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Article Excerpt
Opportunism and relationship continuance are behaviors that express themselves in several different buyer-supplier contexts (Conner and Prahalad, 1996; Morgan et al., 2007; Morgan and Hunt, 1994). How firms manage supplier relationships (e.g., choosing and monitoring suppliers, developing and dissolving relationships) is increasingly critical to firms' operational efficiency, product development, profitability and long-term prosperity, and is becoming a strategic issue in today's business landscape (Chatain and Zemsky, 2007; Dwyer et al., 1987; Good and Evans, 2001; Lee et al., 2007; McIvor et al., 2006). Over the last decade and a half, there have been a number of studies investigating the phenomena of opportunism and relationship continuance (e.g., Heide and John, 1992; Noordewier et al., 1990), but the vast majority of them view the issue from the perspective of the firms, the buyer-supplier dyad (e.g., Morgan et al., 2007; Paulraj and Chen, 2005). To our knowledge, very little work has been done to investigate what role the actual decision-making agents play in influencing opportunism and relationship continuance decisions in the buyer-supplier contexts. These agents may engage in dynamic processes embedded in their exchange relationships such as information exchange and conflict resolutions. Therefore, the agents' behaviors in these processes could make or break the relationships between firms whom the agents represent.
This study departs from the extant buyer-supplier relationship literature by empirically investigating the effects of agents' negotiation characteristics on opportunism and relationship continuance decisions in buyer-supplier relationships. The specific purpose of the study investigates the question, "How do agents' assertiveness and cooperativeness influence the opportunism and the tendency to continue in a buyer-supplier relationship, after controlling for firm-level factors including dependence and relational norms?"
This article is structured as follows. The next section entails a survey of the literature and develops corresponding hypotheses, followed by a description of the experimental design and reporting of the results. The Discussion section contains both general and managerial implications based on our results, and the article concludes with the Limitations and Conclusion section.
LITERATURE REVIEW AND HYPOTHESES
Relational Norms and Dependence
Relational norms may be described as the values shared among exchange partners regarding what is deemed appropriate behavior in a relationship (e.g., Heide and John, 1992).. When buyer-supplier relationships are characterized by high relational norms, exchange parties are more committed (Gundlach et al., 1995) and exhibit a long-term orientation (Ganesan, 1994), thus lowering future negotiation costs (Artz and Norman, 2002). Over the last two decades, closer supply chain relationships exhibited by high relational norms such as trust, collaboration, long-term relationship, and increased information-sharing have evolved in many industries to help firms respond to changes (Droge and Germain, 2000; Hoetker et al., 2007; Monczka et al., 1998; Sengun and Wasti, 2007; Whipple and Frankel, 2000). Relationships with low relational norms are characterized by distributive (Walton and McKersie, 1965) or aggressive (Ganesan, 1993) bargaining behaviors. The use of legal contracts governs these relationships, and aggressive bargaining tactics are used to resolve disagreements. In short, high relational norm relationships may be characterized as partnerial or cooperative, while low relational norm relationships tend to be "arm's length" or competitive.
In the socio-economic literature, Hirschman (1970) and Helper and Sako (1995) use a continuum of firm relationship styles to explain differences between adversarial and partnerial firm relations. The adversarial form of buyer-supplier relationship is called an exit relationship since in the presence of relationship stressors, the tendency to exit the relationship agreement is high. It is often a short-term, competitive, and even coercive (Adler, 1999) relationship where cost reductions and price pressures are the norm. The partnerial form is called a voice relationship since in the presence of relationship stressors, the tendency is to voice and work out differences. The voice relationship is typically characterized by long-term contracts, mutual trust, gain-sharing, and cooperative improvement efforts. The exit relationship would be analogous to the low relational norm case, whereas the voice relationship would be analogous to the high relational norm case.
Dependence can be termed as the cost of replaceability (e.g., Heide and John, 1988). A buyer that expects substantial switching and termination costs in their relationship with a supplier is said to be dependent on that supplier and, in many industries, buyer firms are becoming increasingly more dependent on their suppliers (Lyons et at, 1990), as outsourcing has increasingly become an industry-wide management practice (Espino-Rodriguez and Padron-Robaina, 2006; Narasimhan and Das, 1999). The absence of easily available competing suppliers in the external environment (Pfeffer and Salancik, 1978) and the existence of relationship-specific asset investments (Williamson, 1985) were therefore included in this study as key determinants of buyer dependence on their supplier. Buyers who are dependent on their supplier are expected to comply more readily with supplier requests. Social exchange theory (Thibaut and Kelley, 1959) teaches that parties choose to become dependent on their partners when the perception exists that the benefits resulting from asset investments outweigh the costs of vulnerability, or opportunism. The benefits from these investments are often realized in the long run while the costs are incurred in the near-term. To decrease risks associated with dependence, some buyers include contract provisions to ensure the timely supply of materials and parts even when the relationship with a supplier defaults (Lyons et al., 1990).
Whereas dependence makes relational continuity a valued outcome, relational norms facilitate the achievement of this outcome (Joshi and Arnold, 1998) and the level of relational norms existing in a buyer-supplier relationship tends to moderate the effect of dependence on opportunism (Joshi and Arnold, 1997). Due to their potential impacts on opportunism and relationship continuance, relational norms and dependence (firm-level factors) are control variables in this study, allowing us to investigate their impacts in relation to those of assertiveness and cooperativeness (agent-level factors).
Opportunism
In a buyer-supplier dyad, opportunistic behavior is displayed when one firm behaves unilaterally for its own benefit (Conner and Prahalad, 1996; Morgan et al., 2007). Opportunism can take the form of leaving an existing relationship or of lies and exaggerations that strain relations during negotiations between decision-making agents within the firms. Also, it is nigh impossible for a buyer to distinguish whether a supplier may behave opportunistically until a contract is in place since suppliers will most likely behave as if they are non-opportunistic during the pre-contract stage of the relationship (Lonsdale, 2001). To effectively structure different governance modes in order to prevent opportunism in a buyer-supplier relationship continues to represent a critical challenge for any firm (Wuyts and Geyskens, 2005; Pilling and Zhang, 1992). In a traditional adversarial contract relationship, the tendency for opportunism is greater than in a longer-term, trust-based partnerial relationship. Transaction cost economics and the resource-based view of the firm both espouse that buyers and suppliers that have invested in relationship-specific investments and share specific assets--characteristics of a partnerial relationship--are less likely to act opportunistically (e.g., Williamson, 1985; Conner and Prahalad, 1996).
As explained earlier, high relational norm relationships are characterized by parties that are committed (Gundlach et al., 1995) and demonstrate a long-term orientation (Ganesan, 1994). As a result, the partners in the relationship are confident that their actions will not be opportunistically abused (Heide and John, 1992). By providing a generalized safeguard against partner opportunism (Heide and John, 1992), relational norms make parties more willing to engage in actions that result in relationship continuity. Also, in the high relational norm relationship, the expectation is that it is appropriate for exchange partners to work in the best interest of the relationship and that it is inappropriate for them to make moves that secure only unilateral gains (Gundlach et al., 1995).
Relationship Continuance
Relationship continuance in the buyer-supplier dyad can be described as the intention of both firms to keep the relationship ongoing, in spite of the presence of stressors in the relationship. For example, if a buyer is not greatly dependent on a particular supplier to continue providing parts, the likelihood of continuing a working relationship with that supplier is less than the case when the buyer is desperately in need of the supplier's product or service. If the buying firm has legitimate alternatives in the supply base to...
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