THE SPACE BETWEEN: TOWARDS A TYPOLOGY OF INTERFIRM RELATIONS*
Louise C. Young
School of Marketing
University of Technology, Sydney
PO Box 123,
Broadway NSW, Australia, 2007
and
Ian F. Wilkinson,
Department of Marketing
University of Western Sydney, Nepean,
PO Box 10,
Kingswood, Australia, NSW 2747
*Louise C. Young B. Comm. Ph.D. is a senior lecturer in the School of Marketing at the University of
Technology Sydney. Professor Ian F. Wilkinson B.Sc., M.Sc., Ph.D. is the Foundation Professor of Marketing,
School of Marketing, International Business and Asian Studies at the University of Western Sydney, Nepean.
This paper is in part based on the paper "Towards a Typology of Interfirm Relations in Marketing Systems " in
J-P Valla, R.Spencer eds. Proceedings of 8th I.M.P. Conference, Lyons September 1992. The authors wish to
acknowledge the helpful comments of the three anonymous reviewers in improving the paper.
The Space Between: Towards a Typology of Interfirm Relations
ABSTRACT
Understanding and managing the relationships between firms is the central issue in business to business
marketing. Some of the results of a program of research undertaken in Australia to study interfirm relations are
used to develop an empirically based typology of interfirm relations focusing on the mix of cooperative and
competitive elements coexisting in a relationship. Measures are developed of relationship cooperativeness and
competitiveness and relations are classified into one of four types based on whether they score high or low on
each dimension. A dynamic process model of interfirm relationships is developed as a basis for identifying the
main factors driving relationship development. Measures of these factors form the basis for regression analysis
to identify the characteristics of each of the four types of relations and examples of particular relationships are
used to illustrate the characteristics identified.
Keywords
Interfirm Relations, Cooperation, Competition, Relationship Marketing, Business to Business Marketing,
Relationship typology.
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The Space Between: Towards a Typology of Interfirm Relations
Introduction
The nature of an artwork is as much determined by the qualities of the “ground,” that is the space between and
around the figures/objects in the picture as it is by the figures themselves. The nature and shape of the space
between figures as much defines these figures as do the figures define the ground (Dewey 1934). It is much the
same in business marketing. The spaces between firms, their network of relationships, as much defines firms as
do these firms define the network. Increasingly, this is being recognized - a firm's performance is not simply the
result of its own resources, skills and efforts but depends in important ways on the quality of the relations it has
with other firms and organizations. Relations, both direct and indirect, are the means by which key resources are
accessed and value is created and delivered to customers. They include relations with suppliers, distributors and
customers as well as between organizations who do not trade with each other, e.g. competitors, co-members of
cooperatives, complementary suppliers, etc.
There is a long tradition within marketing considering the importance of relationships between organizations
going back to foundation work in marketing (e.g. Alderson 1958, 1965 and in particular to McGarry 1952).
Following a period of neglect there is now a burgeoning focus in interfirm relations in areas such as industrial
marketing (e.g. Axelsson and Easton 1992, Håkansson 1982, Håkansson and Snehota 1995), marketing channels
(e.g. Dwyer Schurr and Oh 1987) and relationship marketing (Gronroos 1993, Gummesson 1993, Morgan and
Hunt 1994, Sheth and Parvatiyar 1994). It is to be found also in writings in other areas of business including:
corporate strategy (e.g.Contractor and Lorange 1988; Davidow and Malone 1992), organization theory (e.g.
Ghosal and Bartlett 1990; Powell 1987), international business (e.g. Casson 1990; Forsgren 1989; Johanson
and Mattsson 1988) and technological change (Dosi et al 1988, Lundgren 1991).
Much of this work focuses on the role and importance of developing effective cooperative relationships with
other organizations as a means of gaining competitive edge, i.e. the need to cooperate to compete (Morgan and
Hunt 1994). The focus of this article is on the types of cooperative relations that exist between firms in
marketing systems and how this is linked to other dimensions of interfirm relations discussed in the literature,
including performance. First, we describe the value of a cooperative - competitive typology by looking at the
role of cooperation and competition in interfirm relations and by considering the broad conceptual framework
underlying our research program. Second the methods used to develop a comprehensive database of Australian
interfirm relations are described, including the way various dimensions of interfirm relations are perceived to
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co-exist and how these are measured. Third, we describe the way the typology of interfirm relations was
developed based on measures of cooperativeness and competitiveness. Fourth, we report the results of regression
analyses used to develop a profile of each type of relationship. We then identify the characteristics of different
types of relations in terms of other dimensions that previous research suggests affect the nature and development
of interfirm relations. Finally, the implications for developing and managing different types of relations and
future research are discussed.
Cooperative and Competitive Aspects of Interfirm Relations
The term cooperation describes a very wide variety of activity. All activity undertaken jointly or in
collaboration with others which is directed towards common interests or achieving rewards may be defined as
cooperation (Nisbet 1972). Cooperation contains sentiments (Childers and Ruekert 1986), and expectations of
future behavior (Deutsch 1962) as well as behavioral elements. In buyer-seller relationships cooperative
behavior includes the coordination of tasks which are undertaken jointly and singly to pursue common and/or
compatible goals and activities undertaken to develop and maintain the relationship (Argyle 1991). Cooperative
expectations include the attitudes, perceptions and sentiments (including concern for the other party’s
well-being, trust, and personal bonds arising among the people involved) (Childers et al 1984, Reve 1981).
Cooperative expectations arise between firms as a result of cooperative behavior and sentiments and also support
and sustain that behavior.
Firms specializing in different production and marketing activities participate in a complex form of cooperative
behavior where "different and complementary actions (are) executed simultaneously and with reference to each
other" (Asch 1952, p.175). In part this is possible as a result of the operation of system norms; common
understandings about the way business is conducted facilitate interactions occurring in social systems . A
considerable portion of commercial behavior is organized through such norms (Schermerhorn 1975).
Cooperation is also facilitated by relationship norms. In relationships cooperation can be part of the norms, e.g.
through time the division of tasks and the way in which these will be performed are embedded into the
relationship. Alternatively cooperative behavior can be overt where a person or firm may direct the actions of
another as a means of organizing a joint action; or people or firms may jointly organize their activities to achieve
a given end.
Relations among firms are characterized by mixed motives involving both mutually compatible as well as
incompatible goals. As Alderson (1958) observed there is an underlying tension between the desire for what he
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termed monostasy and systasy i.e. the simultaneous desire to remain independent and free from interference from
others (monostasy) yet at the same time to depend on others to achieve common ends (systasy). As Alderson
observes both are desirable states for participants: “(E)veryone desires to stand alone, to maintain some degree
of independence and some freedom from interference from without. The same individual is usually aware of the
help he needs from others in achieving his objectives” (p326).
Firms may choose to cooperate with respect to some goals and not to cooperate with respect to others. Non
cooperation has been identified with opportunism and conflict in the marketing literature. Early work focused
on conflict as the other end of a cooperation continuum (Pearson and Monoky 1976, Stern et al 1979). But
conflict is not simply the absence of cooperation (Frazier 1984, Morgan and Hunt 1994). It is a separate
dimension of relations as has been proposed by a number of researchers e.g. Childers et al 1984, Lusch and Ross
1981, Mallen 1969, Michie and Sibley 1979, Stern 1971. In this view conflict refers to the extent and intensity
of disagreements that arise between firms. Such disagreements can arise as a result of attempts to cooperate to
achieve mutually compatible goals, for example over the means of achieving these goals. They can arise as well
as a result of conflicts of interest due to incompatible goals. This view is supported by more recent theories
(Kaufmann and Stern 1992) which see cooperation and conflict to be two separate dimensions of relations rather
than opposite ends of the same dimension
Work in transaction costs economics suggests opportunism as non-cooperation. It is defined as “self interest
seeking with guile” (Williamson 1975 p6). Opportunism reflects only a subset of possible non-cooperative
attitudes, sentiments and behaviors. It is conceptualized in proactive, behavioral terms including things such as
deceitful withholding of information and failing to keep promises. It does not include hard bargaining or
manifestations of conflict (John 1984). Nor does it consider manifestations of self-interest without guile. This
could be an issue when non-cooperation is part of relational norms and is not consciously executed.
In the social science literature non-cooperation has been conceptualized as competition. Early work is
represented by May and Doob (1937), early anthropological studies (e.g. Mead 1937), classical sociological
theory (e.g. Durkheim 1964 and Tonnies 1959) and developmental psychology (e.g. Piaget 1932). Later work
in the area studies cooperation and competition in the context of game theory (social psychology), animal
behavior, social relationships and communication. (See Argyle, 1991, for a fuller description.). Cooperation
and competition are often viewed as mutually exclusive properties of relationships. In cooperative interactions
both parties can gain from the interaction while in competitive interactions the relevant goals of both parties
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cannot be simultaneously satisfied (Alderson 1965, Deutsch 1949, Stern 1971). A relationship where there are
mutual and positive bonds between the parties is seen as cooperative, whereas a competitive relationship is
characterized by an absence of bonds or negative mutual bonds (Glaser and Halliday 1984, Heider 1958, Young
1992).
