Int. J. Production Economics 129 (2011) 277–283
Contents lists available at ScienceDirect
Int. J. Production Economics
journal homepage: www.elsevier.com/locate/ijpe
Supplier development and the relationship life-cycle
Stephan M. Wagner n
Chair of Logistics Management, Department of Management, Technology, and Economics, Swiss Federal Institute of Technology Zurich, Scheuchzerstrasse 7, 8092 Zurich, Switzerland
a r t i c l e in f o
abstract
Article history:
Received 7 July 2008
Accepted 22 October 2010
Available online 27 October 2010
The mainstream view holds that over time buyer–supplier relationships evolve through a number of
phases. As a consequence, supplier development as a buyer–supplier relationship management practice
should also be adapted to the life-cycle phase. Supplier development activities matching the buyer–
supplier relationship life-cycle phase will lead to more favorable performance improvements. However,
prior studies have neglected the relationship life-cycle perspective. This empirical study shows how the
length of the buyer–supplier relationship can be used to improve the explanatory power of models
investigating the performance outcomes of supplier development activities. The results show that
supplier development is more effective in mature as opposed to initial and declining life-cycles phases.
& 2010 Elsevier B.V. All rights reserved.
Keywords:
Supplier development
Buyer–supplier relationship
Relationship life-cycle
Social capital theory
Regression analysis
Curvilinear relationship
1. Introduction
There is ample anecdotal evidence in corporate practice and
academic research that supplier development as any set of
activities a buying firm expends on a supplier to improve supplier
performance and/or supplier capabilities (Krause et al., 2000) can
help to meet supply needs and generate favorable results for the
buying firm. Recognizing the long-term and strategic benefits of
supplier development, many companies have established supplier
development programs and teams. Honda of America, for example,
has adopted the BP (‘‘Best Practice, Best Process, and Best Performance’’) supplier development program to help suppliers in
implementing the Kaizen philosophy for continuous improvement
and organizational change (MacDuffie and Helper, 1997; Sako,
2004). John Deere built up a systematic supplier development
approach to upgrade suppliers’ just-in-time capabilities. Working
with John Deere’s supplier development teams, suppliers were able
to achieve dramatic reductions in cycle time (Golden, 1999).
Several aerospace and defense companies, including Boeing, Lockheed, Northrop Grumman, Rockwell Collins, Parker Aerospace, and
United Technologies, joined forces and established a program
called the ‘‘Supplier Excellence Alliance’’ with the goal to share
best practices with suppliers and to realize improvements in
quality, on-time delivery, and inventory levels at the suppliers.
After a few years into the program the tier-one suppliers now began
to share with their own suppliers what they have learned from the
aerospace and defense companies (Avery, 2008). By consulting
with the problem solving teams of Toyota’s Operations
n
Tel.: + 41 44 632 3259; fax: + 41 44 632 1526.
E-mail address: stwagner@ethz.ch
0925-5273/$ - see front matter & 2010 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2010.10.020
Management Consulting Division (OMCD) in Japan and the Toyota
Supplier Support Center (TSSC) in the United States, many suppliers
have received assistance in building up lean manufacturing
capabilities. These organizational capabilities benefited both the
suppliers and Toyota in the long run (Dyer and Hatch, 2006; Dyer
and Nobeoka, 2000). Wal-Mart set up a supplier development
group and a series of strategies that help the retailer to better serve
customers. This group fosters close collaboration between WalMart and its suppliers and joint business planning. Consequences of
these efforts include significant improvement in customer awareness of brands, successful key item launches, and increased sales
(Hahn, 2005).
In line with the bigger prominence of supplier development in
corporate practice, scholars have lately paid increased attention to
supplier development activities and programs. In 2007 alone, nine
articles focusing on supplier development were published in
production- and operations management-related journals (Araz
and Ozkarahan, 2007; Carr and Kaynak, 2007; Chan and Kumar,
2007; Krause et al., 2007; Lee and Humphreys, 2007; Li et al., 2007;
Modi and Mabert, 2007; Rogers et al., 2007; Wouters et al., 2007).
