how to cope with BSD. Thereby, the provided suggestions differ for the stronger and weaker actors in asymmetric constellations. This study contributes by structuring divergent strategies into four major strategy groups. It further adds to earlier research by integrating different descriptions of BSD into a holistic framework and, finally, by allocating strategy groups to these forms. However, this purely conceptual discussion carries the limitations of lacking any empirical evidence. This, in turn, offers an interesting field of investigation for future studies. Further avenues for future research encompass the discussion of the BSD forms in the light of specific industry contexts. A closer look at the effectiveness and performance of single dependence management approaches might yield important insights. Finally, it would be interesting to investigate dependence relationships after strategic measures have been taken. Questions that arise include whether the chosen strategies do change a BSD form into another form over time, or to what extent a specific BSD form turns out to be more sustainable (i.e. successful) in long-term observations.

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Pedeliento, G., Andreini, D., Bergamaschi, M., & Salo, J. (2015). Brand and product attachment in an industrial context : The effects on brand loyalty. Industrial Marketing Management, 53, 1–13. Petersen, K. J., Handfield, R. B., Lawson, B., & Cousins, P. D. (2008). Buyer dependency and relational capital formation: The mediating effects of socialization processes and supplier integration. Journal of Supply Chain Management, 44, 53–65. Pfeffer, J., & Salancik, G. R. (2003). The External Control of Organizations: A Resource Dependence Perspective (2nd ed.). Stanford: Stanford Business Books. Provan, K. G., & Skinner, S. J. (1989). Interorganizational Dependence and Control As Predictors of Opportunism in Dealer-Supplier Relations. Academy of Management Journal, 32(1), 202–212. Razzaque, M. A., & Boon, T. G. (2003). Effects of Dependence and Trust on Channel Satisfaction, Commitment and Cooperation. Journal of Business-to-Business Marketing, 10(4), 23–48. Roemer, E. (2004). Managing Asymmetric Resource Dependence and Environmental Risk in Relationships by Real Options. Management Revue, 15(1), 89–106. Ryu, S., Arslan, H., & Aydin, N. (2007). The effect of interfirm dependence structures on governance mechanisms. Journal of Purchasing and Supply Management, 13, 17–25. Scheer, L. K., Miao, C. F., & Palmatier, R. W. (2015). Dependence and interdependence in marketing relationships: meta-analytic insights. Journal of the Academy of Marketing Science, 43(6), 694–712. Schmitz, T., Schweiger, B., & Daft, J. (2016). The emergence of dependence and lock-in effects in buyer – supplier relationships — A buyer perspective. Industrial Marketing Management, 55, 22–34. Tangpong, C., Michalisin, M. D., & Melcher, A. J. (2008). Toward a Typology of Buyer-Supplier Relationships: A Study of the Computer Industry. Decision Sciences, 39(3), 571–593. Tangpong, C., Michalisin, M. D., Traub, R. D., & Melcher, A. J. (2015). A review of buyersupplier relationship typologies: progress, problems, and future directions. The Journal of Business & Industrial Marketing, 30(2), 153. Terpend, R., & Krause, D. R. (2015). Competition or Cooperation? Promoting Supplier Performance with Incentives Under Varying Conditions of Dependence. Journal of Supply Chain Management, 51(4), 29–53. Turner, G. B., LeMay, S. A., Hartley, M., & Wood, C. M. (2000). Interdependence and cooperation in industrial buyer-supplier relationships. Journal of Marketing Theory and Practice, 8(1), 16–24. van Weele, A. J., & van Raaij, E. M. (2014). The Future of Purchasing and Supply Management Research: About Relevance and Rigor. Journal of Supply Chain Management, 50(1), 56– 72. Vijayasarathy, L. R. (2010). Supply integration: An investigation of its multi-dimensionality and relational antecedents. International Journal of Production Economics, 124(2), 489–505. Wilson, D. T. (1995). An integrated model of buyer-seller relationships. Journal of the Academy of Marketing Science, 23(4), 335–345. Zhang, M., & Huo, B. (2013). The impact of dependence and trust on supply chain integration. International Journal of Physical Distribution & Logistics Management, 43(7), 544–563.

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5. Phases and Drivers of Buyer-Supplier Dependence Developmental Insights of a Logistics-Service Relationship in Textile Retailing Abstract

Purpose: Buyer-supplier relationships (BSRs) are composed of basic relational constructs and considered to evolve over time. Although BSR research has resulted in seminal relationship development models, the extant research has neglected the examination of dependence as a key relational construct over time. This is surprising, as dependence is inherently dynamic and frequently regarded as evolving out of mutual exchanges and adaptations. In line with this statement, Caniëls and Roeleveld (2009: 415) particularly call for an investigation into “the relation between dependence, ongoing relationships and time”. Thus, the extant research needs to be complemented by a long-term view and dynamic perspective on BSDs in order to shed light on its development and effects over time. It is the aim of this paper to make a first attempt at creating a phase model for dependence development and to identify the underlying triggers that shape its progression. Methodology: In order to detect how and why dependence develops, a qualitative empirical case study is conducted to investigate a third-party logistics relationship (3PLR) in the German textile industry. Findings: A five-stage development path of BSD and drivers of individual phase transitions are presented. Furthermore, a sequential model for dependence dynamics contributes to the existing research. This serves as the basis from which to suggest avenues for future research, as well as highlight managerial implications regarding the long-term management of BSRs.

Keywords: Dependence; Buyer-supplier relationships; Third-party logistics; Long-term cooperation; Qualitative research.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 T. Mandt, Dependence in Buyer-Supplier Relationships, Edition KWV, https://doi.org/10.1007/978-3-658-24252-7_5

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5.1. Introduction Buyer-supplier relationships (BSR) consist of a buying firm and a supplying firm that interact in exchanges (Håkansson, 1982), surrounded by well-established relational constructs, such as trust, commitment or dependence (Andaleeb, 1996; Kumar et al., 1995; Morgan & Hunt, 1994). BSRs are perceived to undergo dynamic development over time (Jap & Ganesan, 2000; Wilson, 1995). As these relationships are acknowledged to develop, their inherent relational constructs also experience an evolution as time proceeds. Despite this evolving nature for trust, commitment and dependence, the extant research has so far focused on the former two constructs across different relationship phases (Terawatanavong et al., 2007). Besides, extant frameworks on BSR life cycles refer to their development on a more general and abstract level, instead of focusing on the mechanisms within each construct. In result, research has neglected paying detailed attention to dependence and its key role within BSRs over time (Jap & Ganesan, 2000; Terawatanavong et al., 2007). Emerson (1962) defines dependence as the need to rely on a partner’s contribution when pursuing one’s own goals (Emerson, 1962). Extant research has covered the sources (Hammervoll, 2005), forms (Caniëls & Gelderman, 2007), effects (Andaleeb, 1996) and management approaches (Davis & Mentzer, 2006) in the context of buyer-supplier dependence (BSD). However, existing studies have taken a static perspective regarding BSD at a distinct point in time. A static view cannot live up to the very nature of dependence and long-term relationships, which are considered to evolve over time as a result of mutual exchanges and adaptations (Cousins & Crone, 2003; Håkansson & Snehota, 1995). Hence, it is necessary to approach BSD from a dynamic perspective by taking a long-term view on the development of a dependence situation. This is supported by Caniëls and Roeleveld (2009: 415), who particularly call for an investigation into “the relation between dependence, ongoing relationships and time”. Thus, the current study responds to this call by investigating distinct development phases of dependence and their driving forces in BSRs over time. Doing so should facilitate an understanding of the general and specific structural changes within the dependence construct in a BSR, as well as the driving forces behind these changes. In order to investigate how and why dependence evolves, a qualitative case study approach is appropriate (Eisenhardt, 1989; Yin, 2003). More specifically, this study follows a process-oriented research approach as applied in extant studies (Howard-Grenville, Metzger, & Meyer, 2013; Langley, 2007), which builds on a detailed narrative description of the context that serves as a basis for the later theory building. In particular, the textile retailing business provides an ideal context in which to examine dynamic developments, since the industry is characterized by fast-changing market conditions, short product life cycles and intense competition. In particular, an empirical case study between a large fashion design and retailing 124

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company and its third-party logistics provider is examined. This logistics context is especially suited to researching dependencies in BSRs, as the logistics literature frequently mentions the risk of becoming dependent on an established 3PL provider (Cahill, Goldsby, Knemeyer & Wallenburg, 2010; Davis & Mentzer, 2006; Scheer, Miao & Garrett, 2010). Using interview and secondary data, a phase model of BSD over time is proposed. This study contributes to the extant research on BSD by focusing on the timely development of dependence and integrating the formerly discussed dependence drivers into a coherent framework. It finally suggests five stages of dependence evolution and points to characteristic drivers that foster dependence progression. As such, this study presents implications for scholars on the linearity versus circularity of dependence development and shows that BSD development can be detached from general BSR development, thereby contrasting with extant research. This paper finally presents implications for managerial practice regarding managing dependent BSRs. The remainder of this paper is structured around theoretical foundations that introduce the dependence construct and the extant research on its development. This is followed by the presentation of the methodological approach and case study context, after which the case is presented in detail, and phases and drivers of dependence are derived. This study concludes by discussing the generated insights.