Others have argued that cooperation and competition coexist in relations (Michie and Sibley 1979, Nisbet 1972)
and refer to what may be termed other-oriented and self-oriented motives and behavior respectively (Deutsch
1960). As Deutsch (1962, p.278) observes, "people may be promotively interdependent with respect to
particular goals and not others. Firms manufacturing the same product may be cooperative with regard to
expanding the total market but competitive with regard to the share of it each attains.” Within a buyer-seller
relationship parties may cooperate to achieve reliable quality, delivery, and acceptable price but compete for the
most favorable payment terms. Parties may continue to compete for more advantageous financial terms within
the context of an otherwise cooperative relationship.
Interfirm cooperation comprises the behaviors and sentiments which are directed towards assisting trading
partners towards achieving their goals. Here we take the view that interfirm competition comprises the
behaviors and sentiments which are directed towards impeding trading partners from reaching their goals while
facilitating reaching one’s own goals. Further we would argue that this allows a much broader focus than would
a conceptualization of non-cooperation as either conflict or opportunism.
Conceptual Framework
The general conceptual framework guiding the research is summarized in Figure 1. This model guides the
identification of factors affecting the cooperative-competitive norms in a relationship. It is a dynamic model of
relationship development in which the interactions taking place over time result in the building up of a set of
social norms (Dant and Schul 1992, Heide 1994) governing the relationship together with associated attitudes
and perceptions which may be described as the atmosphere of the relationship (Hakansson 1982). These social
norms, attitudes and perceptions in turn shape on-going patterns of action and interaction.
Atmosphere is
defined quite broadly to include a variety of constructs used by researchers to characterize dimensions of
relations. A central aspect is the cooperative and competitive norms of the firms involved, including trust and
opportunism. Trust is here conceptualized as cooperative expectations (along the lines of Deutsch 1960, 1962)
emotions and sentiments (Young 1996).
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Other dimensions of relationship atmosphere included are drawn from work on interfirm relations i.e.
commitment to the relationship (Morgan and Hunt 1994, Gundlach, Achrol and Mentzer 1995); closeness
-distance as reflected in the development of personal bonds between people in the two firms (Cunningham and
Homse 1986, Hakansson 1982); power-dependence (Frazier and Summers 1986, Wilkinson 1979) and
satisfaction (Wilkinson 1979).
Figure 1 about here
A relationship functions in the context of a particular history and environment including other relations. The
previous history of interaction and other relations provide comparison levels from which to judge performance
and other aspects of relationship functioning (Anderson and Narus 1990).
Other contextual factors shape the
ongoing interactions and development of the relationship. These include the nature of the products involved
and tasks to be performed which affects the nature of the contacts and information exchanged between the
parties (Hakansson 1982 p33); the characteristics of the participant organizations such as the relative size; and
any contractual or ownership links binding or constraining the firms.
Cooperative-competitive norms manifest themselves in the way exchange activities and interactions are
coordinated and in the extent and nature of conflicts that arise and how they are handled. The means of
coordination include the types of communication used, the means of influence used and the use of trusting
responses or actions (Anderson and Narus 1990). The use of particular means of coordination has feedback
effects on the atmosphere through the performance taking place and directly through the experience of engaging
in particular interactions. One aspect of this is the effect of using different means of influence on the
perceptions of the influencer and target (Kipnis 1976, Wilkinson and Kipnis 1978). Conflicts and the way they
are managed, especially whether they are handled in a functionally beneficial way (Anderson and Narus 1990), is
another aspect of the interaction experience that is both shaped by the existing atmosphere and in turn shapes it.
The performance outcomes, as well as the experience of the interaction itself (including communication,
personal interaction, power plays and conflict episodes) are interpreted in the context of the particular history of
the relationship as well as in terms of other relations the firms are involved in. These outcomes and experiences
serve to reinforce or undermine aspects of relationship atmosphere including the cooperative and competitive
sentiments and norms.
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Previous models have proposed various causal links among dimensions of atmosphere and with other aspects of
relationship structure, conduct and performance. Problems arise in specifying the causal sequences involved
because the pattern of causation can be two way.
For example Dwyer Schurr and Oh (1987) propose that trust
causes communication whereas Anderson, Lodisch and Weitz (1987) propose that communication causes trust.
Both are correct in that good communication provides the foundation for building trust but levels of trust or
distrust that have been built up through past communication and interaction also affect subsequent
communication (Anderson and Narus 1990). This led Anderson and Narus (1990) to view their model as a
static one representing the relationship at one period of time. Hence feedback effects between communication
and trust or other aspects of the relationship are not considered.
Our purpose is different. We do not seek to identify a particular causal sequence among the various dimensions
of a relations identified but to identify different types of patterns of relationship norms and on-going interactions
that arise in interfirm relations over time. Thus our model focuses on the iterative nature of relationships and
the importance of feedback effects leading to reciprocal causation. The atmosphere is shaped by the ongoing
patterns of interaction taking place in a particular environmental context together with their associated outcomes.
The various dimensions of relationship atmosphere, including cooperative and competitive norms are viewed as
a being co-produced by the ongoing interactions taking place between the firms in a particular environmental
context and in turn shape those on-going interactions (Hakansson 1982, Hakansson and Snehota 1995). The
various dimensions of atmosphere are interdependent but there is not a strict causal sequence of effects.
Cognitive balance theory (Festinger 1957, Heider 1958) indicates that the various dimensions of relationship
atmosphere will tend to move over time to be mutually consistent and consistent with the experience of ongoing
patterns of interaction in the relationship. A balance is achieved when both parties hold views of each other
which lead them to behave towards each other in such a way as to support and reproduce these patterns of
perceptions and actions. This does not mean that both parties will have necessarily the same view of the
relationship but that they are mutually compatible and self sustaining views. Otherwise various forms of tension
will arise in the relationship leading to attitudinal and behavioral changes.
What is of interest here is the different kind of relationship situations that can arise over time as a result of this
interactive process i.e. the types of balance among relational norms, attitudes and perceptions and interaction
patterns that arise in relations. Are there different types of “equilibrium solutions” or attractors for
relationships? Previous relationship development models (Ford 1980, Dwyer Schurr and Oh 1987) propose
various stages of development of relationships as they move to more mature, committed long term relationships.
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But not all relations go through these stages, some remain arms length, adversarial or mutually short term
oriented (Low 1996, Wilkinson and Young 1997). Additional issues are what kinds of circumstances tend to
produce particular “equilibrium” situations and how effective and stable they are.
The IRRP Data Base
The Interfirm Relations Research Program (IRRP) commenced in Australia in the mid eighties. The central
focus has been on the nature, development and performance of different types of interfirm relations. The IRRP
research proceeded in three main stages. First a series of thirty five in-depth semi-structured interviews were
carried out with managers about their firm’s relations with another firm including: the channel/industry context,
the history of the relationship; the means used to coordinate activities; the transaction processes taking place;
the attitudes and beliefs held by the trading partners about each other; the reasons for the continuation of the
relationship; and assessment of the relationship and its future. A wide range of organizations varying in size,
product or services traded and their method or relationship management were included. A fuller account of the
stage one study is to be found in Young and Wilkinson (1989).
In the next stage of the research a pilot study was undertaken using an early version of the survey questionnaire.
The items used to measure different aspects of interfirm relations were developed based on the results of the
exploratory interviews and previous studies including: the IMP Group (Hakansson 1982), Reve (1981), Arndt
(1982), Zand (1978), Schul et al (1985) Schurr and Ozanne (1985) and Frazier (1984). Items were chosen on
the basis of their ability to assist in operationalizing relationship context, atmosphere, performance or
coordination. Respondents were asked to nominate a relationship their firm had with another firm that they
were familiar with and to complete the questionnaire in terms of that relationship. Student interviewers were
used to contact a convenience sample of respondents. The majority of the questionnaire was then
self-completed by respondents. Altogether 120 questionnaires were completed, comprising a diverse array of
industries and types of firms.
The results of the pilot study were used to develop and refine the questionnaire for the main study. The method
of relationship selection was also revised because giving respondents a free choice as to which relation to focus
on in the interview led them to invariably choose very good relations. This resulted in limited variance in the
sample in terms of relationship performance. In the main study a procedure based on that used by
Mummalaneni and Wilson (1986) was used to select the relationship to be the focus of attention in the interview.
Respondents were asked to nominate, in a confidential manner, one or more trading partners with which they
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have a good, moderately good, not very good and poor working relationship. The questionnaire then indicated
which one of these was to be selected as the focus for the interview and was done in such a way as to give an
equal chance of each type of relation being selected.
Throughout the remainder of the interview the trading
partner selected was referred to as “Firm X.” The questionnaire covered a comprehensive range of issues
related to the nature and operation of the relation and the behavior and attitudes of the respondent’s firm and
their perceptions of the other firm.
It should be noted that the study views the relationship through the perceptions and experiences of one firm.
We did not try to interview informants from both firms in the relationship as this would require the respondent to
reveal the name of the other firm involved in the relationship. Our experience with the questionnaire indicates
that this tends to restrict the kind of relationships respondents are willing to be interviewed about and hence to
bias the kinds of relations included in the sample. Respondents are more willing to provide the name of the
other firm in cases where the relationship was long standing, harmonious and performing well, and are less
willing to do so in situations where the relationship is not performing well and strong conflicts and negative
feelings exist.
