The role of agent negotiation behaviors in buyer-supplier relationships.
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).
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 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 do business with, but opts to keep doing business with its incumbent supplier, then the intention to continue the relationship is very likely.
Research has shown that expectation of continuance in buyer-supplier relationships is strong when there are shared values between the exchange partners regarding what constitutes appropriate behavior in the relationship (Morgan and Hunt, 1994). It has been argued that the presence of relational norms increases the expectancy of relationship continuity (Joshi and Arnold, 1998). These norms can take on relevant dimensions such as flexibility, information exchange, and solidarity, to name a few (Heide and John, 1992). Under conditions of high relational norms, buying firms have a high expectation of relationship continuity, while under low relational norms, buying firms have a low expectation (Joshi and Arnold, 1998). Also, evidence has shown that in some buyer-supplier relationships, the effect of trust is a deterrent to relationship dissolution and facilitates relationship continuance (Gassenheimer and Manolis, 2001; Helper and Sako, 1995). If firm relationships are characterized by thin relational networks, mutual lack of knowledge, and weak interdependence between firms, the relationships tend to be fragile and dissolvable when exposed to changes in supply and demand (Hallen and Johanson, 2004).
Assertiveness and Cooperativeness in Managerial Decision-making
Wilmot and Hocker (2001) base negotiation, or conflict management, strategies on a two-dimensional framework: assertiveness and cooperativeness. They base this framework on the five different negotiation strategies provided by Kilmann and Thomas (1975)--avoidance, accommodation, collaboration, competition, and compromise. According to Wilmot and Hocker (2001), assertiveness is required when there exists a tendency of concern for oneself and cooperativeness is required in the presence of concern for others. The greater the concern for self, the greater the individual's assertiveness tendency, whereas the greater the concern for others, the greater the individual's cooperativeness tendency. Using Kilmann and Thomas' (1975) negotiation strategies, a high level of assertiveness would be exhibited by an individual engaged in competition and collaboration strategies and a low level of assertiveness would be exhibited by an individual engaged in accommodation and avoidance strategies. Also, a high level of cooperativeness would be exhibited by an individual engaged in collaboration and accommodation strategies and a low level of cooperativeness would be exhibited by an individual engaged in competition and avoidance strategies.
In our experiment, four of the five negotiation strategies, except for the compromise strategy, are collapsed into the two categories of assertiveness and cooperativeness. We did not include the compromise strategy in the formulation of the assertiveness and cooperativeness score since it lies in the middle of the assertiveness and cooperativeness scale, yielding a neutral effect (Wilmot and Hocker, 2001). The tendencies of an individual's assertiveness and cooperativeness can be estimated by the following formula proposed by Volkema and Bergmann (1995).
Assertiveness = (competition + collaboration) - (avoidance + accommodation)
Cooperativeness = (collaboration + accommodation) - (competition + avoidance)
As explained above, much of the existing buyer-supplier literature explores the phenomena of opportunism and relationship continuance from the perspective of the firm (Heide and John, 1992; Morgan and Hunt, 1994; Noordewier et al., 1990). It is our premise that with such far-reaching consequences that affect the viability of any existing buyer-supplier arrangement, the role of the agents involved with making such decisions cannot be ignored since managers working within the buyer and supplier firms often act as decision-making agents with regards to a number of supply chain functions--purchasing, parts procurement, contract negotiations, etc. The effects of these agents' negotiation characteristics (e.g., assertiveness and cooperativeness) need to be considered since they may influence supply chain decisions.
We contend that decision-making agents with high degrees of assertiveness who are mainly concerned for themselves are more likely to engage in opportunistic behaviors in the buyer-supplier relationship to ensure that their wants and needs will be fulfilled. On the other hand, those with high degrees of cooperativeness who are concerned for others and focus more on mutual benefits of both parties are less likely to engage in opportunistic behaviors in the firm relationship. In other words, agents' characteristics of assertiveness and cooperativeness can still influence opportunism, despite the dependence and relational norms in buyer-supplier relationships. This argument leads to the following hypotheses.
Hypothesis 1: The assertiveness of the decision-making agent has a positive effect on opportunism in the buyer-supplier relationship when controlling for dependence and relational norms in the buyer-supplier relationship.
Hypothesis 2: The cooperativeness of the decision-making agent has a negative effect on opportunism in the buyer-supplier relationship when controlling for dependence and relational norms in the buyer-supplier relationship.
