BUYER-SUPPLIER RELATIONSHIP DEVELOPMENT: AN EMPIRICAL STUDY AMONG DUTCH PURCHASING PROFESSIONALS

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Journal of Enterprising CultureVol. 18, No. 2 (June 2010) 107–137DOI: 10.1142/S0218495810000537

BUYER-SUPPLIER RELATIONSHIP DEVELOPMENT:AN EMPIRICAL STUDY AMONG DUTCH

PURCHASING PROFESSIONALS

MARJOLEIN C. J. CANIËLS,∗,†,§ CEES J. GELDERMAN∗,¶

and JAN M. ULIJN∗,‡,‖∗Faculty of Managementsciences

Open University of the Netherlands, The Netherlands†Netherlands Laboratory for Lifelong Learning

Open University of the Netherlands, The Netherlands‡Eindhoven University of Technology, The Netherlands

§[email protected]¶[email protected]

‖[email protected]

Case study based literature on relationship development presents in-depth informa-tion on contextual factors in relationship development. However, little quantitativeevidence is available about key aspects of buyer-supplier relationships in each stageof its development, such as the level of trust/commitment, buyer’s and supplier’sdependence. The study will try to fill this gap by identifying and quantifying theseaspects from the buyer’s perspective in each development stage. A comprehen-sive survey among 238 Dutch purchasing professionals provides evidence on howthese characteristics of relationships change when relationships develop over time.The results largely confirm the hypotheses, which stem from the extant literatureabout organizational dependence and trust/commitment. A notable finding is thatthe buyer perceives to be dependent on the supplier, even in a desirable relation-ship. Managerial implications are that: (1) industrial marketers should be awarethat professional purchasers feel dominated by them, even in relationships that arepositively evaluated and therefore desirable in the view of the buyer; and (2) thatpurchasers should be aware that dependence implies vulnerability, even when therelationship is still developing in an otherwise desirable way.

Keywords: Buyer-supplier relations; trust; commitment; dependence; relationshipdevelopment.

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Marjolein C. J. Caniëls, Cees J. Gelderman and Jan M. Ulijn

INTRODUCTION

Over the last 30 years the research on inter-firm relationships has been boom-ing. This growing body of literature was brought about by a general shift ofinterest towards issues such as resource accessing and sharing among firms,co-operative approaches to markets and positioning of the firm in a globalmarket. Academic writers generally believe that global competition is mak-ing business too complex and too expensive for one firm to undertake it onits own (Ellram, 1998; Vaaland and Heide, 2007; De Leeuw and Fransoo,2009). Firms are found to benefit from entering into a variety of relationshipswith different suppliers (Cunningham and Homse, 1982; Bensaou, 1999;Lilliecreutz and Ydreskog, 1999). Each type of relationship offers specificbenefits to buyer-firms (Hines, Lamming, Jones, Cousins and Rich, 2000).Moreover, supplier-relationships change while they develop. Studying thenature of buyer-supplier relationships should therefore include an examina-tion of their development over time. In a seminal paper on the developmentof buyer-supplier relationships Ford (1980) introduced a five-stage modelfor the analysis of buyer-supplier relationships. A rich and growing body ofliterature on this topic has emerged ever since. The models described tend tobe either conceptual or based largely on case study research, see for exampleDwyer, Schurr and Oh (1987). The vast and rich case study based literatureon relationship development presents us with in-depth information on con-textual factors in relationship development. However, there appears to belittle quantitative evidence on the intensity of key aspects of buyer-supplierrelationships in each stage of its development, such as the level of trust,commitment, buyer’s and supplier’s dependence.

Entrepreneurs and business owners are very much interested in possibil-ities for relationship development between buyers and suppliers. By consti-tuting one segment in a supply chain, entrepreneurs have to relate to theirsuppliers as well as their buyers. By using evidence from two Dutch multinational companies (MNCs) Walrave et al. (2009) illustrate that corporateentrepreneurship needs to develop a supportive culture for interfirm coopera-tion, and this includes the development of buyer-supplier relations. However,current studies have been focusing mainly on relationship development withbuyers or customers/clients from the viewpoint of the supplier. In a casestudy of the Swedish Anoto (developer of the digital pen) Harryson (2008)clearly demonstrates that entrepreneurship is navigating from creativity tocommercialization through relationships with customers. Building success-ful relationships with customers early on is found to be crucial to survivaland success, especially for start-up firms. The studies of Elfring and Hulsink

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Buyer-Supplier Relationship Development

(2003 and 2007) on the role of networks for IT start-ups indicate that relation-ship formation and development with customers is the lifeblood of emergingfirms. Still, the purchasers viewpoint has seldom been stressed. Quantitativeevidence on this score is even scarcer.

The underlying study addresses this other perspective: how buyers seesuppliers with regard to relationship development on the key aspects oftrust, commitment, and buyer’s and supplier’s dependence. The quantitativeresearch design includes a survey which is developed to distinguish betweenseveral developmental stages of a buyer-supplier relationship. The aim isto identify and quantify the level of trust and dependence from the buyer’spoint of view, by using a large, representative sample of actual relationshipsbetween suppliers and their business customers.

The organization of the paper is as follows. The next section reviewsthe literature on buyer-supplier relationships and generates an overview ofrelationship development studies and the methodologies applied in them.Subsequently, we map out key factors that characterize buyer-supplier rela-tionships and develop hypotheses on how these key factors will change whenrelationships develop over time. After explaining our research methodology,we present the results of our study and discuss the findings and their man-agerial implications. The conclusion offers the limitations of the study aswell as suggestions for further research. In particular we will pay atten-tion to the relevance of this study for small and medium sized enterprises(SMEs).