Two parallel versions of the questionnaire were developed, one for buyers and one for sellers, as pretesting
showed that a single version covering both could be confusing for respondents. i
Respondents were only
interviewed about relations with which they were familiar. Provision was made in the questionnaire for
obtaining multiple informants. Respondents were asked to indicate other people in the firm that were involved
in the relationship and, where possible, at least one of these people was contacted and asked to complete a
questionnaire about the same relationship.
A combination of personal interview and self-completion of the questionnaire was used to gather the data for the
study and interviews took from one to two hours to complete. The nature of the survey required an interviewer
to be present for at least the initial part of the interview. The researchers and students enrolled in various
marketing courses undertook interviews as part of the requirements for their course. The sample of respondents
was drawn from the personal and work contacts of the interviewer and lists provided by industry organizations. ii
The Sample
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The sample is not intended to be a representative sample of interfirm relations. Instead respondents have been
chosen in a variety of ways in order to achieve a diverse sample of industries and firms. In addition the focal
relationship in each interview has been systematically selected from among those the respondent was familiar
with in order to ensure a mix of different types of relations and to avoid respondent selection bias. This
approach to sampling was considered appropriate at this stage of the research as it ensures variation in key
dimensions of relations and the purpose of the study is to identify the different types of relations that exist rather
than to assess how frequently different types exist in particular industries or in relations involving particular
types of firms.
Altogether one or more interviews were conducted concerning 367 interfirm relations. Buyers and sellers are
equally represented and in 39% of relations more than one informant was interviewed. 69% of interviews
concern domestic relations and 31% international relations. Manufacturer to retailer/wholesaler relations
accounted for 27% of relations in the sample, followed by service supply relations (25%), manufacturer to
manufacturer relations (19%), wholesaler/retailer relations (18%) and other types (7%). 35% of relations
concern the trade of consumer products or services, 48% industrial products or services and 19% were mixed.
In terms of the types of working relations, 46% were described by the respondent as good, 26% as moderately
good, 14% as not very good and 13% as poor. Due to the selection procedure used, a greater proportion of
poorer relations than respondents are generally familiar with are included in the sample. Respondents reported
that 58% of all relations they were familiar with were good, 29% moderately good, 12% not very good and 7%
poor. This over sampling of poor relations was done deliberately to ensure a reasonable sub-sample of relations
that were performing less well.
Measurement of Relationship Dimensions
To develop measures the process described by Churchill (1979) and Carmines and Zeller (1979) was followed.
Coefficient alpha is used to indicate the commonality of the set of items developed to capture a construct.
Individual items which substantively lower the alpha were deleted. Coefficient Alpha assumes
unidimensionality in the measurement items but does not provide a check of this. Hence exploratory factor
analysis was used to see whether the items measured reflect one or more underlying dimensions (Green and Tull
1978, Norusis 1986,). Factor loadings were used to determine the set of items comprising the measures.
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The resulting measures were validated in several ways. Firstly, the items included in a scale were tested with
factor analysis on a second sample, that of the second respondents. Secondly, in situations where more than one
scale results from a group of measures, the internal consistency of each scale is checked using coefficient alpha
and a separate factor analysis is run to confirm its unidimensionality. Thirdly, along the lines of the work of
Anderson and Narus (1984) and Gerbing and Anderson (1988), correlations between the items for the first and
second respondents were examined to ensure that the highest correlations occurred between the same items,
otherwise they were excluded from the measures. Lastly, items were dropped from a scale if they correlated
more highly with an item included in another scale.
1) Relationship Cooperation and Competition
Two types of measures were developed: those relating to the respondent’s firm’s and the target firm’s
cooperativeness and/or competitiveness.
a) Respondent Firms' Cooperativeness and Competitiveness:
The questionnaire contains fourteen items which relate to various aspects of the respondent firm’s
cooperativeness and competitiveness. The cooperative items include both the behaviors involved in working
together and maintaining a relationship plus interest and concern for the other firms success.
Competitive
items include behaviors impeding the other firm from reaching its goals and associated motivations.
One item
had a low total correlation with the other items and was excluded. The alpha for the remaining items is .79.
The Scree test indicates the presence of two factors and the factor loadings for each are shown in Table 1. High
loading items on the first factor are concerned with working together and having and/or displaying positive
attitudes, sentiments and emotions towards the trading partner.
These are aspects of cooperation as
conceptualized here and the factor is so labeled. The second factor contains items concerned with
self-interested and misleading behavior and includes items similar to those used by John (1984) to measure
opportunism. Here it is labeled competitiveness.
Table 1 about here
The underlined loadings in each factor indicate the items included in the scale representing the factor. An item
is included if its loading exceeds .50 thus giving significance levels of less than .001 (Burt and Banks 1947).
Because some items load highly on more than one factor (both here and in subsequent analysis) a decision rule
was developed for excluding items loading on a particular factor based on their loadings on other factors. Items
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are excluded if their loading exceeds .40 on another factor or if the difference between their loading on the focal
factor and the next highest loading is less than .20. This was done to improve the discriminant validity of the
scales.
The alpha for each of the scales is shown in Table 1. A factor analysis of the individual factors shows each to
be unidimensional. The correlations between the first and second respondent's responses to these items show
higher correlations between items in the same scale than between those items in the other scale. A factor
analysis of the responses for the second respondent show the same underlying structure and similar loadings for
individual itemsiii.
The two factors show discriminant validity in that a different pattern of correlations
emerges between each of the scales and measures of relationship atmosphere and context (Carmines and Zeller
1979)
b) Cooperativeness and Competitiveness of trading partner (i.e. Firm X)
Twenty items relating to the target firm's cooperativeness and competitiveness were included in the questionnaire
as shown in Table 2. There is very high commonality between items (alpha = .96) and all items were retained
for factor analysis.
Table 2 about here
A three factor solution was chosen for analysis based on the Scree test and the interpretability of the factors.
Table 2 presents these factors and their loadings. The first factor includes items related to Firm X’s
cooperation, honesty, fairness, and reliability and the degree of trust in Firm X. This factor is labeled
"cooperativeness". The second factor includes items concerned with the target firm's interest in and motivation
towards the respondent firm and is labeled "positive motivation." The third factor comprises items describing
various kinds of self-interested and negative behaviors by the target firm. This factor is labeled
"competitiveness".
The underlined items form the scales. The alpha for each of these scales show acceptable levels of
commonality. Validation of these scales on the second respondent show a very similar factor structure. A
factor analysis of the individual factors shows each to be unidimensional. Correlations between respondents
one and two show higher correlations with items included within a scale than with those in other scales. Ten
items were excluded from the scales according to the decision rule described above because they loaded on both
the cooperativeness and positive motivation factors.
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The correlations between the five scales developed to measure relationship cooperativeness and competitiveness
are shown in Table 3
Table 3 about here
2) Other Measures of the Relationship
Based on the relationship development model depicted in Figure 1, various other dimensions of relationships
were measured that are likely to affect the types of cooperative and competitive norms emerging. These are
grouped into four types in line with the conceptual framework depicted in Figure 1. The measures are listed in
Table 6 and further details of the multi-item measures used, including sample items, are given in the appendix.
a) Context of the relationship.
This includes various measures indicating the nature of the firms involved and the business transacted in the
relationship and the task environment. Dummy variables are used to indicate whether the respondent’s firm is
the buyer or seller, what is bought and sold in the relation (i.e. product or service, consumer or industrial) and
whether it involves international trade. Other measures included are the relative size of the participant firms,
the percentage of business (purchases or sales) the respondent firm does with the other firm, the duration of the
relationship and a dummy variable indicating whether any form of formal linkage exists between the two firms
(e.g. companies have ownership stakes in each other, there is a joint venture in place, there is a binding contract
ensuring relation continuation). Three measures of the primary and secondary task environment (Achrol, Stern
and Reve 1983) are included indicating the volatility of the market and the nature of the future prospects for each
firm in the relation. These are formative scales as shown in the Appendix. Because they are formative scales
coefficient alpha is not appropriate. A single item rating of the alternatives to Firm X is used to indicate CLalt
(Anderson and Narus 1990). Lastly, the history of the relationship is measured in terms of a multi-item scale
indicating whether the relation has been improving or deteriorating.
b) Informant Characteristics
As the relationship is reported through a key informant some measures of their characteristics and involvement
in the relationship were included as potential discriminating variables. These are their age and the time they
have been involved in the relation as well as three single item scales designed to indicate their orientation to
business relationships in general.
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c) Relationship Atmosphere
Apart from the central constructs of cooperation and competitiveness described above, other dimensions of
relationship atmosphere were measured. Two single item measures of commitment were used, one rating
general commitment to the relation and the other rating the likelihood the relation will cease. These correspond
to the affective and behavioral intention aspects of commitment (Gundlach, Achrol and Mentzer 1995 p79-80).
Power-dependence was measured in two ways. First a formative scale was developed measuring the relative
influence of the firms over specific relationship issues. Respondents were asked to allocate 100 points among
up to nine issues identified as relevant to the relationship to indicate their importance. The issues included are
product /service quality, financial arrangements, delivery, before and after sales service, guarantees and
warranties, other assistance (e.g. sales promotion), and other issues.