5.2. Theoretical foundations 5.2.1. Buyer-supplier dependence The relational state of dependence is one of the crucial constructs discussed in the literature on strategic management, marketing channels and supply chain management. Dependence is defined as the need to maintain a relationship with another firm in order to achieve the aspired aims (Frazier, 1983). This is because the firm in question provides important and critical resources for which there are few alternative sources of supply (Buchanan, 1992). Dependence is considered to evolve between partner firms as a result of forward integration (Pennings, Hambrick, & MacMillan, 1984), mutual adaptation (Geiger et al., 2012), complementary inputs (Laaksonen, Pajunen, & Kulmala, 2008) and a lack of alternative partners (Kim, Jung, & Park, 2015). The resulting bonding effects can lead to dependencies of one actor on its partner firm, that is, so-called asymmetric dependencies (Gulati & Sytch, 2007), but also dependencies between both firms, that is so-called symmetric dependencies or interdependencies (Caniëls & Gelderman, 2007). Dependence is considered to be of major importance to interfirm relationships (Morgan & Hunt, 1994) and perceived to be a precursor to long-term relationships (Ganesan, 1994), as well as mutual adaptation and integration (Hallen et al., 1991; Mukherji & Francis, 125

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2008). These observed effects are specifically prevalent in dyadic relationships (Dussauge & Garrette, 1999) and, especially, vertical relationships, encompassing firms of subsequent stages in the value chain (Håkansson, 1982). These so-called BSRs have been subject to examinations of dependence in the past (e.g., Bonner & Calantone, 2005; Caniëls & Gelderman, 2007; Habib, Bastl & Pilbeam, 2015). Dependence as a construct in BSRs can be structured around three major components, which are listed in Table 5.1. First, the degree to which dependencies exist can be summarized as the dependence magnitude. This relates to the necessity of the partner to achieve its goals (Andaleeb, 1996), the availability of alternatives (Clark, Scholder Ellen, & Boles, 2010), the potential loss of relation-specific value (Aminoff & Tanskanen, 2013) and the business share accounting for a particular exchange (Kumar, Scheer, & Steenkamp, 1995).

Need for the partner (goal achievement)? Relationship value dependence

Available alternatives Loss of relation-specific value

Dependence

Resource criticality

magnitude

Business share Switching cost dependence

Ease of replaceability (search and costs) Disengagement costs Transition costs

Dependence symmetry

Relationalism

Symmetric

(Interdependence)

Asymmetric

(Supplier OR buyer dependence)

Relational norms

Information exchange

Trust

Competence, goodwill, contractual trust

Interpersonal level

Social bonds, informality, conflict

Orientation and goals

Duration, risk and reward sharing

Mutuality

Reciprocity and adaptations

Formalization

Contract-based?

Table 5.1: The conceptual dependence construct

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Dependence magnitude is summarized by the subcomponents of relationship value and switching cost dependence (Scheer, Miao, & Palmatier, 2015). Secondly, dependence can be differentiated according to its symmetry, thus affecting either one partner in an asymmetric fashion or both partners in a symmetric way (Buchanan, 1992). Finally, the research acknowledges the manifestation of a degree of relationalism needed to impact a dependence relation (Håkansson, 1982; Simpson & Paul, 1994). Relationalism is composed of the existence of relational norms (e.g., Heide & John, 1988; Tangpong, Michalisin & Melcher, 2008), interfirm trust (e.g., Izquierdo & Cillán, 2004), a developed interpersonal level (e.g., Harrison, Beatty, Reynolds & Noble, 2012), the fit of the firms’ future orientation and company goals (e.g., Wilson, 1995), and the presence of mutuality (Baraldi, Proença, Proença, & de Castro, 2014) or formal agreements (Lusch & Brown, 1996). This systematization is the result of prior examinations on dependence in BSRs, which have predominantly tested single interrelations between dependence and other relational constructs (e.g., trust), characteristics (e.g., resource criticality) or outcomes (e.g., presence of relational norms). These will serve as the basis on which to analyze the development of BSD in the remaining paper.

5.2.2. The development of buyer-supplier relationships Frazier’s definition of dependence (1983), in which a particular exchange relation is maintained in order to achieve one’s goals, already implies the long-term orientation of the dependence construct. In contrast to this orientation, there exist no specialized longitudinal examinations of BSD over time, which could shed light on the construct’s progression in BSRs. However, more abstract contributions regarding BSRs in general have touched on how dependencies could develop. These can serve as reference points for the purposes of this study. In one of the first BSR phase models, Ford (1980) differentiates between the pre-relationship, early, development, long-term and final stages of BSRs. Therein, he looks at dependence in the development stage, as mutual commitment and adaptations increase, as well as in the long-term stage, in which institutionalized processes result from the risk of overdependence. In their seminal study, Dwyer, Schurr and Oh (1987) describe a gradual increase in dependence in the context of their well-cited five-stage model of BSR development. At first, this model describes the awareness phase in which two actors get to know each other as potential cooperation partners, before entering the exploration phase, where trial purchases take place (Dwyer, Schurr, & Oh, 1987). If these are continued and increased, BSRs enter the expansion phase as a result of the partners’ satisfaction with the exchange (Frazier, 1983), and subsequently the commitment phase, which is depicted by a state in which other potential exchange relationships are no longer taken into consideration (Dwyer et al., 1987). While dependence emerges in the expansion phase, it reaches a high 127

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level in the commitment phase (Claycomb & Frankwick, 2010). Finally, Dwyer et al. suggest the dissolution phase in which the BSR is terminated. Thus, the authors point to an dependence increase from a minimal to an increased level between the exploration and the commitment phases (Dwyer et al., 1987). Wilson (1995) refines this model and proposes the development stages of partner selection, purpose definition, relational boundary setting, value creation and relationship maintenance. He argues that dependence is an important relationship variable, which is predominantly active in the phases of partner selection, purpose definition and relational boundary definitions, where is depicts “the center of the relationship development process” (Wilson, 1995: 339). Here, dependence is argued in support of the setup of social bonds, mutual goals and joint actions (Wilson, 1995). Similarly, Jap and Ganesan (2000) argue for an increasing dependence in the buildup phase of their four-stage relationship model (exploration, buildup, maturity, decline) (see also Ganesan, 1994). Terawatanavong et al. (2007), in turn, refer to Wilson (1995) when exploring the moderating role of relationship phases on dependence. In focusing on the buildup, maturity and decline phases, the authors also find that dependence increases during the first phases, while remaining at a low level in the latter phase (Terawatanavong, Whitwell, & Widing, 2007). This is explained by managers’ efforts to build up dependence during early relationship stages, which is a view supported by Cousins & Crone (2003). Summing up, existing research has examined dependence on an abstract level according to its intensity. Across the extant contributions, and regardless of the number and names of phases or stages in these models, dependence is regarded as emerging during the early relationship phases and culminating in a maturing phase. However, these observations do not explain the development of dependence in detail with regards to the conceptual construct (Table 5.1). Thus, detailed insights into the driving forces and mechanisms that lead to the emergence and increase of dependence over time remain unclear. It is the aim of the remaining sections to shed light on these matters.

5.3. Methodology In order to analyze dynamic developments in BSD, this study conducts an in-depth case study. A case study is chosen, as it fits in with the explorative research question about how and why dependencies shift over time (Charmaz, 2014; Yin, 2003). A single case is chosen, as it enables a more detailed examination of a given setting, while the extant research has failed to offer any kinds of insight on dependence dynamics so far.

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5.3.1. Case-study approach and empirical context Developments of dependence over time are best examined in settings that are inherently affected by temporal changes. Such an industry is the textile retailing business. In this business, textile firms design their collections for up to 12 seasons a year, leading to short product life cycles (Christopher et al., 2004). These collections are predominantly produced in Asian countries before being shipped to a European warehouse belonging to a textile firm. Textile firms distribute their clothes either via self-owned shops (online and bricks and mortar) and via the so-called wholesaling model. The wholesaling model describes the distribution of large volumes of pre-ordered goods to large retail chains, which carry the goods of specific textile firms amongst other brands. This business is characterized by seasonal trends, which go hand in hand with fluctuations in demand throughout the year, as customer preferences can shift from season to season (Christopher & Peck, 2004). Hence, textile retailing firms can experience volatility, which is further marked by intense competition (Christopher et al., 2004). For the purpose of this study, a German fashion company, which offers mid-priced mainstream and basic products, is examined. The competition between alternative brands is especially fierce in this market segment. Recently, the textile retail business has needed to integrate multiple distribution channels, such as the bricks and mortar and wholesaling businesses. These multiple channels have to be managed coherently in terms of both strategy and operations. This frequently generates the need to team up with specified providers, which offer logistics, marketing or infrastructural services, among others.