LITERATURE REVIEW

Research on supply chain management provides many models that describethe nature of inter-firm relationships in the supply chain. The literature showsa strong belief and a general consensus that companies require a variety ofrelationships, while no general best type of relationship exists (Cunninghamand Homse, 1982; Young and Wilkinson, 1997; Gadde and Snehota, 2000;Holweg et al., 2005).

The literature about buyer-supplier relationships is characterized by abroad spectrum of contributions that vary to the extent in which they focuson relationship development. One strand of research concentrates on varioustypologies for the classification and management of buyer-supplier relation-ships. Academic writers in this line refer to these models as classificationmodels. These models are static in nature and their main focus is on exploringthe characteristics of buyer-supplier relationships. Well-known examples are

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portfolio models (Kraljic, 1983; Caniëls and Gelderman, 2007; Terho andHalinen, 2007; Gok, 2009), relationships type matrices (Krapfel et al., 1991;Mota and de Castro, 2005; Liu et al., 2010), partnership models (Lambert,Emmelhainz and Gardner, 1996), simple tier-structure models (Jones andWomack, 1986; Womack and Jones, 2005), and market-hierarchical gover-nance approaches (Williamson, 1975; 1999; 2005). All these models havein common that they zoom in on the state of a relationship at one specificmoment in time. Their main purpose is to provide management recommenda-tions on the appropriate strategic behavior in different types of relationships,and in that sense they do not put much emphasis on the dynamic characterof relationships.

A second line of research is made up by studies that take the researchon buyer-supplier relationships a step further by not only classifying rela-tionships into certain types, but also explicitly focusing on the provision ofmanagement guidelines about how to move from one type of relationship toanother. This observation implies a sense of relationship evolution and rela-tionship development. Additionally, these studies discuss how to respond tomanagement issues at different stages in the relationship, and also how toselectively manage different types of relationships. Notable illustrations ofthis approach are given by the work of the IMP group, for example Cunning-ham and Homse (1982), Fiocca (1982), Cambell and Cunningham (1983)and Baraldi, Brennan and Harrison (2007). Several of these studies explic-itly acknowledge the existence of evolution of relationships. They provideguidelines on how to develop a relationship from one stage towards a higherstage (Fiocca, 1982).

A third and related strand in the literature contains contributions that con-cern pure relationship development models. These models adopt a specificdevelopment perspective on relationships. In contrast to pure classificationmodels, the notion that relationships evolve over time forms the basis of rela-tionship development models. This notion is not to deny the possibility thatrelationships might sometimes fail to develop or even regress. Blankenburg-Holm, Eriksson and Johanson (1996) emphasize in this respect that “thedevelopment process is by no means deterministic; the dyadic relationshipis only developed if both parties consider it profitable or otherwise worth-while to engage in future exchange”, (1996: p. 1035). Ford (1980), Dwyeret al. (1987), Ellram (1991), Wilson (1995) and Parvatiyar and Sheth (2000)present pure relationship development models. Most of these approachesuse comparable stages and emphasize that inter-firm relationships evolve asthe commitment of resources and interdependence between firms increase(Ford, 1980; Dwyer et al., 1987). The following stages in relationship

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development can be distilled from the literature: (1) Repeated single trans-actions, (2) Development and management of a partnership, (3) Intensifyand strengthen the partnership, (4) Coping with a dissatisfying partnership,(5) Ending the partnership. Appendix 1 of this article gives a description ofeach stage.

Although these models are well known in academic writing, little researchhas been carried out that questions their actual occurrence and practical rele-vance. Table 1 shows that seminal papers on relationship development are illgrounded in empirical research. The various development stages are predom-inantly conceptual by nature. In addition, the variables that typify each stageare merely based on theoretical thinking and undocumented observations.The empirical study in this paper aims to advance upon the current knowl-edge on relationship development by investigating the change in trust anddependence levels during several developmental stages of buyer-supplierrelationships.

Several key elements of buyer-supplier relationships appear from the lit-erature. De Jong and Nooteboom (2000) distinguish three main groups offactors that have both theoretical and empirical support: (1) trust and com-mitment, (2) buyer’s dependence, and (3) supplier’s dependence.

Trust and commitment are essential prerequisites for building and devel-oping customer-supplier relationships (De Ruyter, Moorman and Lemmink,2001; Liu et al., 2008). Successful relationships require commitment andtrust (Morgan and Hunt, 1994; Handfield and Bechtel, 2002; Hald et al.,2009). Trust and commitment are related concepts, which both lead directly

Table 1. Overview of Methodologies in Prominent Relationship Development Studies.

Study Methodology

Ford (1980) Preliminary interviews for the design of scenarios thatwere presented to (an undisclosed number of)respondents in unstructured interviews.

Dwyer et al. (1987) Conceptual study, the model is built on exchange theoryand its offspring – marital theory, bargaining theory,and power theory.

Ellram (1991) Combining findings from literature review withobservations in 6 firms involved in successfulpurchasing partnerships.

Parvatiyar and Sheth (2000) Synthesis of existing literature on relationship marketing.Wilson (1995) Synthesis of existing literature on relationships,

partnerships, strategic alliances, and joint ventures.

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to cooperative behaviors that are conducive to relationship maintenance.Trust must be present in a relationship between two exchange partners beforecommitment can be developed (Moorman et al., 1992; Morgan and Hunt,1994; MacMilan et al., 2005). In addition, the commitment of one partnerwill enhance the other partner’s trust in that partner (Black, 2008).