However, when it comes to the critical decision of relationship continuance--whether the firm should continue the exchange relationship with the current supplier--the agent may rationally make the decision based on the degree to which the firm depends on the supplier and the strength of the relational ties between the two parties. The relationship cannot continue if either firm is unwilling to support the relationship, and the willingness to even do so can be contingent upon the strength of the existing relationship as well as the degree of dependence of one firm on the other. Also, for a buyer-supplier relationship to even come into existence, firm-level policies and procedures need to be put in place to act as mechanisms supporting the relationship. Opportunism, on the other hand, can take place when an individual agent decides to act selfishly for profit or gain. Thus, opportunistic behaviors can be more directly influenced at the individual agent level by an agent's personality characteristics as opposed to relationship continuation decisions that may be primarily influenced by firm-level criteria. Based on this notion, we therefore contend that dependence and relational norms supersede the agents' behavioral characteristics of assertiveness and cooperativeness in affecting the relationship continuance decision. This reasoning suggests the following hypotheses.
Hypothesis 3: The Assertiveness of the decisionmaking agent has no significant effect on relationship continuance when controlling for dependence and relational norms in the buyer-supplier relationship.
Hypothesis 4: The Cooperativeness of the decisionmaking agent has no significant effect on relationship continuance when controlling far dependence and relational norms in the buyer-supplier relationship.
Subjects and Experimental Design
To test our proposed hypotheses, we conducted a scenario-based experiment, which is commonly used in management research (e.g., Florey and Harrison, 2000; Stecher and Rosse, 2005). The subjects in our experiments were originally 300 students, but five did not complete the survey and were excluded from the study. The final sample was 295 students (55% male and 45% female; 78% Caucasian students and 22% non-Caucasian students), 61% and 39% of which were from a Midwestern university in an urban setting and a rural Mid-Atlantic university in the U.S., respectively. In addition, 46% of the students had at least five years of work experience (either part-time or full-time). The sample characteristics are summarized in Table 1.
We used the validated buyer-supplier relationship scenario from Joshi and Arnold's (1998) study. As commonly practiced in experimental research (e.g., Carey and Kacmar, 2003; Joshi and Arnold, 1998), we randomly assigned subjects into four groups based on a two-by-two experimental design of low versus high relational norms and low versus high dependence. The subjects read a short business case verbatim, taken from the validated scenario created by Joshi and Arnold (1998). Subjects were asked to assume the role of a manager at a midsize electronic equipment manufacturer responsible for the purchase of microchips from a partnering supplier. The subjects were provided with information that the microchip supply could potentially be disrupted by labor disputes, a problem that could endanger the delivery of product to customers. After reading the scenario, subjects were asked to rate the nature of their reaction in terms of their opportunism toward the supplier and their intention to stay in the relationship. All respondents were given identical introduction and conclusion sections of the scenario, but received different manipulation materials pertaining to relational norms and dependence based on which group they were assigned to (see Appendix A for the full description of the scenario).
The manipulation checks were successfully performed and two-tailed t-tests indicated that (1) the average rating on the manipulation check item ("I personally feel that my company is highly dependent on the supplier") of subjects in High Dependence groups (mean = 5.69; 1 = Strongly Disagree, 7 = Strongly Agree) was statistically different from that of participants in the Low Dependence groups (mean = 3.64) at p < .001 level and (2) the average rating on the manipulation check item ("I personally feel that my company has an informal, close, cooperative relationship with the supplier") of subjects in High Relational Norms groups (mean = 5.64) was statistically different from that of participations in Low Relational Norms groups (mean = 3.08) at p < .001 level.
Dependent Variables. Our dependent variables were Opportunism and Relationship Continuance. We used Joshi and Arnold's (1998) validated three-item opportunism scale and three-item intention-to-continue scale to measure opportunism and relationship continuance, respectively (see Appendix B). Subjects responded to each questionnaire item using a 1-7 scale (i.e., 1 = Strongly Disagree and 7 = Strongly Agree). Principal Component Analysis (PCA) showed that the three items of opportunism were highly correlated and loaded onto a single component with an extracted variance of 66.56% and a Cronbach's alpha of 0.74. Therefore, they were combined into a single component measure. Similarly, the three items of relationship continuance were highly correlated and loaded onto a single component with an extracted variance of 80.15% and a Cronbach's alpha of 0.87. This was later used as a single component measure of relationship continuance in this study.