Fashion market characteristics  Short product life cycles  High volatility  Low predictability  Time-to-market decisiveness  Strong growth/volatility  Intense competition* 

Multichannel distribution*

Table 5.2: Characteristics of fashion markets (cf. Christopher et al., 2004; *= see case data).

In this study, the relationship between a fashion company, which I call TexCo, and its logistics service provider (LSP), which I call Log-Inc., is analyzed in detail. Logistics services are especially suitable for examinations of inter-organizational dependencies, as the 129

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different operational activities require close adaptation and mutual collaboration, which are both considered to be sources for BSD (Cahill et al., 2010; Davis & Mentzer, 2006; Selviaridis & Spring, 2010).

5.3.2. Data collection The BSR between TexCo and Log-Inc. has existed since 2000. As it is the aim of this study to examine the relation over time, a retrospective case had to be constructed (Leonard-Barton, 1990). This study has the status of a working paper, while data collection is ongoing as the BSR continues to be observed. In order to gain insights into both the historical details and recent developments of the cooperation, it is necessary to collect data from two different sources (Charmaz, 2014). First, seven semi-structured interviews have been conducted among employees of LogInc. and TexCo. More precisely, five interviews have been conducted with top- and midlevel managers of Log-Inc., while two conversations have taken place with former managers responsible for the global operations of TexCo. Four more (former and recent) managers of TexCo were approached to participate in this study, but denied due to compliance issues. By approaching these 11 persons in total, all of the key employees working at the company intersections were invited to participate. Table 5.3 provides an overview of the conducted talks. In addition, it was possible to cross-check these preliminary insights on the dependence dynamics during two workshops at Log-Inc.’s headquarters. The discussion with leading managers contributed to shaping and validating this study’s results. Second, desk-based research using a German media database was conducted. This was further accomplished by investigating the press archives of TexCo and Log-Inc. This provided company reports, newspaper clippings and statements on the BSR. Furthermore, the founder of Log-Inc. and the initial key manager of TexCo’s operations published a popular science paper providing detailed insights on the meaning of trust in their cooperation.

5.3.3. Data analysis Analyzing data on how phenomena develop over time inherently addresses the nature of processes (Langley, 2007). In organizational research, process studies on such issues have gained in importance over recent decades (Langley et al., 2013). Based on their focus on emerging changes within a particular construct, this study follows established procedures in working with the available data. At first, the data are coded by their single expressions (Charmaz, 2006). Consequently, the codes are aggregated at a higher level of abstraction in order to derive categories that summarize certain events, influences or relational changes. These serve as a basis 130

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Source code

Company

Position

L1, 2016

Log-Inc.

Head of TexCo-Cooperation

L2, 2016

Log-Inc.

Head of Operations Control Center

L3, 2016

Log-Inc.

L4, 2016

Log-Inc.

Head of Warehousing on behalf of TexCo

L5, 2016

Log-Inc.

CEO

T1, 2016

TexCo

Head of Global Warehousing

T2, 2016

TexCo

Senior Vice President Supply Chain

Head of IT

Interview date and length February 16th, 2016 52:15 mins. February 23rd, 2016 52:36 mins. March 1st, 2016 36:46 mins March 7th, 2016 41:48 mins March 8th, 2016 51:36 mins March 15th, 2016 45:34 mins September 6th, 2016 49:10 mins

Table 5.3: List of conducted interviews

on which to develop a chronological visualization (Figure 5.1) of the main events and their triggers within the BSR, as well as inherent influences and actions that shape the dependence situation over time (Langley & Truax, 1994). Figure 5.1 allows for presenting the wide amount of information across different relational dimensions in a condensed manner (Langley, 1999). This intermediary step bridges the raw data and the later theoretical abstraction. Chapter 5.4 will at first provide a detailed narrative description of the case, which will be enriched by presenting interview statements to present the “big picture” (Delbridge & Fiss, 2013) and to provide direct contact with the raw data. This initial description is intentionally detailed which is perceived to be necessary, because it serves the purpose of a preliminary step to bring a chronological order to the coded data (Langley, 1999). Moreover, the description informs the reader about the entire temporal development of the examined case, free from any theoretical interpretation. As the aspired phases are marked by changing individual contents from phase to phase, mixing theoretical interpretation and description would be critical, as the reader might be informed of a phase-ending before being able to understanding the substantial difference of the subsequent phase. Thus the initially presented contextual detail aims for enhancing the reader’s understanding of the subsequent theoretical analysis in Chapter 5.5 and to make the interpretation of BSD phases and driving forces transparent and comprehensible. It is further aimed at accuracy in the sense of a close data fit of the later findings (Weick, 1979). This procedure of an introductory narrative followed by a theoretical analysis of processes is acknowledged in extant

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research as indicated by recently published special issues on process studies (Gehman, Trevino, & Garud, 2013; Howard-Grenville et al., 2013; Lok & De Rond, 2013). This narrative report serves as groundwork for Chapter 5.5, which will build on this description to analyze the BSR from a theoretical dependence perspective to derive dependence phases and the underlying driving forces. By identifying and connecting the introduced case milestones, changes within TexCo’s and Log-Inc.’s dependence situation, phases of their dependence relation are derived. In a second step, the analysis moves away from the actual data to theorize underlying drivers and mechanisms that foster the transitions across the phases. Finally, these are challenged in relation to the extant research in the field.

5.4. The case of a logistics service relationship in textile retailing The following case description is based on the sum of narrative information as given by the interviewed partners, along with secondary data that underline business and cooperative developments. Dynamics in BSD are best examined in an ever-changing environment because the relational context is considered to directly impact a BSR (Håkansson, 1982). Figure 5.18 visualizes the relational history between TexCo and Log-Inc., which is a specific case that “developed through different phases” (L5, 2016). In 2000 TexCo requested “urgent help as quickly as possible” (L1, 2016) from LogInc. to support its logistical processes. Prior to that, TexCo managed its logistics on its own in a company-owned facility. However, TexCo faced a growth period between 2000 and 2008, with operating profits increasing from USD 112 to 989.5 million (acc. to TexCo balance sheets). This raised the demand for further resources, staff and logistical knowhow, which could not be provided internally. “At that time, they had done everything by themselves with their own systems and system landscape. They had reached the limit of their capacities. The dam was bursting at the seams. They had already rented additional space, but they also recognized that, while they were able to produce very good and successful fashion, they had trouble in dealing with these non-commercial aspects” (L1, 2016).

8 In Figure 5.1, the different shapes indicate distinct relational levels. Hexagons point to evaluations of the BSR, boxes with round corners indicate joint action, dark ellipses indicate actions by Log-Inc., white ellipses actions by TexCo, clouds highlight the relational level and dark squares refer to the BSRs milestones.

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Figure 5.1: The TexCo – Log-Inc. history

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Answering the request, Log-Inc. offered to take over the logistics services in a manual operation at its facility (known as Location B), which allowed TexCo to focus on the design, marketing and sales of its products. Nevertheless, TexCo prescribed the detailed process operations for Log-Inc., which began by taking over the children’s and men’s wear segments, followed by accessories and permanent stock items, while shoes were added to the service mix between 2001 and 2002. A few special product categories remained at TexCo’s location (known as Location A) to be operated in-house. “The customer does one part by itself and we do one part. The customer could pretty much see a much better level of performance and quality. Nevertheless, better costs are possible at Log-Inc. with the same structures, approximately the same volumes, with the same items. Insofar as I trust Log-Inc. that they can do that better than me, I confide more in Log-Inc. […] This is what we call the trust-building phase.” (L5, 2016) Despite the suggestion of a degree of mutual understanding that existed between the firms at the initial stages of their relationship, interviewees predominantly referred to a distant relationship, in which TexCo regards Log-Inc. as an outsourcing provider, conducting its activities based on instructions from TexCo’s logistics managers. “The origins were as such, as we [i.e., Log-Inc.] were the problem solvers. TexCo faced strong growth and said we are growing out of our existing structures.” (L5, 2016) “Logistics […] is a service provision. We create fashion, and who are you? You are a service department. It simply has to work. It costs money and has to work.” (L1, 2016). Before TexCo outsourced its logistics personnel, logisticians were paid based on textile industry tariff standards. In 2001, the company decided to also hand over its employees and tenancy agreements related to its logistics facilities to Log-Inc. in a transfer of undertakings in 2001 for economic reasons. As a result, Log-Inc. operated TexCo’s logistics activities at the two distant locations (A and B). TexCo’s turnover continued to increase substantially by more than 250 percent between 2001 and 2005. This put the two-location approach into question, given that the efficient handling of the growth phase was no longer possible. Hence, TexCo decided to fully concentrate its entire logistics operations at LogInc.’s warehouse, which also offered spare capacities to cover growing demand. In return, TexCo and Log-Inc. decided to close down location A, leaving Log-Inc.’s facility the only logistics location for conducting TexCo’s operations.