Trust is defined in different ways (Blois, 1999; Schary and Skjøtt-Larsen,2001). Blomqvist (1997, p. 271) points at “the many faces of trust”, referringto the various dimensions and levels of trust, and to the many disciplinesthat incorporate the concept of trust (social psychology, philosophy, eco-nomics, contract law, and marketing). Overall, one could say that trust existswhen one party has confidence in the exchange partner’s reliability andintegrity (Anderson and Narus, 1990; Moorman, Zaltman and Dehpandé,1992; Morgan and Hunt, 1994; Ganesan, 1994; Lui et al., 2008).

The literature distinguishes between competence trust and goodwill trust.Competence trust refers to the confidence in the ability of the exchange part-ner to perform according to agreements (Nooteboom, 1996). Competenceimplies that a partner has the required technical capabilities, skills and know-how (Blomqvist, 1997). Goodwill trust refers to integrity and benevolence.In this respect, some studies propose that the true meaning of trust impliesa leap of faith: parties believe that both are interested in the other’s welfareand that neither will act without considering the impact of his action onthe other (Kumar, 1996, p. 95). In other words, goodwill trust reflects thebelief that each partner is interested in the other’s welfare and that a part-ner will not intentionally undertake actions that harm the other (Andersonand Narus, 1990; Geyskens, Steenkamp, Scheer and Kumar, 1996; Dyer andChu, 2003).

The term commitment emerges in the literature as a critically impor-tant characteristic of business relationships as well. Moorman et al. (1992)defines commitment as an enduring desire to maintain a valued rela-tionship, which corresponds with the belief that relationship commitmentonly exists when the relationship is considered important (Morgan andHunt, 1994). Although different conceptualizations exist, academic writ-ers typically define commitment as the intention of an exchange partnerto continue a relationship (Dwyer et al., 1987; Anderson and Weitz, 1989;Coote et al., 2009). Geyskens et al. (1996) emphasize that different motiva-tions can underlie such intention, and therefore various types of commitmentexist. They distinguish affective commitment and calculative commitmentas the most relevant types of commitment, since these types occur most oftenin practice (see also Kumar et al., 1994; Geyskens et al., 1996; De Ruyteret al., 2001).

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Affective commitment expresses the extent to which a party likes tomaintain a relationship with the other party. This kind of commitment isbased on a general positive feeling towards the exchange partner. An affec-tive committed partner desires to continue his relationship because he likesthe partner and enjoys the partnership (Geyskens et al., 1996; Coote et al.,2009). In contrast, calculative commitment pertains to the extent to whichan exchange partner perceives the necessity to maintain a relationship. Therelationship results from a cold-blooded calculation of costs and benefits(Geyskens et al., 1996). Therefore, calculative commitment is based on ageneral negative feeling towards the exchange partner. Similarly, De Ruyteret al. (2001, p. 286) conceptualize ‘calculative commitment’ as the level towhich buyers state that “there is just too much time, energy, and expenseinvolved in terminating our relationship with this supplier.”

Organizational dependence is another well-known factor that influencesthe formation and development of relationships (Hald et al., 2009). Manyconceptual studies discuss antecedents of organizational dependence. Emer-son provides a much quoted general definition of (social) dependence: “Thedependence of actor A upon actor B is (1) directly proportional to A’s moti-vational investment in goals mediated by B, and (2) inversely proportionalto the availability of those goals outside of the A-B relationship” (1962,p. 32). In other words, two factors determine dependence: the necessity ofa resource to the firm and the degree in which alternative providers of thisresource are at hand.

Jacobs (1974) introduces the concepts of ‘essentiality’ and ‘substitutabil-ity’. He points out that of primary importance to dependence is whetherA can do without B (essentiality of a resource) or whether other sourcesare available (substitutability of the resource). Scholars in Resource Depen-dence Theory refer to essentiality as the importance of a resource, whichis determined by (1) the relative financial magnitude of the resource and(2) the criticality of the resource (Pfeffer and Salancik, 1978). Substitutabil-ity is subdivided in (1) the availability of alternative sources and (2) thelevel of relation specific investments (i.e., the costs involved with switch-ing between suppliers) (Bourantas, 1989). Empirical studies in this veinfind similar factors that determine dependence. In general it is found thatessentiality has a positive impact on dependence, and substitutability has anegative impact (Sriram, Krapfel and Spekman, 1992; Berger et al., 1995;Nooteboom et al., 2000).

On the basis of the reviewed literature we have developed several expec-tations on how the buyer’s perception on the importance of each of the keyfactors (buyer’s dependence, supplier’s dependence and trust/commitment)

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Table 2. Hypothesized Impact on Three Key Relationship Factors (the Buyer’s Perspective).

ConstructBuyer-supplier relationshipphase (transitions) Buyer’s Supplier’s Trust/

dependence dependence commitment

1. From repeated singletransactions into a developingpartnership

H1a increases H1b increases H1c increases

2. From a developing partnershipinto an intensified andstrengthened partnership

H2a increases H2b increases H2c increases

3. From an intensified andstrengthened partnership intoa dissatisfying partnership

H3a unchanged H3b decreases H3c decreases

4. From a dissatisfying partnershipinto an ending partnership

H4a decreases H4b decreases H4c decreases

will change when buyer-supplier relationships develop over time. Since trustand commitment are closely linked concepts (Black, 2008), we will treatthem as one single factor that might change during the course of a rela-tionship. Table 2 gives an overview of the hypotheses. The cells in Table 2show the hypotheses on the direction of change of a certain factor (columns)for a certain transition from one development stage to the next (rows). Forexample, the first hypothesis, H1a, should be read as follows: When a rela-tionship evolves from repeated single transactions into a developing partner-ship, buyer’s dependence increases in importance in the perception of thebuyer.

Our general expectation is that the identified key factors will increaseas relationships develop over the first three stages (transitions 1 and 2). Assoon as the relationship evolves into the fourth stage and further (transitions 3and 4), we expect to find that buyers attach increasingly less value to the keyfactors.