(These issues were used as the basis for
developing measures of conflict, satisfaction and performance as well as relative influence, as indicated below).
Relative influence is measured in terms of respondent’s ratings of who has the most say on each of the issues and
the scale is summed across issues weighted by the importance of the issue. The second type of measure of
power dependence comprises two single item scales for the respondent’s firm and Firm X respectively indicating
the ease of replacing the other firm and the impact on the firms business of being let down by the other firm.
A multi item measure (alpha = 0.80) of the closeness or distance in the relationship was developed based on
items relating to the existence of close personal relations with members of the other firm including non business
and social interactions and personal friendships. The items were drawn in part from those used by Reve (1981).
Lastly a multi-item measure of satisfaction in the relationship was developed (alpha = 0.85) in which
respondents were asked to rate their satisfaction in terms of specific issues identified as being relevant to the
relationship (as described above) and a general rating of the relationship compared to other relations with which
the respondent is familiar.
d) Relationship Coordination Processes
A number of measures were used to reflect different aspects of the way interaction is coordinated. These
comprise measures of methods of influence used, the formalization of the relationship, the frequency of
communication, the extent of bargaining taking place and the extent of conflict experienced and how this is
resolved. Respondents were asked to indicate the frequency with which their firm and Firm X used different
types of influence tactics. Factor analysis revealed a two factor solution for both the respondent firm and Firm
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X’s perceived influence tactics. The stronger means of influence e.g. likelihood of demanding, threatening, etc.,
loaded on one factor and weaker tactics e.g. discussing, compromising, providing information, loaded on the
other. Separate multi-item scales were developed to measure each type of influence for the respondent firm and
Firm X with alphas varying from 0.62 to 0.72. This grouping of influence tactics is supported by previous
studies (Kipnis and Wilkinson 1978, Schmidt et al 1980) and is similar to the distinction between contingent and
non-contingent means of influence (Frazier and Summers 1984)
Twelve items were used to measure the degree of formalization of the relations based in part on Reve (1981).
Coefficient alpha and factor analysis reveals two sets of items. One comprises eight items reflecting different
types of formal and informal coordination and the Scree test indicates two underlying factors i.e. the use of
formal (e.g. government laws and regulations) and informal (e.g. implicit understandings) methods of
coordination (alphas = 0.85 and 0.63 respectively). The remaining four items form a scale reflecting the degree
of dependence on contracts in the relationship including the importance and coverage of written contracts (alpha
0.67). Two single item measures of communication are used, one rating the frequency of contact and the other
the extent of bargaining and negotiation necessary in transactions.
A formative scale to measure conflict was developed in terms of the frequency and intensity of disagreements
experienced in the relation (Anderson and Narus 1990). Respondents were asked to rate of the frequency and
intensity of disagreements on the issues identified as being relevant to the relationship (see above). The product
of frequency and intensity is summed across all issues and weighted by the importance .
e) Performance
A formative scale was developed to measure operational performance. Respondents were asked to rate the
performance of the other firm in terms of the issues identified as being relevant in the relationship (see above).
Ratings were summed across issues weighted by the importance of the issue.
Identifying Types of Interfirm Relations
In order to develop a simple typology of interfirm relations from the five measures of cooperativeness and
competitiveness described above, principle components analysis was used to summarized them in terms of two
underlying dimensions. The results are shown in Table 4. Cooperation and competition emerge as separate
dimensions rather than opposite poles of the same dimension, suggesting that relations comprise different mixes
of each rather than being one or the other. The first dimension relates to the respondent’s firm and Firm X’s
page 16
perceived cooperativeness and positive motivation and is labeled relationship cooperativeness. The second
dimension relates to the competitiveness of each party and is so labeled.
Table 4 about here
Stepwise regression and bivariate correlations were used to identify the predictors of the principal component
scores for relationship cooperativeness and competitiveness. Separate analyses were done for all relations and
for relations in which the respondent’s firm is the seller in the relation and when they are the buyer in the
relationship. The beta weights for the measures included in the stepwise regression are shown Table 5 and
correlations are shown in Table 6.
Tables 5 and 6 about here
The resulting regression equations are all statistically significant with the percentage of variance explained being
higher in the case of the cooperativeness scores. The results shown in Tables 5 and 6 suggest that high versus
low cooperation relations have the following characteristics in terms of each of the main dimensions of relations
included in our conceptual framework:
1. Context
-The respondent’s firm can be either a buyer or seller;
-The environment presents good prospects for growth for both Firm X and the respondent firm
-The alternatives to Firm X are likely to be perceived as worse than Firm X;
-The relation is perceived as growing and/or changing for the better;
-The respondent is older, has been participating in the relationship for longer and believes there are
friendships in business contexts.
2. Relationship Atmosphere
-There is a higher degree of commitment, personalization and expectation the relationship will
continue;
-There is considerable mutual dependence in that it would be difficult for each to replace the other;
-There is a higher level of satisfaction with the relationship.
3. Coordination Processes
-There is a greater likelihood that Firm X will use weak means of influence to coordinate the relations
page 17
and strong influence tactics will be less likely to be used;
-Formal and informal means of coordination are less likely to be used;
-There is unlikely to be dependence upon contracts as a means of coordination;
-Contact between the firms is more frequent;
-There is a lower level of conflict and effective conflict resolution mechanisms are likely to exist.
4. Performance
-Firm X’s performance is rated highly.
While the general pattern of results remains largely the same irrespective of whether the relationship is viewed
from the perspective of the buyer and seller some differences are evident. When the respondent is a buyer,
more cooperative relations are more likely to be international, to be longer in duration, to need more negotiation
to complete transactions and to rate their supplier’s performance highly than when the respondent is a seller.
More versus less competitive relations have the following characteristics:
1. Context
-The respondent’s firm is more likely to be the seller in the relationship;
- More likely to involve consumer products or services;
-The relationship is more likely to be international;
- The percentage of business accounted for by Firm X is likely to be greater:
- A formal link between the firms is more likely;
-The business prospects for Firm X are likely to be poorer;
-Alternatives to Firm X may be perceived as better;
- The respondent agrees that there are no friends in business but accepts that social contact builds
relations
2. Relationship Atmosphere
-Dependence is more likely to be asymmetric with Firm X being perceived as more able to replace the
respondent’s firm but the respondent’s firm more likely to be in trouble if let down by Firm X;
- The relationship is more likely to involve a degree of personalization
-There is dissatisfaction with the relationship.
page 18
3. Coordination Processes
-Both strong and weak means of influence are likely to used by the respondent’s firm and Firm X;
-There is likely to be a greater dependence on contracts;
-The relationship is more likely to involve considerable negotiation with Firm X;
-Higher levels of conflict are likely to be present and conflict will be more difficult to resolve.
4. Performance
- no significant relationship.
Some differences emerge in the pattern of predictors for relationships viewed from the perspective of buyer
versus the seller, indicating that the significant predictors of competitiveness may be relevant to one type of
relation but not the other. In more competitive seller relations compared to buying relations, respondents are
more likely to perceive their own business prospects as poor and that there are no friends in business. More
competitive buyer relationships are likely to involve consumer products or services, a greater percentage of
purchases through Firm X, the existence of a formal link between the firms, a more personalized relationship,
more use of weak means of influence by Firm X and a lower rating of the operational performance of Firm X.
The greater degree of personalization in the relationship for buyers is interesting as it does not emerge in the
bivariate correlations. An inspection of relationship observations having the greatest effect on the regression
coefficients indicates that relations do exhibit such patterns and that it is not due to multicollinearity. Hence
buyers can develop personal bonds with suppliers but still have high levels of competitiveness in the relationship
suggesting that you might fight more with those you are closer to.
Discussion
The focus of our analysis is on the types of balance that may be achieved in relationships between the
cooperative and competitive dimensions and how stable particular combinations are. Therefore, for the
purposes of analysis the relations were classified into four types based on whether they scored above or below
average on the cooperativeness and competitiveness factor scores. The separation between high and low
scoring groups was maximized by excluding relations scoring close to the mean (i.e. <0.1 and >-0.1) on either
dimension. The four types of relations are therefore: Low cooperation-low competition; Low cooperation-high
competition; High cooperation-low competition; and High cooperation- high competition. This is a typology
similar to one proposed by Lado et al (1997).
page 19
In order to develop a profile of the characteristics of each of the four types of relations, the general
characteristics of high versus low cooperative and competitive relationships emerging from the preceding
analysis were used. In addition, the mean scores or percentage of relations exhibiting a particular characteristic
were computed for each type of relation and analysis of variance was used to identify significant differences
across the four types. The results are shown in Table 7. Many of the differences reflect the already identified
characteristics of cooperativeness and competitiveness. But additional features of relations exhibiting particular
combinations of cooperativeness and are also highlighted. The general picture emerging in Table 7 is
summarized in Figure 2. In the following discussion we use examples of relations drawn from the data base to
illustrate the characteristics of the different types of relations.