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“The end of 2005 was again a decisive factor. At that time, the site in Location A was shut down. That meant […] 200 employees were dismissed, even though they were all offered work at Location B […] So, we parted company with 200 employees, closed the property and consolidated everything in Location B again.” (L1, 2016) Strong growth continued, with more than 150 million pieces being handled per year by 2007, compared to nearly 17 million pieces in 2000. This development was further accompanied by frequent exchanges between TexCo’s management staff, who were responsible for the cooperation. Roughly in a two year rhythm, the respective employees either moved over to TexCo or left the firm. This posed a challenge to the cooperation needed to build up effective and ongoing interpersonal exchanges. However, the fact that Log-Inc. was able to handle increasing demand by providing excess capacities in its infrastructure and access to subcontracted workers has been suggested as the reason why the trust on the part of TexCo increased in relation to its service provider. “Of course, TexCo relied on us for a very long time. Extremely relied on us. And we, it has to be said, and of which I am very proud, have grown while we have always managed to maintain quality standards. We were measured by delivery rates, what amount was on the way to arrive at what time. No matter, if there were 16.7 million items or eight million items, we have always managed that. In consideration of night shifts, of weekend work, we have managed this typically seasonal business. We have introduced various new ideas, presented models on how to automate, how to simplify and facilitate, flexible things. We indeed had a very good partnership.” (L1, 2016) The interaction between both firms became more intense, with Log-Inc. starting to proactively suggest ideas, e.g., to optimize the so-far prescribed TexCo processes. Based on the satisfaction with its service provider, TexCo extended its relationship in 2007 by setting up a five-year contract, which secured the terms and conditions of the exchange until the end of 2012. Shortly after the contract extension, another management exchange at TexCo brought a new external manager into the firm, who joined the textile company after having been socialized in a different industry background. As such, the manager was surprised by TexCo’s extent of reliance on Log-Inc and questioned the existing interaction with the service provider. “[The manager] also questioned a bit what Log-Inc. did. From that moment on, we lost the basis of trust. Within the scope of building up this new location, it was quite difficult to build up this trust.” (L3, 2016)

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“Someone said we were totally dependent. Personally I have no confidence, no history and no relationship [with Log-Inc.]. I come from a different world, a different industry, where these relationships are managed in a completely different manner.” (L5, 2016) On the one hand, this was due to doubts in the efficiency of the manually conducted logistics operations. “There was a desire for independency from Log-Inc. based on the feeling of having paid too much.” (T2, 2016) On the other hand, this was due to the fear of being dependent on the service provider. In response, TexCo started a tender process for conducting its logistics operations. With TexCo’s profits at an all-time high, the recently signed contract was ignored. The aims were twofold: first, to automate the processes and consolidate them at one single location closer to the company headquarters; second, to relax TexCo’s reliance on Log-Inc. In order to gain more efficient logistical processes, a consultancy firm was hired to create an appropriate concept. In doing so, TexCo strived to develop an operational blueprint, which it would design to enable frequent and frictionless exchanges between one service provider and another at any time depending on the cheapest bid. When these plans became known, the relationship between Log-Inc. and TexCo, and more specifically between the responsible BSR managers, got worse. Interviewees reported a sudden mistrust towards Log-Inc., prompted by its dominant position regarding operational competences and logistical know-how. “[It was] subliminal. You can hardly call it distrust. Lawyers had been made rich formulating contracts that allowed for no loopholes, which led to the fact that relationship was hardly livable. In fact, it did not work. It was far from reality.” (T1, 2016) More specifically, this phase was described as a depression and involving a distant atmosphere in the interview data. Furthermore, the lack of information exchange and communication was pilloried during the interviews. In sum, the relational level could be described as distant and occasionally hostile at that time. During the tender process, however, Log-Inc. could surpass its competitors and win the tender to become the operative party for conducting the newly designed services. This was mainly due to contractual details in the recently signed five-year contract, as well as due to Log-Inc.’s possession of TexCo’s desirable property next to its headquarter.

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“[There was] a clause saying that, if TexCo ever built a new warehouse within a certain radius from Location B, Log-Inc. would have the right to manage it.” (T2, 2016) Nevertheless, the attempt to regain entire control and full independence regarding TexCo’s operations came to an end, as the management had to recognize that the necessary logistical competences, properties and resources were lacking to realize its plan. Due to its advantage in these areas, Log-Inc. won the tender in 2009. In addition, TexCo released the responsible manager who brought about the tender. After winning the tender in 2009, Log-Inc. joined the design and planning phase of the new facility, which was already at a late stage. So far, TexCo, its consulting firm and a provider of automated warehouse technology (which is planned for the new logistics center) have launched several projects to implement and adapt the necessary technology and processes. When Log-Inc. joined this planning phase, a new responsible manager at TexCo was hired. This gave the boundary managers an opportunity to bilaterally agree to foster their relational exchange. “We were married, at least for the next five years, and had to make sure that we fostered good collaboration. We actually spoke about the history for two hours and then said, ‘ok, that is over now, let’s face the future and see how we can get the place turned around.” (T2, 2016) The two boundary managers collaborated intensely, supported by the consultancy and the warehouse technology firm, to ensure the new facility operations were ready to replace the former Log-Inc. warehouse by 2012. In the process, frequent information exchanges and increasing mutual trust on an interpersonal level at the top on both sides prepared the way for working more closely together, as well as establishing routines and structures, such as morning meetings or cross-company teams. Supported by this initiative, the facility planning process entered a one-year testing phase for the new automated facility. During these tests, several operational, technical and IT-related problems occurred, which prevented a frictionless start for the facility. “Since we had a series of massive malfunctions, especially at the beginning, we were able to further optimize the plant and continuously reduce downtimes, and in turn the costs, which therefore increased productivity, of course.” (L4, 2016) Nevertheless, both firms were able to go-live in 2012. This final realization of the transition project from Log-Inc.’s prior facility to the new facility is regarded as an example of mutual project success in the TexCo-Log-Inc. relationship. Since mid-2013, the facility has run constantly, while further procedural and operational adaptations have been implemented. On this basis, the interrelations between both firms, on a strategic, operational and resource integration level, especially grew strongly. Alongside routine process execution,

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Log-Inc. is frequently in the position of advising TexCo on matters that sooner or later have an impact on the operational side. Despite this success, TexCo’s turnover declined significantly within a few years, reporting a loss of USD 534 million in 2013 compared to a sales peak in 2008 according to TexCo’s annual reports. This was due to several reasons: On the one hand, the textile business was changing at that time. Demand and sales practices shifted distribution channels from a wholesale-oriented business towards a reliance on self-owned bricks and mortar shops. On the other hand, TexCo was undergoing a strategic change, with the aim of integrating two distinct distribution strategies within its business model: the demand-driven production and distribution of clothes as well as a pre-order business, in which produced goods were already assigned to a customer. This strategic split also hampered Log-Inc.’s operations. Against this backdrop, different cost reduction initiatives were implemented. These efficiency increases raised the importance of the logistics function for TexCo because costs could be saved after putting the new warehouse into operation. Other mutually innovative projects and approaches, such as IT adaptations, were also set up. During that time, the logistical expertise of the new CEO at TexCo gives its relationship with Log-Inc. a much higher focus than before. Log-Inc. was now seen and accepted as a competent partner on equal terms in contrast to its role as an executor in the earlier years. Furthermore, an openbook accounting model was introduced that predefined a fixed cost level and which allowed for additional savings to be shared between the partners in order to incentivize both sides to participate in innovation and efficiency-generating activities. “Of course, it depends a little on the people involved, but usually it changes completely. You switch from one mode, ‘I’m in the negotiation mode’ […] to a partner, with whom I would like to create together. This is a completely different mode of working.” (L5, 2016). The most important project to ensure future logistics efficiency was the enlargement of the extant facility by two thirds, which consolidated the entire logistics operations of TexCo on a single site, as minor activities, such as reverse logistics, had remained at another location or been delegated to smaller and niche providers, such as a logistics specialist for hanging-garments. Thus, Log-Inc. and TexCo jointly planned the enlargement of the shared facility in 2014. Another management exchange at TexCo, as well as a challenging business environment, accompanied TexCo and Log-Inc. during the so-called extension project, which is scheduled to be finished and put into operation in 2018.