The idea that buyer’s dependence, supplier’s dependence and commit-ment/trust will increase during the early transitions in the relationship isquite straightforward and follows from the literature (see e.g. Dwyer et al.1987; Liu et al. 2008; Liu et al. 2010). The transition of relationships fromone stage into the next reflects the degree in which trading partners anticipateto prolong the relationship in the future (Heide and John, 1990). When therelationship evolves through the first stages, both parties are willing to investin the relationship in order to benefit from the advantages that are associated

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with close collaboration and relationship continuity (Ellram and Edis, 1996;Ramsay, 1996; Cousins, 2002). As partners agree to form a relationship thatis guided by expectations of repeated transactions, they do not regard anincrease in dependency as problematic (MacNeil, 1980; Provan and Gassen-heimer, 1994; Gulati and Sytch, 2007). Hypotheses H1a, H1b, H2a and H2breflect this notion.

As the relationship matures over time, trust and commitment are expectedto increase (H1c and H2c). The benefits associated with trust in socio-economic relations are specified most prominently in social capital theory(Blau, 1964; Uzzi, 1997; Adler and Kwon, 2002). According to social capitaltheory, “exchange is based on norms of reciprocity or the belief that a firmacting to benefit a partner will be reciprocated favorably for such behaviorin the future” (Woolcock, 1998; Ireland and Webb, 2007, p. 484). In thisrespect, Dwyer et al. (1987) and Liu et al. (2008 and 2010) state that trustand commitment refer to an implicit or explicit pledge of relational continuitybetween exchange partners. As the relationship develops, the willingness tosacrifice short-term self-interests for long-term common interests increases.The feelings of trust and commitment to the relationship will greatly reduceany potential opportunism and provide a stable environment for relationshipdevelopment (Jap and Ganesan, 2000). Many empirical studies present astrong support for a positive relationship between trust, commitment andrelationship continuity, and indicate that trust and commitment will growbetween partners as the relationship continues over time (Anderson andWeitz, 1989; Achrol, 1991; Moorman et al., 1992; Morgan and Hunt, 1994;Rodriguez and Wilson, 2002; Johnston et al., 2004).

In mature relationships, some buyers gradually develop the belief thata supplier is taking advantage of the trust and is acting opportunistically(Grayson and Ambler, 1999; Jap and Ganesan, 2000). This can happen whenone of the exchange parties fails to invest in the relationship, by showinga lack of adaptive behavior and commitment. When one party underper-forms in the eyes of the other party, this results in gradual or immediatedissatisfaction with this party’s performance (Michell, Cataquet and Ague,1992; Gundlach, Achrol and Mentzer, 1995; Henke, 1995). From a buyer’sperspective, a relationship develops in an unfavorable way as the supplierunilaterally decreases his dependence on the buyer (H3b). This results ina locked-in position on the buyer’s account. Anderson and Weitz (1989)and Kumar, Sheer and Steenkamp (1995) show that a negatively evaluatedsupplier relationship generates conflict and decreases trust and commitment(H3c). Additionally, Lui et al. (2010) suggest that when the quality of anexchange is at a low level, the partners’ mutual trust and commitment are

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very limited and the threat of potential opportunism by both parties is veryreal (H3c). However, the buyer might initially not be able to reduce the levelof his dependence on the supplier, for example because of high exit barriers.The investments made towards building the relationship are lost when therelationship ends (Tähtinen and Vaaland, 2005; Narasimhan et al., 2009).Therefore, we expect to find that buyers perceive their dependence on sup-pliers to be equally important in a ’positively evaluated partnership’ as in an’negatively evaluated and locked-in partnership’ (H3a).

A final phase in a buyer-supplier relationship concerns the disengage-ment of the relationship. Following Ellram (1991) and Parvatiyar and Sheth(2000) the ending of the relationship occurs after a negative evaluationof the exchange relationship. Several scientific contributions describe ingreat detail the relationship ending process (Havila and Wilkinson, 2002;Tähtimen, 2002; Halinen and Tahtinen, 2002; Tähtinen and Halinen, 2002).Several of these studies indicate that as the buyer becomes able to end therelationship and replace the supplier, he will set little store to his dependenceon the supplier (H4a, H4b and H4c). The buyer has found a way out of thedysfunctioning relationship, hence he is no longer dependent on the supplier(Tähtinen and Halinen, 2002; Tähtinen, 2002; Narasimhan et al., 2009).

RESEARCH METHOD

We have transformed the five stages of our relationship model intofive comprehensive descriptions of real-life situations, i.e. scenarios (seeAppendix 1). These scenario descriptions were presented to our respon-dents. Respondents answered several survey questions with a real, typicalrelationship in mind that matched a certain scenario description. Note that arespondent could take a different real relationship in mind for each scenario.Hence, the survey did not actually follow the development of one specificrelationship for every respondent. Instead, the survey used a repeated mea-sures design, in which respondents evaluated a series of identical questionson buyer’s dependence, supplier’s dependence, and trust/commitment forevery scenario description. The advantage of having respondents reply tomultiple scenarios as opposed to having them reply just to one of the pos-sible scenarios is that the potential bias caused by individual differencesamong groups of respondents is taken away, which makes the design morepowerful than randomized designs (Stevens, 2001).

An often-voiced drawback of the adopted research method is that respon-dents might not be able to fully visualize themselves in the proposed

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scenario descriptions, resulting in unreliable data. The survey design coun-tered this shortcoming by letting respondents assess the degree to whichthey recognized each described situation. The building of the databaseincluded a removal of the survey results for respondents with low scores onrecognition.