Independent Variables. Our independent variables were Assertiveness and Cooperativeness. We used the 16-item conflict management instrument modified from the Thomas-Kilmann Conflict Mode Instrument (Kilmann and Thomas, 1977). The original Thomas-Kilmann instrument was not suitable for the current study due to its length and the time limitations in our experiment. Consistent with the Thomas-Kilmann instrument, the 16 items were organized into four groups (with four items per group; see Appendix C), reflecting four related concepts--avoidance, accommodation, collaboration, and competition--which collectively determine the degrees of assertiveness and cooperativeness of individuals. After subjects responded to each questionnaire item using a 1-7 rating system, we computed the summed scores of avoidance, accommodation, collaboration, and competition based on their responses to the items in those four groups. Based on Volkema and Bergmann's (1995) formula (see above Literature Review), we then computed the scores of assertiveness and cooperativeness.
Control Variables. Our control variables were Dependence, Relational Norms, Subjects' Academic Major, Campus, Age, Ethnicity, Work Experience, and Gender. Since the main thrust of the study was to investigate the effects of agent-level factors (i.e., assertiveness and cooperativeness) on opportunism and relationship continuance in buyer-supplier relationship contexts, we controlled for dependence and relational norms, both of which were measured through experimental manipulations. High and low dependence conditions were coded as 1 and 0, respectively. Similarly, high and low relational norms conditions were coded as 1 and 0, respectively. We also controlled for other variables, including: (1) subjects' academic major: soft business majors--marketing and management--coded as 1 and hard (quantitative) business majors--finance, accounting and economics--coded as 0, (2) campus: 1 for urban campus and 0 for rural campus, (3) age divided into 6 ordinal groups below 20, 21-24, 25-29, 30-39, 40-49, and 50 years and above, coded as 1, 2, 3, 4, 5, and 6, respectively, (4) ethnicity, simply categorized into Caucasian and non-Cancasian and coded as 1 and 0, respectively, (5) years of work experience, which was kept as a continuous variable, and (6) gender: male coded as 1 and female coded as 0.
We used two separate regression models to test our hypotheses. The first model examines the effects of agents' Assertiveness and Cooperativeness on Opportunism after controlling for Dependence, Relational Norms and other control variables (Hypotheses 1 and 2). The second model investigates the effects of agents' Assertiveness and Cooperativeness on Relationship Continuance after controlling for Dependence and Relational Norms and other control variables (Hypotheses 3 and 4). The regression models are as follows.
Model 1: Opportunism = constant + [b.sub.1] Assertiveness + [b.sub.2] Cooperativeness + [b.sub.3] Dependence + [b.sub.4] Relational Norms + [b.sub.5] (Dependence x Relational Norms) + [b.sub.6] Soft Business Major + [b.sub.7] Campus + [b.sub.8] Age + [b.sub.9] Ethnicity + [b.sub.10] Managerial Experience + errors.
Model 2: Continuance = constant + [b.sub.1] Assertiveness + [b.sub.2] Cooperativeness + [b.sub.3] Dependence + [b.sub.4] Relational Norms + [b.sub.5] (Dependence x Relational Norms) + [b.sub.6] Soft Business Major + [b.sub.7] Campus + [b.sub.8] Age + [b.sub.9] Ethnicitv + [b.sub.10] Managerial Experience + errors.
DATA ANALYSIS AND RESULTS
We began the data analysis by performing correlation analyses. The correlations indicate that there are some significant associations among our control variables. Subjects' Age had a significant negative association with Soft Business Majors (e.g., management and marketing) (coeff. = -0.17, p < .01), and had a significant positive association with Campus (coeff. = 0.17, p < .01), with the majority of the older student subjects coming from the urban commuter campus. Ethnicity had a significant negative association with Campus (coeff. = -0.19, p < .001), implying greater non-Caucasian representation among the student subjects at the urban campus. Work Experience had a very strong significant positive association with Age (coeff. = 0.76, p < .001); older student subjects generally possessed greater work experience on their jobs. With regards to agent characteristics, Cooperativeness had a significant negative association with Assertiveness (coeff. = 0.14, p < .05), implying that among the respondents, those who reported a higher degree of cooperativeness tended also to report a lower degree of assertiveness. However, Variance Inflation Factors did not indicate multicollinearity problems among them. Thus, the underlying assumptions of multiple regression analysis were not violated.