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5.5. Phases and drivers of buyer-supplier dependence The presented case study provides a basis to analyze the dynamic development of dependence. The interview partners were asked for key milestones in the BSR between TexCo and Log-Inc. based on their impressions over time. In addition, the secondary data hint at relational milestones, based on peaks in the release dates of press reports on the BSR, which correspond to those referred to by the interviewees. As it is the aim of this study to create a BSD phase model, it is important to take these relational events as cornerstones for further analysis. In the following analysis, this study considers a phase to be a time period, which is framed by characteristic starting and end points. In the specific context of BSD, I regard characteristic points as those in which the dependence relation between buyer and supplier changes. This ensures that the resulting phases will describe and be marked by particular developments within the dependence relation. To assess these changes within the dependence construct, the following analysis will be built on the dependence construct, which consists of dependence magnitude, dependence symmetry and relationalism, as introduced in Section 5.2.2.

5.5.1. Phases of buyer-supplier dependence The collected data on the relationship between TexCo and Log-Inc. point to six events, which characterize the history of both firms to date, thereby neglecting the start of their BSR in 2000. While the interviewees highlighted the transfer of undertakings in Location A in 2001, both data sources jointly refer to the closing of Location A and the transfer of TexCo’s logistics activities to Location B in 2005 as important events. After expanding their cooperation in late 2007, the most striking event in the BSR was the tender for the logistics activities in 2008, which was intensely emphasized in the data. In late 2009, the acceptance of Log-Inc. as TexCo’s LSP in the new facility was especially discussed in media reports. After winning the tender, TexCo and Log-Inc. entered into the planning and testing phase for the automated facility, which was finished by the so-called “go-live” date in 2012. This has been reported as the most important example of mutual project success in the relationship. Similarly, the respondents compared the ongoing planning phase of the warehouse extension since 2016 as an important milestone. Figure 5.2 summarizes these milestones and the manifestation of the dependence between TexCo and Log-Inc. in reference to the respective dates. The following section will discuss this content in detail. Table 5.4 summarizes the relational milestones and highlights the changes in the dependence construct over the years.

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Relational milestones from a dependence perspective From the very beginning of the BSR in 2000, the BSR has resembled a transactional exchange. TexCo needed urgent support in its logistics processes, as their scope and complexity surpassed the firm’s capacities to deliver its products. In theoretical terms, the service represented a critical resource for TexCo at that time.

Start services

2000

Stepwise take-over/ Transfer of undertakings

Closedown TexCo facility

2001

2005

Tender process

Log-Inc. wins tender/ start facility planning

Start of new facility

WH extension project

2007/’08

2009

2012

2017

Figure 5.2: Characteristic milestones TexCo – Log-Inc. relationship

As Log-Inc. used the TexCo request to employ a small amount of free capacities, which were in any case unused, its dependence on TexCo could have been regarded as low in 2000. Besides, neither relationship value nor switching costs had been pursued, resulting in an overall low level of dependence between the firms. In 2001, TexCo gradually handed over operations for several product segments to LogInc. As Log-Inc. was capable of delivering the required services and efficiently coping with the increasing amounts, TexCo’s trust in the competence of its LSP increased substantially (L1, 2016). Based on this recognition, the transfer of undertakings to Log-Inc. raised the level of importance of the service provider, as well as its employees, warehousing and service capacities, for TexCo. In effect, this also raised the importance of TexCo as a customer of the LSP, due to the increased revenue that Log-Inc. generated (L1, 2016). This event was described as an important step in the dependence relation by the interviewees and it levelled out the symmetry of both partners with regard to their dependence on each other. Subsequently, interviewees referred to 2005 as the next milestone that impacted their dependence relation. Closing TexCo’s initial location (Location A) highlighted the firm’s trust towards Log-Inc., while influencing its switching costs towards terminating the BSR at the same time. This was the case because Log-Inc.’s facility represented the backbone of TexCo’s logistics system, since it was necessary to achieve the buyer’s business goals. Furthermore, TexCo’s sales were on a rise in 2005, thus enlarging the business share that 140

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was connected to the exchange. As a result, TexCo developed into one of the most important customers for Log-Inc. (L5, 2016). The increased volume that needed to be handled also affected the relational level, as the need for close information exchanges on different boundary levels grew. Moreover, TexCo and Log-Inc mutually adapted single processes to meet their respective partner’s needs. Despite this positive development and a five-year contract extension in 2007, the next relational milestone was the tender issued to the market by TexCo for providing the logistics operations in its planned new facility. As it enjoyed its all-time best sales and profits in 2008, a management exchange at TexCo resulted in the tender, as the responsible persons believed the company had the financial power to overcome the transition costs to terminate its relationship with Log-Inc. Given the distant and hostile relational nature cultivated by the newly responsible manager, the relational level decreased significantly, with interviewees pointing to a lack of communication and interaction (L1, 2016; L3, 2016). Moreover, TexCo no longer trusted Log-Inc. to operate as cost-efficiently as possible. In turn, TexCo’s responsible manager disregarded the recently signed contract, which remained as the last relational element in the BSR at that time. In effect, this attempt to move away from Log-Inc. balanced out the dependence relation between both partners: on the one hand, the business with TexCo represented a large part of the provider’s business; on the other hand, TexCo possessed the financial power to disengage from the provider. At the end of the tender process, however, Log-Inc. won against other competitors and joined the planning phase of the new facility, which was already underway. Even more, Log-Inc. possessed the rights to build at the property and joined negotiations with the authorities. This significantly raised the relational value and thus dependence level for TexCo towards its LSP (T1, 2016). Furthermore, the relationship gained in relation-specific value, since the property fulfilled TexCo’s requirements and was closer to its headquarters. After winning the tender, the new facility also hampered the transition from Log-Inc. to another service provider by increasing its switching costs. In the light of TexCo’s sales drop in 2010, these switching costs became even more prevalent from a theoretical view, as the ability to invest in a service exchange was questionable. In sum, the new facility represents a critical resource that has bound both partners together. Following the departure of the manager who had sewn mistrust, TexCo’s newly introduced successor and Log-Inc.’s responsible manager formed a well-functioning boundaryspanning team on an interpersonal level (L1, 2016; T1, 2016; T2, 2016). Hence, the relational level improved and impacted the dependence between both firms. Constant information exchanges and the alignment of operational and relational goals helped to improve

141

142

Relationalism

Symmetry

Dependence magnitude

Available

Need partner to achieve goals?

-

-

n/a

Interpersonal level

Orientation & Goals

Mutuality

Formalization

n/a

-

-

-

competence

n/a

+

n/a

+

-

-

-

-

+

-

+

Symmetric

-

-

+

+

+

-

-

+

2008

competence, contractual

Asymmetric (TexCo)

+

+

+

+

+

-

-

+

2005

+

Asymmetric (TexCo)

+

+

+

n/a

+

+

+

+

2012

+

Symmetric

+

+

+

n/a

+

+

+

+

today

+

-

+/-

+

+

+

+

+

+

+

+

+

competence, competence, con- competence, concontractual tractual, goodwill tractual, goodwill

+

Asymmetric (TexCo)

+

+

+

n/a

+

+

+

+

2010

Table 5.4: Changes in the dependence construct across characteristic milestones

T= TexCo; L= Log-Inc.; + = increasing dependence effect; - = decreasing dependence effect; n/a = no data available; (NAME) = dependent party.

-

Trust

-

Symmetric

-

-

-

-

-

-

Asymmetric (TexCo)

n/a

n/a

+

-

-

T: +, L: -

+

2001

T: +, L:-

2000

Relational norms

Transition costs

Switching replaceability cost de- Disengagement pendence costs

Ease of

Business share

Resource criticality

Relation- alternatives ship value Loss of relationdependence specific value

TOBIAS MANDT

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the cooperation (T2, 2016). In light of these aspects, TexCo turned out to be the more dependent party by 2010. After finishing the planning phase and at the beginning of operations in 2012, the elaborated dependence relation further stabilized. Based on good interaction in the process of setting up the facility, TexCo built up an intense level of trust towards Log-Inc. (T1, 2016). Trust was even further enhanced by the introduction of open-book as a new accounting and payment system (L5, 2016). This system included a win-win situation for both partners by providing incentives for Log-Inc. to increase the efficiency of its operations, while simultaneously defining a maximum cost level for TexCo (L4, 2016). This adaptation of a riskand reward-sharing model was especially important, as TexCo’s business declined constantly, thus providing planning certainty. In this context, the described changes in their relationship led to a larger difference in the dependence asymmetry, which favored LogInc. over TexCo by 2012. Today, the magnitude of dependence consisting of a high level of relational value, as well as switching costs for both actors, remains constant. Looking at TexCo’s sales figures, however, it can also be argued that switching costs for the textile firm increased. Switching costs have been further increased by transferring the remaining minor activities, which had been outsourced to providers, to TexCo’s central warehouse location. Since both partners recognized the potential offered by consolidating logistics activities on this single site, TexCo and Log-Inc. decided in 2016 to enlarge the facility by mutually investing in its expansion. This involved major investments in the infrastructure. This enlargement of their cooperation was also based on an ever-increasing relational dimension between buyer and supplier. As both firms are strategically involved in the extension, this has levelled out their dependence relation, such that it has a symmetric nature again. In sum, when the two organizations are viewed together, TexCo’s logistics and supply chain department and Log-Inc.’s responsible relationship managers, can be described as virtually integrated form of cooperation. Suggestions to form a joint venture, however, were turned down by TexCo’s general management in 2015.