Table 7 and Figure 2 about here
a) High Cooperation Relations
From the preceding analysis we know that in more cooperative relations stronger bonds seem to exist between
the parties in the form of a commitment to continued trading, satisfaction with the relation as well as personal
links. When relations are characterized by high levels of cooperativeness, higher levels of competitiveness
emerge when there is asymmetric dependence, with the respondent firm more dependent on Firm X than Firm
is on it. This is reflected is in the percentage of business involved with Firm X and the firm likely to be in
serious trouble if let down by Firm X. The atmosphere also tends to be one of lack of commitment and low
satisfaction for the respondent’s firm. Coordination involves the respondent’s firm more likely to use strong as
well as weak influence tactics but Firm X only more likely to use weak means. Considerable bargaining is
necessary and more conflict exists. The picture emerges of relationships under strain due to asymmetric
dependence, power plays and conflict and strains due to the international dimensions of the relation but held
together by bonds built up over time and the formal links between them.
With both high levels of cooperativeness and competitiveness it might be expected that the relationship is
unstable. But relations above average on cooperativenes and competitiveness are generally perceived by
respondents to be effective. 66% of the relations in this group are described as good working relationships.
Only 8% are perceived as not good or poor. This would indicate that the enhanced social and operational
functioning often associated with higher cooperation can outweigh or overcome many of the problems likely to
be associated with higher competition.
page 20
An example is the case of a relationship between an advertising agency and a smallish mining company now
showing above average cooperation and competition scores. This relationship was described as having been
highly cooperative and not at all competitive for more than ten years. The mining company then entered a
period of unexpected and rapid growth and became demanding and difficult to work with. The agency lacked
experience in dealing with the problems of large companies and the relation entered a phase of diminished
cooperation. It was rebuilt, however, as both parties recognized that their long and effective prior association
was an asset worth repairing and nurturing. In this case the increased competitiveness resulting from the
changed circumstances of the trading partner led to strains but the bonds resulting from the past enabled
cooperation to be re-established.
Sometimes "competitiveness" is not perceived to be a problem but rather part of the normal practices of doing
business. A firm distributing pipes pride themselves both on working well with their customers and being loyal
to their own interests, i.e. achieving everything they can for their company. They assume their trading partners
do likewise and accordingly have set up systems and procedures that minimize the effect of other firms'
opportunism on themselves. However, this opportunism (their own and their partners’) is not perceived to be
inappropriate or conflict-inducing but rather sound business practice. Hence the reported relationship a
customer is quite stable though the levels of both cooperation and competition are above average.
The manufacturing manager of a company producing consumer appliances describes a an above-average
competitive and cooperative relationship with a supplier of their components in this way: "we have been doing
business for so long we know each other inside out; there is tremendous involvement with each other now and
(it) has been so for a long time." The purchaser is now much larger, more powerful and more innovative than
its relation partner. But the reverse was true 30 years ago when they commenced trading. Each firm has
differing ways in which they wish to evolve and to respond to market conditions. They each attempt to
incorporate their own approach into the relationship. The respondent firm recognizes that its trading partner
will either not benefit from or will not perceive the benefits of the management techniques and marketing
initiatives the respondent firm continues to introduce. This partner almost always has to be compelled into any
change. But this seems to be accepted as just part of the process of doing business with them, has been going
for quite awhile and is anticipated to continue. In other words a combination of high competition and
cooperation can be embedded in the relationship culture as long as it remains within acceptable bounds and
occurs within a history of effective interactions.
page 21
If sources of strain are not present, or can be easily resolved, a committed, mature type of relationship is
indicated involving high levels of cooperation and low levels of competition. Such relationships tend to be stable
in that 50% of respondents with relationships of this type report relationship quality to be consistent, 50% report
the relationship to be continuing to improve and none report a deteriorating relationship.
b) Low Cooperation Relations
Relations with a low level of cooperativeness tend to have weak bonds. Factors that distinguish high versus low
competitiveness in such relations are that the respondent firm is a seller, the relationship involves international
trade and has been continuing longer. Firm X’s prospects are not as good and the respondent firm is likely to be
less satisfied in the relation, to be more likely to use weak influence tactics whereas Firm X is more likely to use
stronger tactics. There is also a greater dependence on contracts, more bargaining and negotiation involved and
more conflict. The parties seem to compete to control the relationship but this does not appear to be effective.
These relationships appear dysfunctional with high levels of conflict, dissatisfaction, power plays by Firm X and
a need to have and refer to formal contracts.
In relationships with lower cooperation and higher competition scores, the overall quality is more likely to be
deteriorating than improving, with 63% of these relationships reported as getting worse or are poor and staying
the same. In other words, whatever the reason for the relation's "illness," they are not likely to be moving
towards recovery. 44% are seen to be more likely than not to cease in the foreseeable future.
One example is a firm exporting to the Middle East that began the relationship optimistically but were
disillusioned in the first or second transaction by their partner’s opportunistic behavior. They reacted with
distrust and opportunism of their own, and have continued to be ever-more-disillusioned and opportunistic.
This relationship is now reported to be very competitive and minimally cooperative.
In some instances low cooperation-high competition relationships continue because of contractual agreements
which require that they do so. This is typified by a relationship between two transportation companies in the
leisure and tourism market. They are involved in a joint venture which started with high hopes but has been
characterized by mismanagement and opportunistic behavior by one venture partner. The "wronged" firm is
merely biding their time until the ten year agreement is at an end.
page 22
When dependence is low on both sides, competitiveness also tends to be low. Such relations are likely to be
forming or dissolving. But relations with less extreme but still below-average overall cooperation and
competition scores may well be ongoing and of the mutually convenient, uninvolved, "transaction-based” or
arms length type. These would include relations where firms are essentially unimportant to each other due to
multi-sourcing, competitive bidding or only intermittent need of one another. An example is that of a fast-food
chain with a printer supplying promotional material. The printer is competent and has a history of successful
interactions with the respondent firm. But the purchaser's policy precludes establishment of a loyal, committed
relationship. The printing firm is a member of pool of similarly competent print suppliers, used always on a
quote-for-job basis. Their best efforts could achieve them no more than "always-a-share" of the available
business (Jackson 1985). Such a policy would seem likely to be one of the causes of the long-term low but
stable levels of cooperation and competition present in this relationship.
Conclusions
Our results show that relationships are multidimensional, including both elements of cooperativeness and
competitiveness. Many evolutionary paths may have led to a similar relationship state and it is this particular
history (the shadow of the past), as well as the hopes and aspirations of the relationship partners for the future
(the shadow of the future), that shape the future of the relationship rather than simply the current state itself. A
relationship also operates in the context of other relations and experience of these other relations provides a basis
for comparison which affects how a focal relation is evaluated.
A range of types of relations appear to be effective and stable. As might be expected these include relations
with low levels of competition and high levels of cooperation. There is usually little “space between” these
trading partners. Indeed our results show that relations of this type have good life expectancies with over 95%
expected to continue indefinitely. Their nature nurtures the relationship and the ties that bind them together
grow ever-stronger and more meaningful to the participants. Strongly bonded, cooperative relations provide a
stable platform for long term investment and for joint planning and development to respond to changing
conditions (Hakansson 1987). But highly cooperative, committed relations can become ineffective and
inefficient if they resist adaptations to new conditions that may call for the establishment of relations with other
partners. Moreover, as we have seen, other types of relationships can be perceived as very stable, be mutually
page 23
satisfactory and have excellent prognoses. Norms can evolve that make low levels of cooperation or high levels
of competition acceptable and ongoing, legitimizing them.
Relations unlikely to be effective or stable are those combining low cooperation and high competition. Here
unsatisfactory outcomes can lead to less exposure to the relation partner, resulting in less effective cooperation
and even more unsatisfactory outcomes. The “space between” these traders grows ever greater with dissolution
likely - often sooner rather than later. "Stability" in this type of relationship may be maintained with the
assistance of ongoing legal commitments rather than by other, more voluntary ties.
Our work provides insight into the kinds of “attractors” that may exist for relations and what are some of the key
drivers towards these attractors, such as relative dependence, environmental conditions, the accumulation of
bonds and experience built up over time, previous commitments (e.g. legal ties) and the tasks involved. This
provides a foundation for more purposive sampling of relations in particular contexts to study their development
and how the paths to different attractors are co-produced by the firms involved operating within a particular
context and history.
Finally, some limitations of the current research should be acknowledged which suggest avenues for further
development. Firstly, the measures of cooperativeness and competitiveness need further development. In this
research the items for the respondent firm and Firm X were not identical and this may account for the emergence
of a positive motivation factor for Firm X but not for the respondent firm. Parallel items need to be used as far
as possible to develop similar measures for the respondent’s firm and the other firm.
In addition, the
competitiveness scales developed have few items, and tend to reflect one dimension of competitivenss, i.e.
opportunism, rather than other types of self interested behaviors and motivations. This is partly the result of the
conservative decision rule used to include items in the scales and in future studies attempts should be made to
develop stronger items reflecting other aspects of competitiveness. Secondly, while the research has indicated
the types of inter-firm relations that emerge in markets the sample is not representative of a particular industry or
type of firm. Additional studies need to be conducted investigating the types of relations that emerge in
particular cultural, industrial and firm contexts as well as longitudinal studies showing how different types of
balanced relationship states emerge. Lastly, studies in which both firms involved in a relationship are
interviewed are required.