The survey procedure included a pilot study aimed at enhancing the reli-ability and the validity of the questionnaire. First a draft set of descriptionsand questionnaire items was discussed with a focus group of academics.Then, the adapted descriptions and items were discussed with six purchas-ing professionals in four Dutch firms. Several issues were brought up duringthese interviews, such as the clarity of the questionnaire items, the recog-nizability of the scenarios, the time needed to fill in the questionnaire andother issues for further improvement of the items. On account of this pilotstudy several adaptations have been made in the exact wording and layout ofthe questionnaire items, response options and scenarios. The final question-naire was administered by postal mail in two rounds to 1,153 members ofthe Dutch Association of Purchasing Management (NEVI), which includesmembers in a wide range of industry sectors, such as electro-technical, chem-ical, machine and metal products. In the second round we addressed onlythose respondents that had not responded to the earlier mailing. The NEVIsupported our study. The president of the NEVI wrote a letter of recom-mendation for the study and this letter was added in the first round of postalmailings. The follow-up mailing contained a letter of recommendation thatwas signed by the researchers, emphasizing academic relevance and includ-ing the university logo. Both letters contained sincere and direct requests forhelp and cooperation.

In addition to the pilot study, engaging the explicit support of the businessassociation, and the follow-up mailing, the following measures were taken toenhance the response rate of our study. In the accompanying letter universitysponsorship was emphasized. We offered a summary of our findings to therespondents, which they would receive after the findings had been analyzed.The first 200 respondents were entitled to a free copy of a book on purchasingmanagement written by a Dutch professor on purchasing management, whosupported the study and is well known among members of the businessassociation. In this way respondents were encouraged to react quickly tothe survey request, which is important, because if respondents postponecompleting the questionnaire, they might forget about it after a while. Weenclosed business reply envelopes (freepost).

The survey generated a total number of 248 responses, of which 238 werevalid, resulting in a response rate of 20.6%, mainly from large companies

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(more than 100 employees), only 28.6% (N = 68) from SMEs. The firstwave generated 121 valid responses, and the second wave generated 117valid responses. Tests on the likelihood of a non-response bias indicated nostatistical significant differences between the first wave and the second waveof respondents. The survey procedure included removing all responses thatscored on average less than 3 for recognition on a 5-point Likert scale (22reactions). The effective response rate is therefore 18.7%. This can be con-sidered as quite satisfactory for an industrial mail survey in Europe (Erdoganand Baker, 2002; Frohlich, 2002), especially when we take into account thatthe questionnaire was very long because of the five scenario descriptions.Whereas Yu and Cooper (1983) have shown that an optimal response isreceived on questionnaires that contain 40 to 50 items, our questionnairecontained eight pages with 175 items in total.

The procedure recommended by Armstrong and Overton (1977) ensuredthe investigation of the likelihood of a non-response bias. All tests indicatedthat no statistical significant differences were present between the first waveand the second wave of respondents. Hence, the study does not suffer froma non-response bias.

Another potential threat to validity is common method bias As all vari-ables in the study were measured with self-reports, correlations betweenconstructs may be inflated as a result of using a monomethod design (Pod-sakoff, MacKenzie, Lee, and Podsakoff, 2003). However, Spector (2006)argues and shows that the threat of common method bias is generally exag-gerated. Still, we believe a discussion of this threat to validity is warranted.High levels of expertise and interest of respondents reduce the threat ofrespondent “guessing”, which is one possible source of common methodvariance, together with social desirability (Malhotra, Kim, and Patil, 2006).In order to reduce the threat of social desirability bias in our study design,we have indicated in the questionnaire that there are no right or wronganswers. Furthermore, we have assured respondents that their answers wouldbe anonymous. In order to reduce the threat of respondents “guessing” wehave specifically targeted purchasing professionals form the Dutch Asso-ciation of Purchasing Management. Purchasing professionals undertakenegotiations with suppliers on a daily basis. Therefore, they have vast expe-rience, expertise and insight into the power and dependency issues in therelationship with their suppliers. See Table 3 for the respondent profile. Takentogether, the threat of common method variance in the data is considered tobe very low.

We performed a reliability analysis using Cronbach’s alpha to ensurethe internal consistency of the indicators that constitute each construct

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Table 3. Respondent Profile.

Job title Number of valid responses %

Director Purchasing 70 29Purchasing Manager 79 33Senior Buyer 23 10Purchasing Assistant 37 16Manager of Logistics 10 4Supply Chain Manager 4 2Other 12 5Unknown 3 1

Total 238 100

Table 4. Reliability Analysis: Cronbach’s Alphas.

Buyer-supplier Constructrelationship phase

Buyer’s Supplier’s Commitment/trustdependence dependence

Full Reducedconstruct construct

Repeated single transactions 0.64 0.69 0.51 0.64Developing partnership 0.71 0.70 0.53 0.75Intensified and strengthened 0.64 0.74 0.59 0.75

partnershipDissatisfying partnership 0.70 0.79 0.69 0.81Ending partnership 0.65 0.78 0.69 0.80

(Cronbach, 1951). In Table 4 we present the results of our reliability anal-ysis. The table shows the values of Cronbach’s alpha of the constructs inevery development stage. Note that we present two constructs for commit-ment/trust. By employing the full construct, which included ‘calculativecommitment’, we found very low Cronbach’s alphas in the first three devel-opment stages. In reaction to this finding, we have run additional reliabilitytests, in which we excluded ‘calculative commitment’ from the commit-ment/trust construct. The results from these tests are presented in the col-umn labelled ’reduced construct’. Excluding ‘calculative commitment’ fromthe commitment/trust construct greatly improved the internal consistencyof the construct. The resulting coefficients of Cronbach’s alpha are higher

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than 0.60, indicating an acceptable internal consistency and reliability of theconstructs.