Deriving phases of buyer-supplier dependence The above-discussed relational milestones were the ones that were mostly referred to in the interviews and the secondary data. Taking these critical events in chronological order enables the identification of five distinct phases of BSD development, which are depicted in Figure 5.3. A particular phase is framed by two critical relational events, which serve as starting and end points. More importantly, these events symbolize a change in the dependence structure between buyer and supplier, thus resulting in five phases that describe the dynamic shifts in a dependence relationship over time. 143

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At the beginning of the exchange between TexCo and Log-Inc., both dependence components of relationship value and switching costs could have been described as low, while the relational dimension had not yet been developed (Ford, 1980). The relationship was in its early stages and resembled a transactional exchange. Nevertheless, the specific need for logistical help at TexCo resulted in the gradual enlargement of services outsourced to LogInc., which even took over legal control of TexCo’s employees in 2001 (Schmitz, Schweiger, & Daft, 2016). Taking these events together, one can identify an increase in relationship value and switching costs prior to 2005, when Log-Inc. finally took over TexCo’s facility (Barnes, Naudé, & Michell, 2005). This phase was characterized by mutual growth and the stepwise takeover of TexCo’s employees and activities by Log-Inc. This is referred to as the dependence formation phase. Building on this new relationship basis, TexCo’s growth phase led to an increase in the importance of the BSR. Replacing or transitioning away from Log-Inc. became difficult, with the relationship value and switching costs for TexCo increasing substantially after closing its former facility and having to fully rely on its supplier’s resources and trust in its competences (Buvik & Reve, 2001). As the initial dependence formation phase progressed, a continued period of stabilization of the dependence relationship began, which also impacted the relational level between both firms for the first time until early 2008. Hence, this second phase is referred to as dependence stabilization. In 2008, when TexCo exchanged the boundary manager with Log-Inc., this was in recognition of the former’s dependence on its service provider, as the new externally hired person joined the firm with a fresh view on how matters should move forward. This had not been perceived earlier because the design and sales of textiles, as well as growth management, were the primary focus of TexCo’s attention. Existing processes and routines, together with the efficiency of the external party, were called into question. In response, TexCo made plans to design ideal logistics processes from scratch to be located in a selfowned facility, so that service providers could be interchanged more flexibly at shorter notice. By planning for such an alternative solution, the buyer decreased its dependence on the supplier by planning for an alternative option (Geiger et al., 2012; Pfeffer & Salancik, 2003). Furthermore, the importance of the particular relation with Log-Inc., in addition to the criticality of the services it provided to TexCo, was decreased as it pursued the interchangeability of market alternatives (Buchanan, 1992; Emerson, 1962). In fact, the new concept and strategic approach adopted by TexCo posed a threat to the existing business from Log-Inc.’s perspective. Overall, in this phase, the aim was to regain independence and flexibility. Hence, this phase is referred to as the wake-up and defense phase. In late 2009, Log Inc. won the tender following the bid process initiated during this phase. From a dependence perspective, TexCo’s available alternatives were once more limited. Thus, it was not easy or even possible for the company to replace Log-Inc., thereby indicating an increase in the dependence magnitude during this fourth development phase. 144

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In addition, the relational dimension benefited from boundary-spanning employees who closely collaborated at the intersection between buyer and supplier (Cai, Yang, & Hu, 2009), as they realized their need to adapt and reorient the level of cooperation towards opening the new facility in 2012. On the whole, this again fostered an increase in their mutual dependence, which linked with the prior stabilization phase and can thus be seen as a restarting the process of cooperative interaction. Hence, this phase is referred to as the dependence realignment phase. Based on this newly adjusted cooperation, TexCo and Log-Inc. perceived their specific dependence relation in terms of competitive advantage. Joint investments and projects were focused on constantly improving cooperative and operational processes, while the interpersonal exchange on multiple levels between both partners was enhanced. This raised the level of their dependence magnitude even further (Hammervoll, 2005; Schmitz et al., 2016), as the specific relation between TexCo and Log-Inc. became more valuable, critical, and economically as well as operationally necessary for both firms. As a result, since 2012, switching costs have continued to rise until today. Furthermore, the planned extension of their facility also signaled that the level of collaboration would become larger in the future (Scheer et al., 2015; Yeniyurt, Henke, & Yalcinkaya, 2013). Indeed, their relationship has appeared to be close to an integrative company of late. Taken together, this final phase makes a virtue of the obvious constellation and is thus called the dependence leverage phase. A phase model of BSD can be derived by abstracting data from the case study involving TexCo and Log-Inc. Figure 5.3 suggests that BSD evolves during five characteristic stages, namely, dependence formation, stabilization, the wake-up and defense phase, realignment and dependence leverage.

Dependence Formation

Dependence Stabilization

Wake-up & defense

Dependence Realignment

Dependence Leverage

Figure 5.3: Phases of buyer-supplier dependence

These five phases represent an evolution of the dependence construct, which is not linear. After a clear starting point when buyer and supplier become dependent (formation), this situation eventually develops into the stabilization phase. At a certain point, the wakeup moment takes place, where the more dependent party recognizes its situation and fears the potential drawbacks of BSD, such as inflexibility, inertia or opportunism (Joshi & Arnold, 1998; Sezen & Yilmaz, 2007). In turn, this wake-up moment triggers a defense reaction, in which the dependent party tries to balance out its relationship with the more powerful opponent (Emerson, 1962). Nevertheless, a continuation of the BSR is more likely than relationship termination, given that dependence situations describe, by definition, the 145

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superiority of the relationship, as opposed to alternative relations (Anderson & Narus, 1990). However, the weaker partner continues to fear the negative consequences of its dependency and will thus try to achieve a balanced state. This is the trigger for the realignment phase, which serves as a period during which the form of exchange is restarted after being rearranged. This realignment affects the trust level of both partners because potential fears and hidden agendas can be cleared up (L5, 2016; T2, 2016). This leveling of the playing field turns the dependence relation from a potential threat into a potential source for further integration, efficiency generation and thus competitive advantage (L2, 2016; T1, 2016). Hence, the leverage phase describes the recognition of both partners to use their dependent BSR as a shared approach to foster their individual businesses and realize their goals. Summing up, this BSD phase model describes a starting point, followed by a dependence growth phase, a turning and a reorganization of the exchange, before BSD continues to increase as part of a strategic relationship. On a more abstract level, these phases can also be regarded as two repeating sequences of metaphases called dependence buildup (formation and realignment phase) and extension (stabilization and leverage phase), which are separated by the wake-up and defense phase. Looking even further ahead, the phase model suggests intervals between these metaphases with an increasing dependence level to be entered after each sequence, as indicated by the TexCo-Log-Inc. cooperation history. Figure 5.4 illustrates this sequence.

Dependence extensionphase

Dependence buildup-phase

Conflict episode

Figure 5.4: Sequences of dependence buildup, dependence extension, and conflict.