Management Implications.
page 24
Our results suggest that there is not one best way of managing relationships. Relationship management is about
developing an appropriate mix of relations, suited to the various types of tasks and situations involved. In the
past much of the literature has tended to emphasize the adversarial nature of relationships and how firms should
try to control others or protect themselves from their trading partners. There is now a danger of moving too far
in the other direction - assuming that the task is one of simply developing strong cooperative relations with
trading partners. But our analysis shows that competitiveness and cooperativeness are two inescapable
dimensions of relations that vary to some extent semi-independently and need to be managed accordingly.
It is
not only the size of the space between firms but also its shape and composition that needs to be considered.
Strategies for increasing cooperativeness will not necessarily reduce competitiveness and may even have the
opposite effect. Similarly, strategies for reducing competitiveness may have little effect in promoting
cooperative attitudes and endeavors. Relationships require different mixes of cooperation and competition to be
effective depending on the market(s) in which they operate, the pattern of their past interactions and/or the nature
and goals of the firms participating in them.
The task now is to identify which types of relations are able to function best in different interfirm and
environmental situations and what types of processes and transition stages are required to “move” a relation from
one type to another - if this is possible. But controlling the development of relationships is problematic as the
relationship is co-produced by the parties involved rather than being controlled by one. It is the actions and
reactions over time that shape the nature and management of the space between the trading partners in a kind of
trial and error manner. As Hakansson and Sharma (1996) argue: “The typical business relationship evolves in
an organic way. It is formed step-by-step through an interaction process” (p116). This challenges traditional
notions of management in which relations are controlled and directed by a dominant actor.
Relationship
management is as much about participating and responding to the opportunities that arise as it is about
controlling and directing the relation to achieve particular objectives, particularly if a firm is the less powerful
actor in the relationship. Furthermore, a firm operates in the context of a net of relations with many different
types of counterparts including suppliers and customers as well as complementary producers, competitors and
government. A particular relation needs to be assessed not only in terms of its own character and operations but
in terms of the function it performs within the larger network of relations of which it is a part. Taking into
account the various direct and indirect effects of actions taken in one relation on the relationship itself, on other
relations in which the firm is involved and on the larger network of relations is difficult but greater awareness of
and sensitivity to these types of effects will help improve managerial decision making (Ford et al 1996).
page 25
Footnotes
i
The terms “buyer” and “seller” were substituted for each other throughout and the criteria for evaluation of
performance and the relationship environment were slightly modified. In addition, versions of the questionnaire
was developed for specific types of interfirm relations that were to be included in the study, i.e. domestic
relations, international relations, and relations featuring some form of quality management (in particular
just-in-time). These questionnaires were identical to the basic version except for an introductory section
indicating the type of relation to be focused on and the exclusion of one or two classification questions.
Questions asking whether the trading partner was located domestically or internationally and whether quality
management techniques were being used to coordinate relationship activity were excluded as this was covered in
the introductory sections.
ii
The quality of the data gathering process was ensured through various means. First, detailed briefing and
training sessions were held with the students before the survey began. Second, the completed questionnaires
were closely scrutinized and all queries raised by the information contained in the interviews were checked either
with the student interviewer and/or the respondent. Third, a random sample of 10 per cent of the respondents
were called to verify that the interviews had in fact been conducted. No questionnaires were found to have been
falsified by the students.
iii
Space limitations prevent the reporting of results for the second respondent. The results for second
respondent for this and other analyses are available from the authors.
page 26
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page 7
APPENDIX A
MULTI-ITEM SCALES USED TO MEASURES PREDICTOR VARIABLES IN REGRESSION ANALYSIS
VARIABLE
No. of
items
Sample item
alpha
Context: Task Environment and History
Volatility of Market (sellers)
3
rating of change in size of orders
(from 1= have greatly decreased to
4= have not changed to 6=have greatly
increased)
0.74
Volatility of Market (buyers)
4
rating of change range of available
products/services (from 1= have
greatly decreased to 4= have not changed
to 6=have greatly increased)
0.61
Business Prospects for
Respondent (Firm X)
5
Rating of prospects of improvements
in market share (1=very poor to 6=very good)
0.86r
0.90x
Relation deterioration
through time
4
Trend in business over past year
(1=increasing rapidly to 9= decreasing rapidly)
0.82
up to 9
Weighted sum rating of relative influence
summed over up to 9 issues (1=Our firm has
most say to 6=Firm X has most say)
The relation between our Firm and
Firm X is characterized by close
and continuous personal contacts
(1=strongly agree to
6 = strongly disagree)
Relationship Atmosphere:
Relative Influence*
Closeness-Distance
Dissatisfaction
6
5
Rating compared to other relations
respondent familiar with (1= one of
the best to 6=one of the worst)
(formative
scale)
0.80
0.92
page 8
APPENDIX A (Continued)
VARIABLE
No. of
items
Sample item
alpha
Coordination Processes:
3
Threaten to punish for non compliance
(1=very unlikely to 6=very likely)
0.62r
0.70x
Respondent (Firm X’s) use
of weak influence tactics
4
Offer to compromise
(1=very unlikely to 6=very likely)
0.67r
0.72x
Use of Formal coordination
4
Importance of statutory bodies
affecting way your firm and Firm X do
business (1=very important to
6=very unimportant)
0.85
Use of Informal coordination
4
Importance of implicit understandings
affecting way your firm and Firm X do
business (1=very important to
6=very unimportant)
0.63
Dependence on contracts
4
To what extent are there written or
unwritten, agreements and contracts
between your firm and Firm X?
(1= no agreements to 6= mostly formal)
0.67
Conflict*
up to 9
Weighted sum of frequency multiplied by
intensity of disagreements summed over up
to 9 issues (1=very infrequently to 6= very
frequently, 1=not intense at all to
6=very intense)
Respondent (Firm X’s) use
of strong influence tactics
(formative
scale)
Performance:
Firm X’s performance*
up to 9
Weighted sum rating of performance over
up to 9 issues (1= very poor to 6=very good)
(formative
scale)
r = respondent firm
x = Firm X
* = formative scale summed over up to 9 issues deemed relevant to relation by respondent ,i.e. product /service
quality, financial arrangements, delivery, before and after sales service, guarantees and warranties, other
assistance (e.g. sales promotion), other. These were weighted by an importance rating in which respondents
allocated 100 points among the issues according to perceived importance of each issue. Coefficient Alpha
inappropriate.
page 9
Figure One - Model of Relationship Development
Atmosphere
(e.g. Cooperation, competition,
commitment,power-dependence,
closeness, satisfaction)
Performance
Coordination Processes
(e.g. communication, formalization,
bargaininng, conflict management,
influence tactics)
Context
(e.g. firm, product,
market, CLalt and
history)
page 10
Figure 2: Four Types of Relationships
COMPETITION IS:
COOPERATION IS:
LOW
LOW
ARMS LENGTH (STARTING OR
FINISHING)
More likely a buying relation and domestic
Relation and respondent time in relation
are of short duration
Business prospects not as good
Alternatives to Firm X maybe better
Deteriorating relation
Respondents more likely to disagree that
social contact builds relations
Low commitment and dependence
Distant, Dissatisfied
Less use of weak means of influence by both
More use of formal and informal coordination
More bargaining/negotiation involved
Higher conflict
Poorer Firm X performance rating
HIGH
HIGH
ADVERSARIAL
More likely a selling relation
More stable market
Business prospects not as good
Alternatives to Firm X maybe better
Deteriorating relation
Respondents more likely to agree that
social contact builds relations
Low commitment, more likely to end
Distant, Dissatisfied
Both firms more likely to use strong means of
influence
More use of informal coordination
Lower frequency of contact
Dependence on contracts to coordinate
Highest conflict and poor resolution
Poorer Firm X performance rating
“Space between” is large and
may not be harmonious
“Space between” is growing and/or one or
both of the parties is working to
increase the distance or end the relation
COMMITTED, MATURE
Lowest percent of business with Firm X
Lasted longer
Least likely to have a formal link
More frequent contact
Less bargaining/negotiation
Low conflict and good resolution mechanisms
Better Firm X performance rating
NORMATIVELY OPPORTUNISTIC
Highest percentage of business with Firm X
Lasted longer
More likely to be international relation and
have a formal link
Reasonable prospects for both firms
Alternatives to Firm X worse
Relation improving through time
Respondent agrees that social contact builds
relations
Committed and continuing
Respondent Firm more dependent on Firm X
Close personal relations and satisfied
More use of weak influence by both
Less use of formal and informal means of
coordination
More frequent contact
Less bargaining/negotiation
Moderate conflict
Better Firm X performance rating
“Space between” is small, harmonious
and may be shrinking
“Space between” is small, probably fairly
stable but not necessarily harmonious
Good prospects for both firms
Alternatives to Firm X worse
Relation improving through time
Committed and continuing
Moderate interdependence
Close personal relations and satisfied
Less use of strong influence tactics by both
Less use of informal means of coordination
TABLE 1: MEASURES OF COOPERATIVENESS AND COMPETITIVENESS OF THE RESPONDENT
Items:
-We work hard to maintain a good working relationship with Firm X
-Our firm has and demonstrates a sincere interest in Firm X's success
-Our firm is interested in making Firm X's operations profitable
-Our firm searches for solutions to any joint problems we may have
-Our firm has a genuine interest in Firm X's continued success
-Our firm has the desire and ability to maintain a good trading relationship
with Firm X
-Our firm works well as a team with Firm X
-Sometimes our firms has to alter the facts slightly to get what it wants from
Firm X
-Sometimes it is necessary to hold back information from Firm X to get
things done
- - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - -Sometimes our firm promises to do things for Firm X without actually
doing them later
-We are usually able to look at issues from Firm X's point of view
-Our firm is only concerned with promoting their own interests.