A subsequent factor analysis confirmed the robustness of these findings,again supporting the reduced construct for commitment/trust. The factoranalysis resulted in a single commitment/trust-component for each devel-opment stage. The component only included competence trust, goodwilltrust and affective commitment. Calculative commitment showed low factorloadings on the commitment/trust-component. Based on these findings weexcluded calculative commitment from our commitment/trust construct inthe remainder of our study. Appendix 2 reports the factor analysis results forthe reduced commitment/trust construct.

RESULTS

Note that we do not want to know whether one variable is related toanother one, but rather whether certain aspects of the buyer-supplierrelationship — such as buyer’s dependence, supplier’s dependence andtrust/commitment — change from one stage of development to the next.To test this kind of hypothesis it is appropriate to perform pair wise compar-isons and test for mean differences.

Figure 1 shows the mean construct scores on a 5-point scale in everydevelopment stage. The figure compares stages that follow up each otheras a relationship evolves from the first transactions until a dissolution. Theresults show that in the initial stages of the relationship the perceived levelsof commitment and trust are rather high. The level of bilateral dependencein these phases is relatively low. In an intensified and strengthened part-nership buyer’s dependence and commitment/trust are both being equallyhigh. In this respect, note that the respondents are professional purchasers(not suppliers). Apparently buyers tend to perceive a high dependence onsuppliers, while they believe that suppliers are much less dependent. Buyersmight underestimate supplier’s dependence (Ford, 1978). Figure 1 seemsto support this notion, since the figure shows that during four phases ofthe development model the buyer regards himself as being more dependenton the supplier than the other way around. Only in the first stage of therelationship supplier’s dependence is higher than buyer’s dependence. In thefinal two stages of the relationship commitment/trust plummets. The buyer’sdependence is now the main concern of the buyer.

Table 5 shows the direction of change in the importance dedicatedby professional purchasers to the key relationship characteristics as the

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Note: Due to lack of scenario recognition (22 responses) and missing values (4 responses), we coulduse 212 of our 238 cases for this analysis.

Figure 1. Mean construct scores in every development stage (n = 212).

buyer-supplier relationship develops over time. Furthermore, the table showsthe significance of the change. The findings confirm the hypotheses aboutthe transition from a repeated single transactions relationship to a developingpartnership. Buyer’s dependence as well as supplier’s dependence shows asignificant increase in the first transition (H1a and H1b). The findings sup-port the decision to accept the hypothesis regarding trust and commitmentas well (H1c).

As the relationship progresses from a developing partnership to a partner-ship that is positively evaluated and subsequently intensified and strength-ened, the commitment/trust-construct does not show a significant increase(H2c is rejected). Presumably, trust and commitment already reach opti-mal values in the initial stages of the relationship. Trust and commitmentare very high to set off the relationship in the first place and they cannotimprove further as the relationship intensifies. Mutual dependence increasesconsiderably in this transition, which confirms H2a and H2b. Remarkably,buyer’s dependence increases relatively more in this transition than supplier’sdependence (0.88 and 0.24 respectively).

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Table 5. Mean Differences and Pair Wise Comparisons (n = 212).

ConstructBuyer-supplier relationship

phase (transitions) Buyer’s Supplier’s Trust/dependence dependence commitment

1. From repeated singletransactions into a developingpartnership

0.74a 0.39a 0.20a

2. From a developing partnershipinto an intensified andstrengthened partnership

0.88a 0.24a 0.01

3. From an intensified andstrengthened partnership intoa dissatisfying partnership

−0.00 −0.68a −1.49a

4. From a dissatisfying partnershipinto an ending partnership

−0.31a 0.01 0.01

aSignificant at P < 0.05 (Bonferroni adjusted).

Note: Due to lack of scenario recognition (22 responses) and missing values(4 responses), we could use 212 of our 238 cases for this analysis.

In the third transition the relationship changes from a positively evaluatedand intensified partnership into a negatively evaluated partnership. Buyer’sdependence remains on the same high level (confirming H3a). Despite thefact that the relationship has become unsatisfactory, the buyer is unable todecrease his dependence on the underperforming supplier. In contrast, thesupplier experiences less dependence, resulting in a significant drop in thesupplier dependence (confirming H3b). Understandably, commitment andtrust drop as soon as the relationship becomes unsatisfactory. The meanscore decreases 1.5 on a 5-point scale, thereby confirming H3c.

In the final transition the relationship enters the final stage. Trust/commitment does not decrease any further, which disproves H4c. A pos-sible explanation could be that the faith in the supplier already decreasedenormously as the relation moved into an unsatisfactory, locked-in partner-ship. At this moment the buyer only wants to discontinue all transactionswith the supplier. Trust/commitment is not an issue anymore. Hence, thebuyer maintains his negative judgment about the supplier. In addition, thefindings indicate that supplier’s dependence remains virtually unchanged ona low level (disproving H4b). Only the buyer’s dependence declines signif-icantly: apparently the buyer succeeded to become less dependent on thesupplier (supporting H4a).

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DISCUSSION AND CONCLUSION

A number of interesting findings appear from the study. Buyers and suppliersproceed through a series of steps that correspond to the relationship devel-opment process as identified by several authors (e.g. Dwyer et al., 1987).The survey undertaken in our study quantifies the changes in mutual depen-dence and trust/commitment in various development stages. The hypothesesthat stem from theoretical and empirical contributions in the field of orga-nizational dependence and trust/commitment were largely confirmed. Asbuyers and suppliers explore and expand their relationship their bond inten-sifies and the perceived mutual dependence as well as trust/commitmentincreases until the relationship reaches an intensified partnership. As soonas the relationship becomes undesirable, the positive trend turns into a neg-ative one, in which commitment and trust will drop immediately, whilethe supplier dependence slackens. Buyer’s dependence remains virtuallystable and only weakens slightly when the relationship enters the finalphase.