5.5.2. Towards a model on driving forces of BSD development The presented phases of BSD suggest one potential development in dependence relations over time. While these have depicted isolated phases so far, it is necessary to shed light on the transition between a single phase and its successive phase. The influences that trigger the shift from one BSD development stage to the next provide insights to drivers 146

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

that influence dependence dynamics in general, while highlighting the sequence in which single components of the dependence construct foster development over time. The dependence formation phase is characterized by an overall low dependence magnitude of an asymmetric relationship, which favors the supplier, and a rudimentary relational level. Although minor in terms of intensity, the dependence between buyer and supplier has already formed. This remains without further notice, as the challenging business environment demands the buyer’s attention, while the positive perception towards the supplier regarding necessary resources is reassuring. Due to reasons of procedural and economic efficiency, an extension of the outsourcing relation mandates a focus on core activities (Razzaque & Sheng, 1998), as well as leads to a stabilization of dependence at a moderate level of intensity. Meanwhile, all this appears in a symmetric fashion, as the supplier relies on the earnings from conducting activities for the buyer. This is supported by an elaboration of the relational level as both a result and a precursor of increased relationship value and switching costs (Van Bruggen et al., 2005; Eggert et al., 2009). However, the increased dependence magnitude causes doubts regarding its vulnerability on the part of the buyer (Lee et al., 2015; Svensson, 2004), who appears to wake up and recognizes the situation that has developed. Fearing potential dependence drawbacks, the buyer defends itself by creating alternative solutions to the incumbent supplier’s input (Emerson, 1962), with the aim of regaining control and flexibility over its operations. This lowers the dependence magnitude again and threatens the supplier’s business. In response, the supplier has to secure its exchange with the buyer. On the one hand, this is carried out by lobbying the buyer and pointing out switching barriers (Pfeffer & Salancik, 2003), which have formed in the formation and stabilization phases. On the other hand, there is an aim to regain control over the BSR whereby the buyer builds up trust regarding its offerings, which in turn strengthens the damaged relational level. In the specific case of this paper, e.g., this is done in the form of introducing a transparent open-book accounting, which takes account of the buyer’s fear about paying too much to its supplier (Alenius et al., 2015). This assurance and rebuilding of relationalism provide an opportunity to realign the BSR for the now dependence-aware buyer. The realignment phase thus results, once again, in the strengthening of the relationship value and switching costs by putting both partners back at eye level. Regaining a symmetric relation prepares the ground for a more successful interaction (Chicksand, 2015). Both partners are now aware of their dependence relation, which, by definition, involves the lack of better alternatives compared to the existing relation. This shifts the understanding of buyer and supplier towards BSD as a way of achieving competitive advantages by mutually complementing and integrating activities of the two focused and specialized parties. Once this perception has changed, both partners strive for leveraging their dependence with an increased intention to cooperate in the future (Andaleeb, 1995).

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Based on this five-phase development model driving forces can be detected, which expedite the dependence development from phase to phase. Thus, the environment, mutual interaction, simultaneous realization and resistance towards the situation, the appeasement and assurance between the partners, and the balanced integration trigger the transitions towards subsequent dependence phases (see Figure 5.5). More specifically, the environment is a driving force, as the pace of development demands the full attention and resource efforts of the buyer. The mutual interaction describes the combined necessary and reciprocal actions that have to be taken in order to quickly manage the changing situation from an operational perspective. Realization describes the sudden understanding of the as-yet evolved situation by the buying firm, whereas resistance describes the subsequent reaction of the cumulative measures taken in order to overcome this particular dependence situation. Furthermore, appeasement and assurance describe the mutual collective measures of buyer and supplier, which are taken to calm down the situation and allow the parties to jointly look ahead. The result of this reaction is balanced integration, which describes the consistent use of the dependence relation as a basis for future development by mutually creating efficiencies.

5.6. Discussion This study aimed to uncover the development of dependence in a BSR over time. By examining a logistics service relationship in the textile retailing industry, it has been possible to create a phase model for dependence development. Thus, it is proposed that dependence can develop during the formation and stabilization phase, followed by the wakeup and defense phase, before experiencing a realignment and leverage phase. Moreover, this study revealed the driving forces that trigger the phase transitions. Hence, the environment and mutual interaction, the realization and resistance of one partner, appeasement and assurance initiatives, and balanced integration drive development in this context. Comparing these results with those in the extant literature leads to the following conclusions: First, the linear development of dependence, as indicated in the extant literature (see 5.2.2.), differs from the derived phase model. Although increasing dependence exists in the formation and stabilization phase, the dependence magnitude decreases in the wake-up and defense phase, before increasing once again in the realignment phase. This nonlinear dependence progression is reasonable, given that the extant literature, e.g., points to conflicts resulting from diverging dependence perceptions between buyer and supplier (Zhou et al., 2007). In turn, it is recommended to counteract dependence as soon as it is perceived (Casciaro & Piskorski, 2005). Hence, the phase model could serve as a basis for further discussions on dependence pathways in future research.

148

Dependence Magnitude

DEPENDENCE IN BUYER-SUPPLIER RELATIONSHIPS

Balanced integration

Environment & interaction

Stabilized BSD

Basic BSD Formation

Stabilization

Realization & resistance

Opposed BSD Wake-up & defense

Powerful BSD

Adjusted BSD

Appeasement & assurance

Realignmentt

Leverage Asymmetry Symmetry

Figure 5.5: Driving forces that trigger dependence phases

Second, the increase in dependence during the five phases can be differentiated in more detail. While prior studies point to a general dependence increase (Dwyer et al., 1987; Terawatanavong et al., 2007), this study differentiates between specific increases within the dependence construct. Thus, the BSR in question indicates that switching cost dependence rises first, while relationship value dependence contributes to an increase in dependence at an even higher level. Furthermore, the case study in this thesis points to the requirements of an elaborated relational dimension, which must be satisfied in order to enter the higher level of dependence magnitude. While switching cost dependence is on a mostly constant level, the high magnitude of dependence is only reached with the joint manifestation of a developed relational dimension. This is in line with extant findings on e.g., relationalism (e.g., Simpson & Paul, 1994), trust (e.g., Izquierdo & Cillán, 2004; Laaksonen et al., 2008), and norms or long-term orientation (Petersen et al., 2008; Provan & Gassenheimer, 1994) as drivers of dependence intensity. Among these, Table 5.4 highlights that a specific form of competence trust acts as a ‘door opener’ for the relationalism dimension to evolve. At the start of the relationship, as well as after the wake-up phase, competence trust is initially present, before the relational dimension develops further to finally impact the dependence magnitude, which is in turn increased by an enhanced relationship value.

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Third, shifts in dependence symmetry and asymmetry have been observed, which can be interpreted as both the result and the driver of action and reaction over time, since each actor tries to balance out asymmetric dependencies. These competitive moves, consisting of one action-reaction sequence over time, increases the dependence level between buyer and supplier and resembles a spiraling effect. Fourth, the phase model can alternatively be seen as the reiteration of formation and stabilization patterns at different intensity levels, separated by conflicting episodes. Thus, TexCo and Log-Inc. experienced two phases (formation and realignment) in which dependence was built up (again), followed by two phases (stabilization and leverage) in which the dependence subsequently increased. Taken together, these two metaphases of dependence adjustment and extension appear twice, along with a conflicting episode as a separating element. This three-step circular interplay also makes clear that the dynamics in dependence do not equate to the stage of the entire BSR on its development path, as this interplay can be active in early relationship stages (formation and stabilization), as well as in late relationship stages (realignment and leverage), thus being detached from the overall BSR evolution. Fifth, the suggested dependence drivers in Chapter 5.2 contribute to this field of study by integrating drivers of dependence, which have so far been examined in isolation. While interaction has been introduced as a dependence driver (Barnes et al., 2005), resistance has been recommended for counteracting dependence (Emerson, 1962; Pfeffer & Salancik, 2003). Besides, connections with appeasement can be found in discussions on commitment (Huo et al., 2015), whereas references to assurance can be found with regard to the buildup of relational norms (Joshi & Arnold, 1998). The aforementioned studies have also advocated putting a dependent BSR back on track. Lastly, there is support in the literature for the balanced integration driver in terms of the effect of cooperative behavior (Kim & Wemmerlöv, 2015; Razzaque & Boon, 2003) and integration (Pennings et al., 1984; Vijayasarathy, 2010; Zhang & Huo, 2013) on dependence situations. Sixth, this study adds to the extant literature by proposing that thriving market conditions in the environment of a buyer support BSD. Such conditions require the buyer’s full attention and resource efforts, while the supplier can provide productive support by taking over necessary tasks. Finally, this study emphasizes the noteworthy and decisive role of boundary-spanning managers in dependence relationships. The present case thus indicates their potential to both draw down and move up dependencies either to a negative or to a positive state. This also points to a hierarchy within the introduced dependence components (Chapter 5.2.1), in which switching costs and competence trust building are at the basic level. On top of that, relationalism, as pursued by boundary spanners, moves BSD to a higher level. In the

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case of conflict, BSD falls back to the basic level, which consists of switching cost dependence. These insights could provide starting points for future research on prevailing mechanisms within and hierarchies among the single components of BSD. This paper also proposes a nonlinear perspective regarding dependence developments consisting of ever-repeating intervals that drive a relationship (Ring & Van De Ven, 1994). Similarly, the wakeup and defense phase is an interesting turning point in this case, which could inspire future exploration of management conflicts under dependence conditions. An examination of boundary spanner roles, whether played by individuals or cross-company teams, in shaping dependences would be especially productive. However, this study does not come without limitations, which are specifically relevant, as the present paper should be considered as a working paper. In particular, this study is limited in its examination of a single case, which prevents any claims to generalization. Nevertheless, the observed processes justify the discussion of the depicted development by their very existence. Furthermore, this study is limited by its specific context. The fastchanging textile market serves as an ideal case setting for this paper’s research question. However, it may be worthwhile carrying out a similar study in a contrasting environment. In particular, BSRs that inherently carry potential for lasting long time, such as productservice based exchange relations (Ulaga & Reinartz, 2011), provide an ideal context to examine dependence developments over time due to their enhanced degree of partner interconnections. Finally, the ongoing BSR between TexCo and Log-Inc. limits this study, which in turn justifies the work-in-progress status of this paper. Future developments could incur further dependence shifts or level out the depicted episodes in this paper in the long run.