All these studies and previous research on supplier development
have investigated the buying firms’ supplier development activities
at a single point in time and ignored the life-cycle of the buyer–
supplier relationship.
Scholars pointed out that suppliers with strategic partnershiplike relationships with the buying firm should be considered as
potential candidates for supplier development (Araz and
Ozkarahan, 2007; Talluri and Narasimhan, 2004). Likewise, Li
et al. (2007, p. 231) remarked that ‘‘[i]mprovements in performance will happen within the unique exchange relationships
developed between the buyer and supplier firms.’’ Since such
‘strategic partnership-like relationships’ or ‘unique exchange
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S.M. Wagner / Int. J. Production Economics 129 (2011) 277–283
relationships’ which influence the effectiveness of buying firms’
supplier development activities develop over time, I contend that it
is necessary to go beyond the study of supplier development
activities at a single point in time and to take the stage of the buyer–
supplier relationship into account.
My study draws on social capital theory (e.g., Adler and Kwon,
2002; Inkpen and Tsang, 2005; Nahapiet and Ghoshal, 1998) to
explore the performance improvements of buying firms willing to
develop social capital with key suppliers through supplier development. The primary goal of the study is to explore the impact of
the dynamic nature of buyer–supplier relationships on the outcome of buying firms’ supplier development activities. I test my
proposed model in a cross-sectional sample by means of a quasilongitudinal analysis. More specifically, I show that different stages
of the buyer–supplier relationship life-cycle moderate the relationship between supplier development and the buying firm’s performance. As such, my research refines and extends previous
empirical studies on supplier development and asserts that the
life-cycle of the buyer–supplier relationship should be included as
a moderator in models studying the impact of supplier development and other models investigating buyer–supplier relationship
practices.
I next provide a review of the current literature on buyer–
supplier relationship dynamics embedded within the theoretical
constructs of social capital theory and previous research in
management and relationship marketing. This includes the delineation of my hypothesis. Next, I describe the data and the
measures, and present the analysis and results. Finally, I discuss
implications for further research.
2. Theory and development of hypothesis
2.1. Time contingent value of social capital
Social capital theory is an emerging concept that acknowledges
the inherent value of social structures such as relationships,
networks, and groups. Social capital refers to ‘‘the sum of the
actual and potential resources embedded within, available
through, and derived from the network of relationships possessed
by an individual or social unit’’ (Nahapiet and Ghoshal, 1998, p.
243). Central to the studies using social capital theory is the idea
that networks of relationships and interactions between individuals can facilitate the creation of value within firms (Inkpen and
Tsang, 2005; Tsai and Ghoshal, 1998).
Social capital can be defined and applied on different levels of
analysis, such as individuals, groups, and organizations (Adler and
Kwon, 2002). Whereas some relationships only require relationships between certain boundary spanning individuals, others need
group- or organization-level social capital to enable collaboration
in teams. One can distinguish between three components of social
capital: (1) relational capital (trust, identification and obligation),
(2) cognitive capital (shared ambition, vision, and values) and
(3) structural capital (strength and number of ties between actors).
Each dimension relates to a specific and identifiable aspect of social
capital (Nahapiet and Ghoshal, 1998). In the context of this study, I am
specifically concerned with the relational dimension of social capital.
While the explanatory power of social capital theory and the
central value and importance of social capital to organizations have
been popularized within the management literature (e.g., Adler
and Kwon, 2002; Lin, 2001; Nahapiet and Ghoshal, 1998; Tsai and
Ghoshal, 1998), social capital theory is particularly applicable to
better understanding buyer–supplier relationships. First, social
capital has been described as the ‘‘relational glue’’ underpinning
effective supply chains (McGrath and Sparks, 2005). Second, social
capital theory acknowledges that buyer–supplier relationships
are embedded within a larger social, environmental, political,
and legal context (Håkansson, 1982). Third, social capital enhances
the efficiency of buyer–supplier relationships resulting in the
creation of opportunities that may not otherwise have been
possible (Cousins et al., 2006; Krause et al., 2007; Lawson et al.,
2008).
