Performance implications of buyer-supplier relationships in industrial markets

Abstract

Increasing international competition in a number of industries has required U.S. manufacturers to undertake strategic realignments of various kinds. One of the most noticeable changes has been in the purchasing area, where industrial buyers frequently have made deliberate efforts to establish stronger relationships with suppliers. Although recent research has generated considerable insight into the nature of such relationships, the existing literature is incomplete in several important respects. In particular, the performance implications of adopting particular forms of relationships are virtually undocumented in the extant literature. This article draws on transaction cost theory (TCA) to propose that: (1) crafting stronger relationships is partly a response to the presence of uncertainty and transaction-specific assets and (2) structuring relationships in accordance with TCA prescriptions should have positive performance implications. Regression analysis conducted in a sample of OEM-supplier relationships shows good support for our hypotheses.