5.7. Conclusion Dependence has a key role to play in examining BSRs (Ford, 1980; Jap & Ganesan, 2000) Dependence is also considered to vary across the relationship life cycle in its intensity (Terawatanavong et al., 2007). Although BSRs have been considered as evolving over time (Dwyer et al., 1987; Ford, 1980; Wilson, 1995), the interconnected dependence construct has not been examined in terms of its development in great detail. The current study has addressed this gap in the literature by investigating the logistics service relationship between a textile firm and its LSP across their shared life span of 17 years. By employing a qualitative process approach to the collected primary and secondary data, six relational milestones have been identified. These milestones have been examined according to their dependence characteristics along the dimensions of dependence magnitude, dependence symmetry and relationalism. The distinct manifestations of dependence at the temporary 151

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intersections resulted in the five development phases of dependence formation, stabilization, wake-up and defense, and realignment and leverage. Moreover, this paper aimed to determine the driving forces that foster transition in the course of the respective phases. Factors in the BSR’s environment and interaction, one firm’s realization and resistance, as well as mutual appeasement, assurance, and balanced integration were identified as triggers of dynamic dependence development. These findings have implications for scholars in the respective field. In particular, the presentation of a nonlinear dependence evolution, in combination with insights into the mutual influences and characteristics of single components at a detailed level, within the dependence construct points to directions for future research to follow. In addition, scholars ought to focus on the turning point in the wake-up and defense phase, as well as on the role of boundary spanners in shaping dependence developments. These findings on BSD, however, are not without limitations. Most prominently, the work-in-progress status, single-case approach and specific nature of the empirical context have to be considered. Finally, managerial practitioners could benefit from this study by paying attention to Log-Inc.’s customer management approach towards employing continuous personnel at the company boundary. This enabled Log-Inc. to maintain a minimum trust level and ensure an informational head start with regard to the regularly changing TexCo personnel, which laid the foundations for subsequent dependence development. Moreover, practitioners may want to learn from the wake-up and defense phase and pay attention to the level of dependence in their own BSRs in turbulent times, given that handing over critical resources can lead to weaker situations involving the exchange partner in the future. Lastly, BSR managers should understand that dependence can be positive for the involved actors, given that dependence carries both relationship value and switching cost elements in a symmetrically distributed manner, based on a well-elaborated relational foundation between buyer and supplier.

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6. Conclusion & Outlook BSD is a prevailing topic for both academics and practitioners. Its relevance is mirrored in the uninterrupted high number of publications in the last decades. Besides, managers who are active in BSRs as a supplier or a buyer report on the actuality and meaning of this issue in their daily activities. This thesis set out to contribute to extant research in the field by questioning, based on extant knowledge, which factors and mechanisms lead to BSD and how can characteristic dependence situations be handled best over time. Hence, it first strived for putting the so far disorganized literature streams in relation with each other. Chapter 2 thus contributes by providing a first systematic review of the literature base, presenting the status quo of the field, which consists of dependence sources, forms, effect, mediating influences, perceptions, and management measures. Secondly, it aimed to detect hidden mechanisms leading to dependence and lock-in situation in BSRs which could be empirically identified by the interaction of the driving forces convicing, tying, and complementing in chapter 3. Chapter 3 also contributes to BSD research by employing a qualitative research approach to address the why’s and how’s (Yin, 2009) in dependence relationships in an underrepresented methodological fashion. Third, the thesis approached the contrasting strategic recommendations on coping with BSD by Chapter 4 which presented a conceptual allocation of the four groups of exit, expand, balance, and secure strategies to the specifically derived situations of systemic-, monopolistic-, symbiotic-, governmental-, emotional-, providing-, friendly-, as well as commodity-dependence. Thereby it answers research calls for grounding its arguments on both the relational view and resource-dependence theory (van Weele & van Raaij, 2014). Finally, the thesis suggests a phase-model of BSD development over time to contrast the so far static examinations of the construct. Based on an empirical observation, Chapter 5 proposes dependence to develop from a formation and stabilization phase, before experiencing a wake-up and defense phase, the realignment, and eventually the leverage phase. These insights imply starting points for future research. Thus, BSD scholars would benefit from a behavioral perspective. Chapter 2 highlights that the perceptions on BSD influence the behavior of the involved firms and whether it is seen as a burden or a potential competitive advantage. While first attempts have been done (Gassenheimer, Davis, & Dahlstrom, 1998; Kumar, Scheer, & Steenkamp, 1995; Munksgaard, 2010) this focus area is underrepresented despite its importance for managing dependence relations. This also links to the promising exploration of the role of boundary-spanning employees in dependence relationships. As Chapter 5 points out, the role of the directly interacting boundary managers and their impact on dependent BSRs as well as their impact in mutually shaping the development of BSD appears to be an interesting area of investigation. Lastly, recent © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 T. Mandt, Dependence in Buyer-Supplier Relationships, Edition KWV, https://doi.org/10.1007/978-3-658-24252-7_6

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strategic shifts towards servitization by manufacturers that move away from a pure production focus towards an integrated product-service offering (Ulaga & Reinartz, 2011) provide an interesting area for investigating dependence relationships, as the combination of tangible and intangible resource inputs bears potential for long-term dependencies in BSRs. Although these four studies might fill important literature gaps, the thesis comes along with limitations that have to be considered. Regarding the theoretical embedding, the focus on dependence in vertical, dyadic relationships prevents this study from investigating the also relevant and interesting appearance of dependence in e.g. triadic settings. These gain in importance in managerial practice and present a recommended avenue for future research (Choi & Wu, 2009), for which the insights of this thesis’ might serve as a starting point. Thus, scholars might investigate the validity of the conceptual model on dependence emergence (Chapter 3) in a triad. Besides, it would be interesting to study dependence in horizontal relationships to challenge the insights of this thesis in a distinct relational context. Moreover, the empirical models on dependence emergence (Chapter 3) and dependence development (Chapter 5) focus on third-party logistics relationships in two distinct industrial contexts. Consequently, it might be worth investigating different relationships, such as retail partnerships, or component manufacturing in the future, as these exchanges gain in practical importance recently. Finally, while chapter 3 and chapter 5 make use of single-case studies, enlarging the empirical basis by adding further cases or by statistically testing single influences and mechanisms on a larger scale can validate or adapt the findings. Similarly, a taxonomical investigation might shed light on the occurrence of Chapter four’s conceptual dependence forms and their specific configurations in practice. Finally, this thesis carries implications for managerial practice. First, the final overview of the BSD research landscape as result of Chapter 2 serves as an information base to practitioners on the important influences and potential effects of BSD, which should increase their awareness towards this relevant issue. Second, the thesis emphasizes the importance of maintaining both the necessary skills and knowledge as well as a minimum equipment of necessary resources when outsourcing, purchasing, or distributing goods or services via a partner firm. This limits the probability of entering intense dependence relations and also ensures negotiations on eye-level in long-term cooperations (see Chapter 3). The other way around, the knowledge on dependence emergence provides recommendations on buyers and suppliers on how to strategically shape BSRs, in order to aim at the partner’s dependence to ensure long-term exchange relations. Third, it is argued that BSD is not inherently good or bad as proclaimed by some existing studies. Chapter 4 points to specific situations of dependence that might help practitioners in raising awareness for the multifaceted nature of BSD and it further provides an elaboration of dependence components that might be useful for a self-assessment of individual supply relationships. The suggested strategy recommendations can support managerial decisions accordingly. 158

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Lastly, practitioners can be referred to chapter 5 which highlights the importance of individual actors at the intersection between buyer and supplier. In order to avoid the frequently mentioned negative effects of dependence, such as opportunism (Joshi & Arnold, 1998) or vulnerability (Lee, Mun, & Park, 2015), and to realize the dependence advantages, such as a positive financial impact (Kim & Wemmerlöv, 2015), more effective governance (Gulati & Sytch, 2007), or efficiently integrated processes (Pennings, Hambrick, & MacMillan, 1984), it is essential to install a well-paired and well-functioning boundary-spanning management team across both the buying and supplying firm.

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