Table 2 displays multiple regression results with Opportunism and Continuance as dependent variables. Model A1 tested the effects of agent-level factors: Assertiveness and Cooperativeness on Opportunism in the buyer-supplier relationship (Hypotheses 1 and 2). Results of the Full Model A1 in Table 2 indicate that after controlling for Dependence, Relational Norms, Major, Campus, Age, Ethnicity, Work Experience, and Gender, agent Cooperativeness was negatively associated with Opportunism in the buyer-supplier relationship (p < .001), whereas agent Assertiveness was not significantly related to Opportunism. These results yield support for Hypothesis 2 but not Hypothesis 1. The incremental R" for Model A1 was also significant (p < .01), whereby agent-level factors, Assertiveness and Cooperativeness, improved the total explained variation in Opportunism by 75% (8% [R.sup.2] in Control Model A1 versus 14% [R.sup.2] in Full Model A1). This provides support for our overall argument that agent-level factors, Cooperativeness and Assertiveness, matter in buyer supplier relationships even after taking organization-level factors, Dependence and Relational Norms, into consideration. In addition, we found that Ethnicity had a significant negative relationship with Opportunism (p < .05).
Model A2 was used to test the effects of Assertiveness and Cooperativeness (agent-level factors) on Relationship Continuance (Hypotheses 3 and 4). Results of Full Model A2 in Table 2 indicate that both agent Assertiveness and Cooperativeness were not significantly related to Relationship Continuance, whereas Dependence and Relational Norms were positively related to Relationship Continuance (p < .001). These results provide support for Hypotheses 3 and 4. We also found that Gender had a positively significant relationship with Relationship Continuance (p < .05).
Since the results in Table 2 showed that agent-level factors, Cooperativeness and Assertiveness, could significantly increase the explained variance in Opportunism, we performed four additional regression analyses to explore whether the effects of such agent-level factors on opportunism vary across four different Dependence-Relational Norms conditions: (1) Low Dependence--Low Relational Norms, (2) High Dependence --High Relational Norms, (3) Low Dependence--High Relational Norms, and (4) High Dependence--Low Relational Norms, using regression Models 1B, 2B, 3B and 4B in Table 3, respectively. The sample was divided into four sub-samples according to the Dependence-Relational Norms conditions. Then, the data from four sub-samples were analyzed, based on those four regression models.
We found that in Model B1 (Low Dependence--Low Relational Norms), agent Cooperativeness was negatively related to Opportunism with p < .001, whereas agent Assertiveness was not significantly related to Opportunism. This implies that the greater the cooperativeness of the agents, the less likely opportunism would occur in this circumstance. In Model B2 (High Dependence--High Relational Norms), agent Assertiveness and Cooperativeness were not significantly associated with Opportunism. This indicates that in this particular context, factors other than the agent's negotiation characteristics may play a part in influencing opportunistic behaviors. Interestingly, in Model B3 (Low Dependence--High Relational Norms), agent Assertiveness was positively related to Opportunism with p < .10, while agent Cooperativeness was not significantly related to Opportunism, implying that in a strong voice buyer-supplier partnership with low dependence, any show of opportunism could be partially explained by the assertiveness of the decision-making agent. Finally, in Model B4 (High Dependence-Low Relational Norms), agent Cooperativeness had a significant negative relationship with Opportunism (p < .01), while agent Assertiveness did not. This could indicate that the less cooperative the decision-making agent, the greater the chance of opportunistic behaviors in this context. In sum, the results of this exploratory study indicate that the effects of agent Cooperativeness and Assertiveness on Opportunism appeared to differ in different Dependence-Relational Norms conditions.
The Role of Agents in Opportunism.
The current results show that agent level factors do matter in buyer-supplier relationships. Specifically, co-operativeness of the agents can restrain opportunism in exchange relationships. While the extant literature suggests that developing relational norms and managing dependency are critical to successful buyer-supplier relationships (Heide and John, 1992; Morgan and Hunt, 1994), this study also shows that choosing agents who are cooperative in nature and self-governed from opportunism cannot be ignored since opportunism can undermine the long-term viability of the relationships. By filling the void of agent-level factors in previous research, this study makes a modest contribution to the buyer-supplier relationship literature.