-Our firm behaves in a trustworthy manner towards Firm X
Alpha for underlined items
Eigen Value
% Variance
Cooperation
.76
.83
.67
.55
.74
Factor Loadings
Competitiveness
.00
-.02
.06
-.04
.03
.62
.60
-.05
-.17
.04
.75
-.03
.63
-.05
.48
-.27
.47
.43
-.03
.11
-.39
.83
2.52
36%
.62
1.25
18%
Excluded due to low correlation with other items in scale:
“Our own profitability is sometimes obtained at the cost of Firm X's profitability”
page 2
TABLE 2 - COOPERATION, MOTIVATION AND COMPETITION OF FIRM X
Items:
-Our firm trusts Firm X
-I feel Firm X is generally very fair in working with my firm
-We have confidence in the accuracy of the information we get
from Firm X.
-Our firm has confidence in the fairness and honesty of Firm X
-When an agreement is made with Firm X our firm can generally
rely on Firm X to fulfil all of the requirements involved
-Firm X has a genuine interest in my firm's continued business
-Firm X is interested in helping us to make our operations profitable
-Firm X demonstrates a sincere interest in our firm's success
-Firm X sometimes suggests unnecessary changes to practices and
procedures for doing business
-Firm X's profitability is sometimes obtained at the cost of our own
profitability
---------------------------------Firm X is only concerned with promoting their own interests.
-Firm X's refusal to make reasonable compromises/concessions
adversely affects our firm's relation with them
-We are kept informed by Firm X about things we ought to know
-My firm can always rely on being informed early enough by Firm X
in areas of importance to us
-Communication from Firm X is very efficient
-Firm X works well as a team with my firm
-Firm X has the desire and ability to maintain a good trading relation
with my firm
-Firm X is usually able to look at issues from our point of view
-Firm X searches to solutions to any joint problems we may have
-Firm X makes my firm feel its contribution is valuable`
alpha for underlined items
Eigen Values
% Variance
Cooperativeness
Factor Loadings
MotivCompetiation
tiveness
.71
.76
.33
.43
.18
.27
.78
.84
.29
.31
.26
.25
.73
.29
.34
.43
.35
.70
.78
.77
.19
.19
.23
.13
-.20
-.16
-.60
-.16
-.12
-.67
-.14
-.35
-.47
-.44
.51
-.21
.57
-.57
.15
.56
.57
.62
.54
.52
.55
.22
.21
.28
.52
.50
.53
.45
.64
.57
.58
.57
.21
.34
.26
.21
.94
3.40
38%
.88
1.34
15%
.64
1.08
12%
page 3
TABLE 3: CORRELATIONS BETWEEN MOTIVATION, COOPERATION AND COMPETITION MEASURES
Respondent’s Firm
Cooperation
Competition
Firm X
Motive
Cooperation
Competition
Respondent
Cooperation
Competitiveness
--.04
-.04
--
.52*
-.10
.60*
-.26**
-.13*
.33*
Firm X
Positive Motive
Cooperativeness
Competitiveness
.52*
.60*
-.13*
-.10*
-.26
.33*
-.63*
-.37*
.63*
--.42*
-.37*
-.42*
--
4.78
0.95
2.57
1.37
4.02
1.46
4.43
1.28
2.89
1.32
Mean
Standard Deviation
* significant at .05 level
page 4
TABLE 4: Principal Components Analysis of Cooperation and Competition Scales.
Scale
Respondent Firm
Cooperativeness
Competitiveness
Firm X
Positive Motivation
Cooperativeness
Competitiveness
Percentage of variance
Cooperation
Competition
.85
.04
.09
.84
.83
.82
-.29
-.18
-.34
.74
49%
23%
page 5
Footnotes:
page 6
TABLE 5: BETA WEIGHTS FOR RELATIONSHIP VARIABLE PREDICTING HIGH VERSUS LOW
COOPERATIVENESS AND COMPETITIVENESS FACTOR SCORES
Dependent Variable
All
Sellers
Cooperation
Factor Score
Sellers+
Buyers
Competition
Factor Score
All
Buyers
R2
0.80
0.82
0.78
0.32
0.22
F ratio
15.80***
120.0***
90.0***
74.2***
12.57***
8.3***
degrees of freedom
11,316
8,153
8,154
13,314
5,156
0.42
8,154
1 Context of Relationship
a) Characteristics of Firms and Business
Respondent is buyer or seller (0=seller, 1=buyer)
Product sold/bought (0=No, 1=Yes)
Service sold/bought (0=No, 1=Yes)
Consumer product/service (0=No, 1=Yes)
Industrial product/service (0=No, 1=Yes)
Domestic (=0) or International (=1)
Relative Size of firms (1= Resp. firm much
larger to 6= Resp firm much smaller )
% of Res. purchases/sales through Firm X
Duration of relation (years)
Formal Link (0=No, 1=Yes)
.06*
-.16**
.
.16*
.16*
.13*
.27**
.13**
.10*
b) Task Environment and History
Volatility of marketm
Good Future Prospects for Respondent Firmm
Good Future Prospects for Firm Xm
Alternatives to Firm X (1= much worse
to 5=much better
Relation change through timem
2 Informant Characteristics
Age (1=25yrs or under to 5=over 55yrs)
Time in relation.(years)
Business rels useful (1=strongly disagree
to 6= strongly agree)
No friends in business (1=strongly disagree
to 6= strongly agree)
Social contact builds rels (1=strongly disagree
to 6= strongly agree)
-.08*
.08**
.12**
-.16***
-.10**
.08*
.11*
.19**
__________________________________________________________________________________________
m = multi-item measure refer to appendix for details
* (p<0.05)
** = (p<0.01)
*** = (p<0.001)
page 7
3. Dependent Variable
All
Cooperation
Factor Score
Sellers+
Competition
Factor Score
All
Buyers
Sellers
Buyers
Relationship Atmosphere
High level of commitment exist (1=strongly
disagree to 6= strongly agree)
.30***
Likelihood Rel will cease
Relative influencem
Dependence(1=strongly disagree to 6= strongly agree):
Easy to replace Firm X
Easy for Firm X to replace Resp. Firm
Resp. firm in serious trouble if let down
by Firm X
.12***
Firm X’s operations in serious trouble if
let down by resp. firm
Closeness-Distancem
.14***
Satisfaction with Relationm
.38***
4.
.33***
.24***
-.09*
.12***
.12***
.19***
.18*
.14**
.35***
.12*
.44***
.11***
-.34***
.13***
.10*
.15**
. .15*
-.19***
-.18*
.24**
.37***
-.47***
Coordination Processes
Respondent’s firm’s use of strong influencem
-.06*
Respondent’s firm’s use of weak influencem
.11***
Firm X’s use of strong influencem
Firm X’s use of weak influencem
Use of formal coordination meansm
-.06*
Use of informal coordination meansm
Dependence on contractsm
Frequency of contact (1=daily to 6=less than
once every 6mths)
Considerable bargaining/negotiation necessary
for transaction with Firm X
(1=strongly agree to 6= strongly disagree)
Use of quality management (0=No, 1=Yes)
Conflict m
Conflict Resolution Effectiveness
.13***
-.09*
-.08*
.23***
-.29***
.25***
.17***
5. Relationship Performance
Quality of Firm X's operational performancem
__________________________________________________________________________________________
m = multi-item measure refer to appendix for details
* (p<0.05)
** = (p<0.01)
*** = (p<0.001)
page 8
TABLE 6: CORRELATIONS OF FACTOR SCORES WITH VARIABLES FOR HIGH VERSUS LOW
COOPERATIVENESS AND COMPETITIVENESS
All
Cooperation
Factor Score
Sellers+
Buyers
Competition
Factor Score
All
Sellers
Buyers
1 Context of Relationship
a) Characteristics of Firms and Business
Respondent is buyer or seller (0=seller, 1=buyer)
Product sold/bought (0=No, 1=Yes)
Service sold/bought (0=No, 1=Yes)
Consumer product/service (0=No, 1=Yes)
Industrial product/service (0=No, 1=Yes)
Domestic (=0) or International (=1)
Relative Size of firms (1= Resp. firm much
larger to 6= Resp firm much smaller )
% of Res. purchases/sales through Firm X
Duration of relation (years)
Formal Link (0=No, 1=Yes)
-.08
-.01
-.03
.04
-.09
.08
na
.07
-.07
.06
-.13
.01
na
-.08
-.03
.05
-.09
.16*
-.15**
.09
-.03
.12*
-.05
.11*
na
.10
-.11
.13
-.11
.00
na
.13
.00
.13
-.05
.21**
.05
.10
.10
.14
.17** .06
.01
-.12
.00
.12
.29**
.13
.01
.16**
.10
.14**
-.03
.08
.05
.07
.03
.27**
.14
.21**
b) Task Environment and History
Volatility of marketm
Good Future Prospects for Respondent Firmm
Good Future Prospects for Firm Xm
Alternatives to Firm X (1= much worse
to 5=much better
Relation deterioration through timem
2
.21**
.22**
.53**
.28**
.23**
.51**
.17*
.19*
.54*
-.00
-.03
-.13**
-.05
-.17*
-.14*
.06
.08
-.15
-.48**
-.59**
-.43**
-.57**
-.53*
-.60*
.11*
.05
.08
.10
.13
.03
Informant Characteristics
Age (1=25yrs or under to 5=over 55yrs)
.12*
.13
.11
-.04
.06
-.14
Time in relation.(years)
.20**
.19**
.22**
.02
.07
-.04
Business rels useful (1=strongly disagree
to 6= strongly agree)
-.02
-.02
-.03
.02
-.10
.09
No friends in business (1=strongly disagree
-.13*
-.13
-.14
.13*
.22**
.05
to 6= strongly agree)
Social contact builds rels (1=strongly disagree
.04
-.00
.04
.16**
.01
.24**
to 6= strongly agree)
_____________________________________________________________________________________________
m = multi-item measure refer to appendix for details
* (p<0.05)
** = (p<0.01)
*** = (p<0.001)
page 9
3. Dependent Variable
All
Cooperation
Factor Score
Sellers+
Buyers
Competition
Factor Score
All
Sellers
Buyers
Relationship Atmosphere
High level of commitment exist (1=strongly
disagree to 6= strongly agree)
.80**
Likelihood Rel will cease
-.53**
Relative influencem
.01
Dependence(1=strongly disagree to 6= strongly agree):
Easy to replace Firm X
-.25**
Easy for Firm X to replace Resp. Firm
-.15**
Resp. firm in serious trouble if let down
by Firm X
.23**
Firm X’s operations in serious trouble if
let down by resp. firm
.19**
Closenessm
.69***
Satisfaction with Relationm
.81**
4.