Historically, it has been common to look at the transactional
nature of buyer–supplier exchanges, masking the embedded social
and behavioral aspects. However, just recently social capital has
received increasing attention as a theoretical lens through which to
understand buyer–supplier relationships and the value creation
process—resulting in four articles: drawing on social capital as
theoretical underpinning, Cousins et al. (2006) studied inter-organizational socialization processes that create relational value in supply
chains. Through case studies with six firms from the European food
industry, Knoppen and Christiaanse (2007) investigated the behavioral dimensions of inter-organizational adaptation in buyer–
supplier relationships along the lines of social capital theory and
delineated adaptation into a cognitive, relational, and structural
dimension. Krause et al. (2007) used social capital theory as the
explanatory framework for the relationship between buying firms’
supplier development efforts, the accumulation of three types of
social capital, and buying firm performance. Lawson et al. (2008) draw
on social capital theory to support their model linking relational
embeddedness and structural embeddedness to buyer performance
improvements within strategic buyer–supplier relationships.
Only two of the studies refer briefly to the time contingent value
of social capital. To capture relational capital, Krause et al. (2007)
included relationship length (i.e., years of the buyer–supplier
relationship) as a measure and suggested a simple positive linear
relationship between relationship length and improvement in the
buying firm’s performance. Knoppen and Christiaanse (2007) were
aware that the relationship stage has an influence on interorganizational adaptation. However, the authors did neither
investigate the influence of relationship length nor relationshiplife cycle in much detail. They merely concluded from their case
studies that ‘‘[p]artners admitted that trust had grown over the
years, by living through good and bad times together.’’ (Knoppen
and Christiaanse, 2007, p. 217) The authors realized that the crosssectional assessment of inter-organizational adaptation is a limitation and that future research should ideally apply a longitudinal
approach.
Both studies did not capture path dependence in the evolution
of social capital. Krause et al. (2007, p. 534) pointed out in the
discussion of relational capital that ‘‘past transactions may alter the
calculus for further transactions’’ and that ‘‘prior history of
cooperation between firms’’ has an impact on buyer–supplier
relationship outcomes. However, the authors did not factor the
path dependence of buyer–supplier relationships into their model.
Path dependence could have been modeled by including some
measure of relationship length or relationship life-cycle as a
moderator between a buyer–supplier relationship management
practice and performance. In a nutshell, I suggest to account for the
dynamic nature of buyer–supplier relationships over the relationship life-cycle in studies on supplier development.
2.2. Dynamic nature of buyer–supplier relationships
Krause et al. (2007) posited simple positive linear relationships
between relationship length and the improvement in two categories of buying firm performance. Both relationships were not
supported, which is not surprising given the recent hints of social
capital theorists to the path dependence of social capital.
Kotabe et al. (2003) studied two forms of knowledge exchange
between a buying firm and a supplier – which can be considered as
S.M. Wagner / Int. J. Production Economics 129 (2011) 277–283
a means of supplier development (Krause et al., 2000; Wagner,
2006) – and its impact on supplier performance and included the
length of the relationship as a moderator. The results show that the
hypotheses were only partially supported: relationship length did
not moderate the link between technical exchanges and supplier
performance improvements, while relationship length did moderate the link between efforts to transfer technology and supplier
performance improvements. These findings caused them to argue
that simple technical exchanges can enhance supplier performance
independent of the history of the relationship.
I argue that a more accurate model of supplier development
activities should account for the life-cycle of the buyer–supplier
relationship by including a squared term for relationship length as
a moderator for the relationship between the buying firm’s supplier
development activities and the improvement in the buying firm’s
performance. The inclusion of a squared term for relationship
length as a moderator is a much better reflection of the dynamic
nature of buyer–supplier relationships over the relationship lifecycle. Fig. 1 depicts the possible approaches to include relationship
length in a model on supplier development.