Cooperativeness-Relational Norms Interaction Effects on Opportunism. Exploratory results of our study seem to suggest interaction effects between Relational Norms and agent Cooperativeness on Opportunism. As seen in Table 3, agent Cooperativeness has a significantly strong influence on Opportunism in the Low Relational Norms cases (Models B1 and B4), but not in the High Relational Norms cases (Models B2 and B3). This implies that when relational norms are lacking between constituents in a supply chain (i.e., Low Relational Norms scenarios), the greater the influence the cooperativeness of the decision-making agent plays in restraining opportunism occurrences. On the other hand, when relational norms are strong, the norms may constrain agent behaviors. The agents with strong predispositions toward opportunism may be reluctant to act opportunistically. Similarly, agents who are indeed cooperative in nature may feel compelled to act according to the norms rather than their own conscience. Therefore, the personal cooperativeness of the agents may not exert influence in the strong relational norms cases. In short, our research provides only preliminary evidence that agent-level cooperativeness and firm-level relational norms could potentially interact with each other in influencing opportunism. However, further a priori hypothesis-testing research is still needed to systematically investigate this.
Betrayal of Those Who Trust You. Other exploratory insights can be found when we observe Model B3 in Table 3, the Low Dependence--High Relational Norms case. Here, the buying firm has little dependence on the supplier, yet has a well-established business relationship with the supplier. This provides a recipe for buyer opportunism to occur. This is analogous to the notion that it is always easier to succeed in betraying or deceiving those who already trust you. If the decision-making agent of the buying firm is very assertive and knows that the supplier respects the established relationship and is likely to accommodate requests from the buyer, then he or she may take advantage of this situation. We see in Table 3 that Assertiveness is significantly related to Opportunism in the Low Dependence--High Relational Norms case. The agent shows some significant Opportunism, but at the 0.10 level. While this is barely significant, it is significant enough that to ignore it may understate the chance of abuse and opportunism, and thus increase the chance of a Type II error.
On the contrary, in the High Dependence cases (Models B2 and B4 in Table 3), it is possible that there is little room for the agent to act opportunistically. When the buyer is highly dependent upon its supplier, there is no incentive for buyer agents to act opportunistically since they depend on the supplier. Even when relational norms are low, the buyer may not know how the supplier will react because they are not familiar with one another. The supplier's response or retaliation to the opportunistic behaviors may thus be unpredictable and could adversely affect the buyer's business viability in such a high dependence context. Contrastingly, in the Low Dependence cases (Models B1 and B3 in Table 3), the buyer may act more opportunistically than in the High Dependence cases. In sum, when agents are highly assertive and when the buying firm's dependence upon the supplier is low, there is little check to opportunistic behaviors, even when the norms of the relationship are strongly established. Although this is an interesting exploratory result, more formalized a priori hypothesis testing will need to be performed to gain further insight.
Demographic Factors. Our findings in Table 2 also suggest that some demographic variables may impact the dynamics in buyer-supplier relationships. Specifically, we found that Ethnicity was significantly related to Opportunism while Gender was significantly related to Relationship Continuance. This may imply that idiosyncratic differences in ethnic groups and gender diversity in part shape the likelihood of decision-making agents to act opportunistically and to maintain the existing exchange relationships, respectively. These findings are in line with a broader-spectrum of the gender and diversity literature, which suggests that certain behaviors (e.g., leadership, technology acceptance) differ with gender and ethnicity (e.g., Eagly and Johnson, 1990; Venkatesh and Morris, 2000).
The findings of this study suggest that agent-level factors play an important role in buyer-supplier relationships and have managerial implications pertaining to various phases in the relationship development process (e.g., Dwyer et al., 1987). First, in selecting exchange partners (buyers or suppliers) during the relationship awareness and exploration phases, firms should incorporate the characteristics of the agents who will represent the partner companies as part of their selection criteria. When a firm considers partnering with another firm in a supply chain, several criteria such as price, quality, proximity, and reputation may be used to aid in the choice (Reid and Sanders, 2005; Swift and Gruben, 2000). However, many of these are firm-level considerations. Our results indicate that other criteria such as agent characteristics should also be considered. A firm looking for a supply chain partner should be wary in choosing a company that possesses only adequate organizational-level criteria but has an uncooperative or overly assertive agent representing their business. The agent should thus be considered in the selection decision.
A second implication is relevant to the relationship expansion and commitment phases. When firms conduct business in an existing buyer-supplier relationship, each firm should carefully monitor the personnel turnover of the agents in the partner company. In today's business landscape, personnel turnover either through corporate restructuring or through voluntary career movement and attrition is not uncommon. When an agent quits or is eliminated from his or her job, a new agent is put in place. A change in agent may change the degree of relational risk associated with potential opportunism. Therefore, agent turnover may signal the need for change in governance or safeguard mechanisms to help the partnering firm adapt to the business behaviors of the new agent or vice versa.