Interestingly, significantly different levels of buyer’s and supplier’sdependence exist in a relationship that is positively evaluated and hencedesirable from the buyer’s point of view. Our survey results indicate thatin this situation the buyer perceives higher levels of buyer dependence thansupplier dependence, suggesting that the supplier holds a dominant posi-tion in this development stage. This finding might have considerable man-agerial relevance. Industrial marketers should be aware that professionalpurchasers feel dominated by them, even in relationships that are positivelyevaluated and therefore desirable in the view of the buyer. This finding couldentice marketers to try to exploit their power and to skim off the market sur-plus. However, marketers should be aware of the negative effects of theexploitation of their position. In fact, a situation in which the buyer feelsdominated yet satisfied is desirable, since the buyer will not regard the rela-tionship as one that he actively has to cope with by searching for alternatives(suppliers or products). Therefore, marketers should nurture these kinds ofrelationships.

In general, the mere presence of asymmetric dependence positions inrelationships is associated with instability and conflict (Anderson and Weitz,1989; Frazier and Rody, 1991; Kumar et al., 1995; Geyskens et al., 1996;Rokkan and Haugland, 2000). However, decreasing a firm’s own dependenceon the exchange partner or increasing the exchange partner’s dependence onthe own firm is not an end in itself. Especially in buyer-supplier relationshipswith a long term perspective, it might be okay when one of the parties has

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a dominant position, as long as this position is not exercised to influencethe trading partner’s behavior. In this respect it is important to distinguishbetween the possession of a dominant position and the actual use of this posi-tion (Frazier and Summers, 1984). A dominant dependence position occurswhen the other party in more dependent on you, than you are on them.The research about the use of dominant positions is refined to exploring theeffect of various influence strategies — exercised coercive and non-coercivepower (e.g. Molm, 1997; Lui et al., 2006). Studies have documented influ-ence strategies that are used most frequently by firms (Frazier and Summers,1984; Frazier and Summers, 1986) and how certain influence strategies willaffect compliance of the trading partner (Payan and Nevin, 2005). Researchon the possession of a dominant dependence position contains studies advo-cating that the positions of trading partners should be balanced in order toachieve co-ordination and co-operation among exchange partners and there-fore an optimal exchange relationship (Dwyer and Walker 1981; Irelandand Webb, 2007). In contrast, other studies argue that power dominancemight not be bad for the relationship, as long as the dominant position isnot misused by employing a coercive influence strategy (Stern and Heskett,1969; Kotter 1979).

The presence of trust and commitment is essential for a successful rela-tionship in which one of the parties dominates the other. In non-trustingrelationships ambiguities are more likely to be interpreted negatively (e.g.Murray, Holmes and Griffin, 1996). In contrast, loyalty towards the otherparty prevails in a strong and co-operative relationship in which both partieshave invested and which is characterized by mutual trust and mutual com-mitment (Geyskens et al. 1996; Casciaro and Piskorski, 2005). In such arelationship both parties have the desire to continue the relationship (Gulatiand Sytch 2007). In the literature the notion of trust is sometimes referredto as being an aspect of ‘relational capital’ (Dyer and Singh, 1998; Burt,2000; Dyer and Nobeoka, 2000). Theories of the embeddedness of eco-nomic exchanges in social relations (Granovetter, 1985; Uzzi, 1997) suggestthat trading partners in trusting relationships will be able to overcome luringproblems of uncertainty and opportunistic bargaining. Hence, dependenceasymmetry does not necessarily have to be bad for a relationship. Trust couldact as a moderating mechanism, counteracting possible negative effects ofdependence asymmetry on the relationship.

For professional purchasers the managerial implication of perceived sup-plier dominance is that purchasers should be aware that dependence impliesvulnerability, even when the relationship is still developing in an otherwise

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desirable way. Buyers should ask themselves whether sufficient benefits areattached to the relationship to offset the obvious disadvantages of a depen-dent position towards a supplier. In addition, purchasers should assess therisks that this kind of relationship harbors, and explore possibilities thatmight increase the bargaining power of their company. In other words,even in a positively evaluated and therefore desirable relationship, buyersshould explore the market by scouting for alternative suppliers and deter-mining their competencies. In a positive evaluated relationship the buyermay be lulled into satisfaction and this might prevent the firm from search-ing out new suppliers. One of the few ways to reduce a firm’s dependenceon domestic suppliers and thereby broaden its supplier base, may be toenter international buyer-supplier relationships and thus further increase itsoptions in business. Furthermore, professional purchasers should becomeaware of their own power basis. They should investigate to what extent theperceived supplier dominance is based on an objective assessment of therelationship.

These findings are particularly relevant for entrepreneurs in small andmedium sized enterprises (SMEs). SMEs, especially high technology firms,are confronted with a focus on niche markets, short product cycles, and theyoften face a small size domestic market (Arend and Wisner, 2005; Bradleyet al., 2006). The resources that are created in the relationship develop-ment process with a certain buyer can be quite specialized to achieve a goodmatch and strong bonding between both parties in the relationship. This spe-cialized position creates an advantage for SMEs, because this is a way tobond their customers to them. As is shown by our findings, the specializedresources are an important ingredient of increasing buyer’s dependence andit is experienced as such by the buyers. On the other hand the high levelof specialization, typical for SMEs, creates a vulnerability towards oppor-tunistic behavior on the part of the buying firm, which is due to its relativepower. Over time a negative relationship might develop in which the buyingfirm uses the relationship mainly to exploit the SME supplier, for exam-ple by requiring higher quality levels or more frequent deliveries withoutcompensation. To prevent the possibility of this opportunistic behaviour,it is necessary for the SME to ensure that the benefits of buyer-supplierrelationships are reciprocal and to ensure that asymmetrical dependenceupon the relationship is avoided. In this respect, SMEs would be wise tospread investment costs associated with the first relationship and put thespecialized resources to additional use in new relationships (Bradley et al.,2006).