The marketing literature emphasizes the importance of the
dynamic nature of buyer–supplier relationships and encourages
researchers to include the relationship life-cycle in their analysis.
Several marketing scholars insist that the interactions between
buyers and suppliers and their outcomes are contingent on the
stage of the buyer–supplier relationship (e.g., Dwyer et al., 1987;
Frazier et al., 1988; Jap and Ganesan, 2000; Medlin, 2004; Wilson,
1995). Researchers have proposed several ways of categorizing the
phases in the buyer–supplier relationship. Aside from the number
of phases and their labels, in all relationship models the phases
are characterized by their direction and strength of growth
(e.g., initiation, maturity, and decline).
Buyer–supplier relationships are built up over time through
legal, formal and informal exchange processes, and relation-specific
investments (Ring and Van De Ven, 1994). The relationship life-cycle
influences the development of central relationship marketing constructs, such as cooperation, adaptation, information sharing, or
Source
279
commitment (Jap and Ganesan, 2000; Wilson, 1995). Supplier
development will be more successful if the relationship is in a stage
where the levels of cooperation, adaptation, information sharing,
commitment, etc. are high (maturity) rather than low (initiation and
decline).
Trust is a central organizing construct in buyer–supplier
relationships. Trust builds slowly from experience as the relationship progresses and vanishes as the firms seek to leave the
relationship (Dwyer et al., 1987; Zaheer et al., 1998). Firms in
buyer–supplier relationships are more willing to work with other
firms they can trust. When trust prevails, employees involved in
supplier development activities will be more open to knowledge
sharing with employees of the other party. Therefore, the outcome
of supplier development activities in trust-based and reliable
relationships will be more positive.
The low impact of supplier development at the early and late
stages and the high impact at the intermediate stages of the buyer–
supplier relationship life-cycle are also supported by research
of Jap and Anderson (2007). They found that relationship properties – such as goal congruence, idiosyncratic time investments,
idiosyncratic adaptation investments, willingness to take risk, or
information exchange – are low in the exploration and decline
phases of the relationship and high in the build-up and maturity
phases. The effectiveness of supplier development activities will
follow such a pattern of increase, zenith, and decline because many
of these relationship properties are supportive or necessary for
supplier development activities.
In sum, in established buyer–supplier relationships, a buying
firm’s supplier development activities will have the highest impact
on its performance improvement. In contrast, supplier development in newer and older buyer–supplier relationships will be
detrimental to the buying firm’s performance. As a refinement and
extension of the work of Krause et al. (2007) and Kotabe et al.
(2003) I therefore posit:
Hypothesis. The linear relationship between supplier development and performance is maximized at a moderate level of
Proposed relationship
Model
P
Proposed by
Krause, Handfield,
and Tyler (2007)
Supplier development
Performance
Relationship length
RL
P
Proposed by
Kotabe, Martin, and
Domoto (2003)
High SD
Relationship length
Supplier development
Performance
Low SD
RL
P
Relationship length 2
High SD
Proposed in this
research
Supplier development
Performance
Low SD
RL: Relationship length; P: Performance; SD: Supplier development
Fig. 1. Approaches to include relationship length in a model on supplier development.
RL
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S.M. Wagner / Int. J. Production Economics 129 (2011) 277–283
relationship length. Low and high levels of relationship length have
a detrimental effect.
3. Methods
3.1. Data collection and sample
To test this hypothesis, data were collected through a survey,
which was administered to 251 firms in Germany, Switzerland, and
Austria. From these 251 targeted firms, the responses of 60 were
finally used for this study, yielding an effective response rate
of 23.9%. A variety of industries is represented in the sample,
including high-tech, automotive, machinery and plant construction,
construction, chemicals and pharmaceuticals, food, and textiles.
About 30.9% of the responding firms had an annual sales volume
of US $100 million or less, 18.2% had between US $100 million and
US $250 million, 21.8% between US $250 million and US $ 1 billion,
21.8% between US $1 billion and US $5 billion, and 7.3% of more than
US $5 billion. The average annual sales volume was US $1.56 billion.