That being said, we acknowledge that implementing the above recommendations lend themselves more easily to some industry scenarios than others. For example, many industries such as today's automotive, computer, and aerospace industries are experiencing massive supply base reductions to simplify the managing of multiple suppliers and to develop more closely-knit supply networks. This facilitates the creation of established working relationships between several purchasing and procurement agents in the supply base, making it easier for the buyer to consider agent-level characteristics in their supplier selection decisions. Also, certain firm policies and procedures can be created (such as a balanced scorecard concept for helping to evaluate agent characteristics) to aid front-line personnel in making objective decisions based on selective criteria. Implementing protocols and rubrics for supplier selection criteria can also aid in the decision making, and the practice of monitoring agent turnover within key suppliers can be developed by buyer firms to facilitate proper evaluation of supplier companies and their agents.
Finally, in some cases, firms are moving toward the dissolution phase in which the buyer-supplier relationship is strained and about to be terminated for various reasons (i.e., opportunism, unsatisfactory performance, change in business demand, etc.). For firms in this circumstance, our results imply that if the viability of the relationship is undermined by opportunism and the relationship is on the verge of termination, then one consideration may be to change the agent to actually revitalize and resurrect the relationship before the choice of termination is made. Replacing the uncooperative agent who may be acting opportunistically with a new cooperative agent may send the signal to the partnering firm that opportunism problems are recognized and that efforts are being made to solve the problem and to restore mutual trust. This attempt can potentially reignite the willingness of both parties to work together.
Limitations and Future Research
The researchers acknowledge that this study is not without its limitations. First, the use of students from two geographic regions as surrogates for actual purchasing managers presents external validity limitations. Nevertheless, the extant student-manager surrogacy literature does suggest that students appear to exhibit similar decision-making patterns to those of managers in multiple decision-making contexts such as marketing, production and operations, lobbying, and ethical dilemmas (e.g., Corfman and Lehmann, 1994; Potters and van Winden, 2000; Remus, 1986; Wyld and Jones, 1997). Since the decision making in this study was in the purchasing/ buyer-supplier relationship context, which is multifaceted and involves some aspects of marketing, operations and dilemmas regarding opportunism and relationship continuance, student subjects can be used as reasonable surrogates for practicing managers in this study. Future research can address the external validity limitation by replicating the experiment in this study, using manager subjects or subjects from broader geographic regions. Another limitation is that the results are based on a fictitious purchasing scenario. It is not a "real-world" situation involving real-time management decision-making. Although the scenario was validated by Joshi and Arnold (1998), it is still based on role play rather than actual business incidents. To improve realism, future research may empirically derive scenarios from real-world business cases. Finally, some demographic variables in the study (i.e., Ethnicity and Gender) had significant impact on certain aspects of buyer-supplier relationships such as opportunism and relationship continuance, although they were not part of our research question. These demographic variables may collectively improve our understanding of various buyer-supplier relationship phenomena and future research can examine the role of agents' demographics in firm relationship dynamics.
Although this study is not all-inclusive, it sheds light on the role of the agent in buyer-supplier relationships. As explained in the Literature Review above, much of the existing buyer-supplier literature views supply chain decision-making issues such as opportunism and relationship continuance from the perspective of the firm, with the role of the agent often overlooked. However, our study reveals that the characteristics of agents actually do play some part in the buyer-supplier relationship, at least in the case of opportunism. This implies that viewing supply chain decision problems from merely a firm perspective may be too limiting in some situations, particularly when opportunism is of major concern. Future research can further investigate the role of the agent and agent characteristics to provide more insights into their impacts on various aspects of buyer-supplier relationships.