.80**
-.51**
.08
.79**
-.55**
-.00
-.08
.13*
.08
-.08
.15*
.04
-.10
.13
.19**
-.27**
-.14
-.21**
-.18*
-.13*
.15**
-.17*
.13
-.06
.16*
.31**
.16*
.69***
.81**
.24**
-.17**
.22**
.25**
.21**
.69***
.81**
.10
.01
-.22**
.04
.04
-.22**
.11
-.11
-.24**
Coordination Processes
Respondent’s firm’s use of strong influencem
Respondent’s firm’s use of weak influencem
Firm X’s use of strong influencem
Firm X’s use of weak influencem
Use of formal coordination meansm
Use of informal coordination meansm
Dependence on contractsm
Frequency of contact (1=daily to 6=less than
once every 6mths)
Considerable bargaining/negotiation necessary
for transaction with Firm X
(1=strongly agree to 6= strongly disagree)
Use of quality management (0=No, 1=Yes)
Conflict m
Conflict Resolution Effectiveness
-.32**
.13*
-.24**
.32**
-.23**
-.34**
-.27**
-.33**
.07
-.26**
.36**
-.24**
-.37**
-.26**
-.29**
.14
-.26**
.28**
-.23**
-.30**
-.30**
.13*
.25**
.19**
.12*
-.15**
.01
.21**
.17*
.18*
.19*
.06
-.14
.08
.20**
.12
.26**
.15
.17*
-.15
-.07
.20**
-.24**
.15**
-.23**
.11
-.26**
.24**
.02
-.30**
.05
-.30**
-.03
-.28**
.07
-.50**
.62**
.01
-.45**
.63**
.13
-.54**
.63**
-.00
.29**
-.18**
.06
.32**
-.17*
-.06
.30**
-.18*
5. Relationship Performance
Quality of Firm X's operational performancem
.37**
.31**
.62**
-.03
.08
-.18*
______________________________________________________________________________________________
m = multi-item measure refer to appendix for details
* (p<0.05)
** = (p<0.01)
*** = (p<0.001)
page 10
TABLE 7: Means and Percentages for Predictor Variables for Different Types of Relations
All
Relations
Sig
A
B
53%
71%
31%
46%
55%
20%
.65%
72%
31%
37%
67%
7%
43% *
73%
30%
49%
64%
23% *
58%
66%
34%
45%
58%
16%
44%
75%
28%
54%
51%
33% *
2.91
13.8
8.64
10%
2.93
11.6
5.55
05%
2.48
14.9
8.33
13%
2.89
9.2
9.78
02%
3.27
19.6 **
10.51
21% ***
4.8
4.9
4.4
4.5
4.7
4.0
4.3
4.7
3.6
4.9
5.0
4.9
5.2
5.0
4.7
2.7
3.1
3.3
3.5
3.3
3.6
2.1
2.6
2.3
2.7
2.6
4.3
2.6
3.0
2.4
3.2
2.8
5.5
2.7
5.1
5.4
5.3
5.5
5.5
5.3
2.6
2.6
3.0
2.2
2.8
3.6
3.3
3.8
3.3
3.9
A vs B
Sig
C
D
C vs D
1 Context of Relationship
Characteristics of Firms and Business
Respondent is buyer or seller (%=buyer)
Product sold/bought (% Yes)
Service sold/bought (% Yes)
Consumer product/service (% Yes)
Industrial product/service (% Yes)
Percentage International
Relative Size of firms (1= Resp. firm much
larger to 6= Resp firm much smaller )
% of Res. purchases/sales through Firm X
Duration of relation (years)
Formal Link (% Yes)
Task Environment and History
Volatility of marketm
Good Future Prospects for Respondent Firmm
Good Future Prospects for Firm Xm
Alternatives to Firm X (1= much worse
to 5=much better
Relation deterioration through timem
*
2 Informant Characteristics
Age (1=25yrs or under to 5=over 55yrs)
Time in relation.(years)
Business rels useful (1=strongly disagree
to 6= strongly agree)
No friends in business (1=strongly disagree
to 6= strongly agree)
Social contact builds rels (1=strongly disagree
to 6= strongly agree)
*
____________________________________________________________________________________________
A = Low Cooperation Low Competition Relations, B= Low Cooperation High Competition Relations
C= High Cooperation Low Competition Relations, D = High Cooperation High Competition Relations
m = multi-item measure refer to appendix for details
* (p<0.05)
** = (p<0.01)
*** = (p<0.001)
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All
Relations
Sig
AvsB
C
D
Sig
C vs D
A
B
2.8
2.8
5.4
5.1
2.8
2.7
3.2
3.2
1.2
3.1
1.6
3.1
3.7
3.0
3.1
3.4
2.9
2.6
2.5
2.9
2.3
2.8
3.0
3.8
*
2.7
2.7
2.9
3.1
3.0
2.5
3.3
4.6
5.1
3.4
4.5
4.6
*
2.2
3.9
2.2
3.6
3.1
2.3
2.9
2.4
3.5
2.3
3.0
3.7
2.7
2.9
2.7
4.2
2.8
3.4
3.3
2.7
3.5
1.7
3.8
1.7
3.7
2.8
2.0
2.6
2.1
4.4
2.2
4.1
2.7
2.0
2.8
2.2
2.3
2.5
2.0
2.0
3.4
3.4
2.6
4.2
3.0
12%
7.7
4.5
17%
9.8
3.6
4%
12.8
3.3
8%
3.1
5.6
17%
6.5
*
5.0
3.9
3.2
3.0
4.7
4.6
Relationship Atmosphere
High level of commitment exist (1=strongly
4.2
disagree to 6= strongly agree)
Likelihood Rel will cease
2.2
Relative influencem
3.1
Dependence(1=strongly disagree to 6= strongly agree):
Easy to replace Firm X
3.1
Easy for Firm X to replace Resp. Firm
2.9
Resp. firm in serious trouble if let down
by Firm X
3.0
Firm X’s operations in serious trouble if
let down by resp. firm
3.1
Closenessm
3.8
Satisfaction with Relationm
3.9
4.
*
*
Coordination Processes
Respondent’s firm’s use of strong influencem
Respondent’s firm’s use of weak influencem
Firm X’s use of strong influencem
Firm X’s use of weak influencem
Use of formal coordination meansm
Use of informal coordination meansm
Dependence on contractsm
Frequency of contact (1=daily to 6=less than
once every 6mths)
Considerable bargaining/negotiation necessary
for transaction with Firm X
(1=strongly disagree to 6= strongly agree)
Use of quality management (% Yes)
Conflict m
Conflict Resolution Effectiveness
**
*
*
*
*
*
*
5. Relationship Performance
Quality of Firm X's operational performancem
____________________________________________________________________________________________
A = Low Cooperation Low Competition Relations,
C= High Cooperation Low Competition Relations,
B= Low Cooperation High Competition Relations
D = High Cooperation High Competition Relations
m = multi-item measure refer to appendix for details
* (p<0.05)
** = (p<0.01)
*** = (p<0.001)
page 12