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LIMITATIONS AND SUGGESTIONS FOR FURTHERRESEARCH

The study has several limitations that offer suggestions for further research.The study focuses on purchasing experts. Yet, buyer-supplier relationshipsare dyadic in nature. Researchers should investigate any given relationshipfrom both supplier and buyer sides. Suppliers might perceive quite differentlevels of dependence and trust in the various stages in the relationship lifecycle. In a positively evaluated and hence desirable relationship from thebuyer’s point of view the survey results indicate that the buyer perceiveshigher levels of buyer dependence than supplier dependence. Consequently,buyers might systematically underestimate the dependence of the supplieron themselves. They might not only make underestimations in a positivelyevaluated relationship, but also in a negatively evaluated one. The implicationwould be that it might be much easier than currently is perceived for a buyerto terminate an undesirable and seemingly locked-in relationship. Therefore,a need for further research exists that would give insight into the perceptionof sales experts about their position in the relationship, and especially aboutthe level of buyer’s and supplier’s dependence they perceive in various phasesof a relationship.

A research design that would be needed to solve these questions involvesdyad research — meaning that the researcher identifies and investigatesmatches between a buying and a supplying firm. However, dyad research isvery complicated for several reasons. It is quite hard to acquire enough dyadsto perform statistical analysis, since both parties need to participate in theresearch. Furthermore, anonymity is lost for the respondents, because buyersand suppliers indicate their most important trading partner, and hence theyknow which party they will be linked up with. Loosing anonymity mightbe detrimental to the investigation of issues such as trust and dependence.Trust and dependence are influencing the bargaining power of firms andthere is a high probability that firms will not give honest answers about theirown power position, when they know that their partner is surveyed as well.Hence, a social desirability bias is likely to be introduced to the analysis.Researchers will have to come up with new innovative ways to undertakedyad research on issues like trust and dependence.

Another limitation of our study is also linked with our focus on the buyer’sside of the relationship. We have not explicitly included the buyer’s viewon supplier’s trust and commitment in our questionnaire. Future studiesshould shed light on the differences between buyer’s and supplier’s trust

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and commitment in the different stages of a relationship, and on the causesand effects of these differences.

A further limitation concerns the sample, which stems from a list of mem-bers of the Dutch Association of Purchasing Management (NEVI). Althoughthe sample includes a wide range of industry sectors, the generalizability ofthe results will benefit from the inclusion of firms in the service sector, aswell as other Dutch and international companies. The broadening of thesample will be the object of a further study.

In addition, the current research provides a static albeit a posteriori assess-ment of real relationships. Future studies of relationship development cangreatly benefit from taking a longitudinal approach, and investigate the devel-opment of real relationships over the years.

Moreover, we would like to explicitly examine the relevance of suchresults for entrepreneurs and assess to what extent the findings from Dutchfirms may be generalized to SMEs. In our research we could not interviewentrepreneurs directly to see how their purchasers and marketers are devel-oping relationships. However, as stated in the introduction of this article, anyentrepreneur in a SME needs relationship development with customers andsuppliers. Hence, it would be a very interesting avenue for further researchto explore the issues of trust and dependence specifically in buyer-suppliersrelationships that involve SMEs. Future studies that replicate our study forSMEs might also include narratives of respondents giving some additionalexplanation beyond a mere hypothesis testing on the basis of Likert scales.

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APPENDIX 1

Description of the Relationship Development Stages.

Scenario Characterization Scenario description (translated from Dutch)

1 Repeated singletransactions

You have a very favorable negotiating position with thisproduct. The supply risk is low, while the product hasa relatively high financial value. Negotiations aretough in pursuit of lowest prices, guaranteed qualityand reliable delivery. Competitive bidding is anoption. You are only willing to enter short-termcontracts.

2 Development andmanagement ofa partnership

You have a very favorable negotiating position with thisproduct. The supply risk is low, while the product hasa relatively high financial value. You recognizepossibilities for deepening the relationship with thesupplier, allowing him to contribute more to thecompetitive position of your company. It is expectedthat the supplier then will behave as a partner and willplace his technological experience and knowledge inservice of your company.

3 Intensify andstrengthen thepartnership

Consider a product with a high supply risk and a highfinancial value. You consider the supplier as animportant partner with whom a satisfactory,cooperative strategic relationship exists. Theperformance of the supplier is excellent. Both partieshave an interest in continuing and intensifying therelationship and the parties have a good mutualunderstanding.

4 Coping with adissatisfyingpartnership

Consider a product with a high supply risk and a highfinancial value. It is expected that the supplier behavesas a strategic partner. However, the relationship withthe supplier leaves much to be desired. Your companyfeels that it is forced to do business with the supplierand has no alternative than to put up with the supplier.Your company tries to make the best of theinvoluntary relationship with the supplier.

5 Ending thepartnership

Consider a product with a high supply risk and a highfinancial value. It is expected that the supplierbehaves as a strategic partner. However, therelationship with the supplier leaves much to bedesired. Your company feels that the behavior of thesupplier cannot be corrected. It is decided to searchfor another supplier with whom your company willhave to build up a new relationship. It is clear that thiswill be a difficult and challenging task.

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BUYER-SUPPLIER RELATIONSHIP DEVELOPMENT: AN EMPIRICAL STUDY AMONG DUTCH PURCHASING PROFESSIONALS

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