APPENDIX A: SCENARIO AND EXPERIMENTAL MANIPULATIONS Introduction You are a purchasing manager responsible for the purchase of microchips for a midsize electronic equipment manufacturer. Microchips are an important component for the equipment that you manufacture; therefore, they need to be purchased on a regular basis. You have one existing supplier for this component. Low Dependence High Dependence As purchasing manager responsible As purchasing manager responsible for microchips, you find yourself for microchips, you find yourself in a situation wherein it is not in a situation wherein it is difficult for you to find a difficult for you to find a suitable replacement for the suitable replacement for the existing supplier. If you decide existing supplier. If you decide to stop purchasing from this to stop purchasing from this supplier, you could easily supplier, you could not easily replace their volume with replace their volume with purchases from alternative purchases from alternative suppliers. There are many suppliers. There are very few, if competitive suppliers for any, competitive suppliers for microchips and you can switch to microchips and you cannot switch them without incurring any search to them without incurring costs. Switching suppliers is not significant search and going to have any negative verification costs. Switching effects on the quality or design suppliers is also going to have of the equipment that you negative effects on the quality manufacture. Your production or design of the equipment that system can be easily adapted to you manufacture. Your production use components from a new system cannot be easily adapted supplier. The procedures and to use components from a new routines that you have developed supplier. The procedures and are standard and they are equally routines that you have developed applicable with any supplier of are unique and hence they are not this component. The skills that applicable with any other your people have acquired in the supplier of this component. The process of working with the skills that your people have supplier can easily be changed to acquired in the process of fit another supplier's situation. working with the supplier cannot You can therefore terminate your easily be changed to fit another relationship with your present supplier's situation. You cannot supplier without incurring therefore terminate your any costs. relationship with your present supplier without incurring significant costs. Low Relational Norms High Relational Norms Both you and your supplier bring Both you and your supplier bring a formal and contract governed an open and frank orientation to orientation to this relationship. the relationship. Exchange of Exchange of information in this information in this relationship relationship takes place takes place frequently, infrequently, formally, and in informally, and not only accordance to the terms of a according to a pre-specified prespecified agreement. Even if agreement. You keep each other you do know of an event or change informed of any event or change that might affect the other that might affect the other party, you do not divulge this party. Flexibility is a key information to them. Strict characteristic of this adherence to the terms of the relationship. Both sides make original agreement characterizes ongoing adjustments to cope with your relationship with this the changing circumstances. When supplier. Even in the face of some unexpected situation arises, unexpected situations, rather the parties would rather work out than modifying the contract, you a new deal than hold each other adhere to the original terms. You responsible to the original have an "arm's-length" terms. You tend to help each relationship with your supplier. other out in case of unexpected You do not think that the crises. If your supplier is supplier is committed to your unable to fulfill an order, they organization-in fact, you think recommend an alternative source that if you did not carefully of supply for the same. Above monitor this supplier's all, you have a sense that your performance, they would slack off supplier is committed to your from the original terms. Above organization and that they work all, you see your supplier as an with you keeping your best external economic agent with whom interests in mind. You see each you have to bargain in order to other as partners, not rivals. get the best deal for yourself. Conclusion Recently, the supplier informed you that they are involved in a labor dispute. Consequently, they are temporarily unable to guarantee schedule delivery. This creates some uncertainty for your organization. Delayed delivery of microchips, may, for example, cause problems for your organization in meeting delivery schedules to customers. The supplier has called to get your regular order. Drawing from experience, how would you be most likely to react in this situation? Please rate each of these statements to the extent that they match with your expectation of your reaction. Adopted verbatim from Joshi and Arnold (1998). APPENDIX B: OPPORTUNISM AND CONTINUANCE SCALE ITEMS Respondents used a 1-7 point system (1 = strongly disagree, 7 = strongly agree) in rating their response to each of the following statements. Dependent Variable Statement Opportunism 1. I would lie to this supplier (e.g., other suppliers are offering lower process) in order to protect my own interests. 2. I would not be completely honest with this supplier. 3. I would exaggerate my needs in an attempt to force the supplier to deliver on schedule. Continuance 1. I would continue to buy microchips from this supplier. 2. I would continue our relationship with this supplier. 3. I would purchase the microchips from this supplier as soon as the were able to deliver them. APPENDIX C: MODIFIED CONFLICT MODE INSTRUMENT Respondents used a 1-7 point system (1 = strongly disagree, 7 = strongly agree) in rating their response to each of the following statements. No. Statement Negotiation Strategy 1 There are times when I let others take Avoiding responsibility for solving the problem. 2 I might try to soothe the other's feelings and Accommodating reserve our relationship. 3 I attempt to get all concerns and issues Collaborating immediately out in the open. 4 I try to win my position. Competing 5 I try to postpone the issue until I have had Avoiding some time to think it over. 6 I sometimes sacrifice my own wishes for the Accommodating wishes of the other person. 7 I attempt to immediately work through our Collaborating differences. 8 I make some effort to get my way. Competing 9 I feel that differences are not always worth Avoiding worrying about. 10 I try not to hurt the other's feelings. Accommodating 11 I am very often concerned with satisfying Collaborating all our wishes. 12 I am firm in pursuing my goals. Competing 13 I try to do what is necessary to avoid tensions. Avoiding 14 In approaching negotiations, I try to be Accommodating considerate of the other person's wishes. 15 I usually seek the other's help in working Collaborating out a solution. 16 I try to convince the other person of the Competing merits of my position.
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Chanchai Tangpong *
Assistant Professor of Management
North Dakota State University
Young K. Ro *
Assistant Professor of Operations Management
University of Michigan--Dearborn
* Acknowledgement: Both authors contributed equally to this paper, and the authors would like to thank two anonymous reviewers for their helpful comments.
Table 1 Selected Sample Profile Demographics Percent Gender Male 55 Female 45 Age Less than 25 years 80 25 years and above 20 Ethnicity Caucasian 78 Non-Caucasian 22 Campus Urban 61 Rural 39 Major Soft Business Majors 62 Quantitative Business Majors 38 Work Experience (part-time & full-time) More than 5 years 46 5 years or less 54 Table 2 Regression Analysis Results DV1: Opportunism Beta (a) Control Full Model Model Dependent Variable (DV) A1 A1 Control Variables: Dependence 0.06 0.08 Relational Norms -0.10 -0.08 Dependence x Relational Norms 0.03 0.02 Soft Business Major -0.09 -0.08 Campus -0.12 * -0.11 ([dagger]) Age -0.14 -0.14 Ethnicity -0.14 * -0.13 * Work Experience -0.02 -0.03 Gender 0.07 0.05 Independent Variables: Assertiveness 0.07 Cooperativeness -0.23 *** R Square 0.08 0.14 Adjusted R Square 0.05 0.11 F Value 2.62 ** 4.03 *** Incremental R Square (b) 0.06 Incremental F Value (b) 9.64 ** DV2: Continuance Beta (a) Control Full Model Model Dependent Variable (DV) A2 A2 Control Variables: Dependence 0.42 *** 0.41 *** Relational Norms 0.59 *** 0.58 *** Dependence x Relational Norms -0.24 ** -0.23 ** Soft Business Major 0.01 0.01 Campus 0.03 0.02 Age 0.14 0.14 ([dagger]) ([dagger]) Ethnicity 0.07 0.07 Work Experience 0.01 0.01 Gender 0.12 * 0.12 * Independent Variables: Assertiveness -0.03 Cooperativeness 0.02 R Square 0.33 0.33 Adjusted R Square 0.31 0.30 F Value 15.04 *** 12.28 *** Incremental R Square (b) 0.00 Incremental F Value T 0.24 (a) Standardized regression coefficients. (b) Full Model vs. Control Model. ([dagger]) p <.10; * p <.05; ** p <.01; *** p <.001. Table 3 Regression Analysis Results of Opportunism in Different Dependence-Relational Norm Conditions Beta (a) Dependent Variable: Model B1: Model B2: Opportunism Low Dep. High Dep. & Low Rel. & High Rel. Control Variables: Work Experience 0.03 -0.38 ([dagger]) Age -0.21 0.20 Ethnicity 0.00 -0.26 * Soft Business Major -0.05 0.16 Campus 0.01 -0.24 ([dagger]) Gender 0.05 0.02 Independent Variables: Assertiveness 0.16 0.05 Cooperativeness -0.44 *** -0.08 R Square 0.29 0.22 Adjusted R Square 0.19 0.12 F Value 3.08 ** 2.23 * Beta (a) Dependent Variable: Model B3: Model B4: Opportunism Low Dep. High Dep. & High Rel. & Low Rel. Control Variables: Work Experience 0.11 -0.04 Age -0.38 * 0.06 Ethnicity -0.27 * -0.01 Soft Business Major -0.13 -0.28 * Campus 0.06 -0.20 ([dagger]) Gender 0.11 0.11 Independent Variables: Assertiveness 0.21 ([dagger]) -0.07 Cooperativeness 0.02 -0.36 ** R Square 0.26 0.26 Adjusted R Square 0.16 0.17 F Value 2.66 * 2.89 ** (a) Standardized regression coefficients. ([dagger]) p <.10; * p <.05; ** p <.01; *** p <.001.
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|Author:||Tangpong, Chanchai; Ro, Young K.|
|Publication:||Journal of Managerial Issues|
|Date:||Mar 22, 2009|
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