Purchasing or supply chain management executives were the key
informants. These informants are likely to have an overarching,
boundary-spanning view of their companies’ supplier development
activities (Jemison, 1984). The majority of informants in this sample
were heads of purchasing (61.7%) and heads of supply chain management, logistics or materials management (20.0%). The remainder
described themselves as purchasing or commodity managers (11.7%),
heads of supplier development, procurement information managers,
or quality managers (6.7%). All had held their position for an average
of 5.3 years and had been with the firm for an average of 7.0 years.
The respondents were asked to answer the questions with respect
to the development of one particular supplier. Therefore, the units of
analysis in this research are not the buying firms’ supplier development activities in general, but rather the activities performed and the
performance improvements achieved through the development of an
individual supplier (‘‘Supplier X’’). On average, the firms have
maintained relationships with the suppliers for about 10.2 years
prior to their development, which ranged from 1 to 22 years.
Furthermore, from the total of 60 supplier development incidents
in my sample, 50 pertain to suppliers of products, such as printed
circuit boards, electronic assemblies, mobile phone handsets, plastics
moldings, hydraulic power units, chemicals, flavoring, or tomato
puree. The remaining ten were suppliers of services, such as logistics
services, mechanical processing, electric installation, or facility management. As can be seen, the supplier development activities included
in this study cover a broad spectrum of products and services, thus
enhancing the robustness and generalizability of the results.
3.2. Measures
The measures used in my study tie in with the measures used by
Krause et al. (2007). Multiple-item measures assess the two main
constructs on five-point Likert scales. Translated descriptions of the
specific measures and items used are included in Appendix A.
Descriptive statistics, correlations of summated composites, and
scale reliabilities are summarized in Table 1.
Supplier development can be categorized as either ‘‘indirect’’
(also called ‘‘externalized’’) or ‘‘direct’’ (also called ‘‘internalized’’).
When a buying firm engages in indirect supplier development, the
firm commits no or only limited resources to a specific supplier. In
case of direct supplier development, the buying firm plays an active
role and dedicates considerable relation-specific resources to a
supplier (Krause et al., 2000; Monczka et al., 1993). The supplier
development construct used in this study consists of direct supplier
development activities. There are two reasons why my supplier
development measure taps direct supplier development activities.
First, strategic buyer–supplier relationships and social capital
accumulation are more relevant for direct supplier development
than for indirect supplier development. Second, Kotabe et al.’s
(2003) and Krause et al.’s (2007) supplier development construct
also pertains to direct supplier development activities. The five
items were selected from prior studies, which have assigned a
range of activities to direct development (Krause et al., 2000;
Wagner, 2006). Thus, the measures used for supplier development
focus on the allocation of buyer personnel to the supplier and the
transfer of tacit knowledge in order to improve the supplier’s
skill base with respect to technology, product development and
manufacturing, and training of supplier personnel. The supplier
development scale shows a satisfactory level of reliability with a
Cronbach’s alpha of 0.81.
To capture the impact of the supplier development activities on
the buying firm’s performance improvement I developed a sevenitem scale based on prevailing supplier performance goals, and
competitive priorities in operations, supply chain management,
and purchasing (Krause et al., 2001; Ward et al., 1998) as well as on
the operationalization of Krause et al. (2007) ‘‘quality, delivery, and
flexibility’’ performance improvement construct. The items indicate the effect of the supplier development activities on the buying
firm’s own product and service performance. The performance
improvement construct turned out to be reliable with a favorable
Cronbach’s alpha of 0.90.
To ensure discriminant validity, principal component factor
analysis (as shown in Appendix A) was conducted. The analysis
resulted in two uniquely interpretable factors, with all supplier
development items clearly loading together on one factor, and all
performance improvement items loading together on another
factor. The explained variance of these two factors was 61%.
To capture the dynamics of a buyer–supplier relationship over
the life-cycle would require the collection of longitudinal data on
the relationship over several years. Since such longitudinal studies
are very difficult to perform, researchers typically examine buyer–
supplier relationships at a single point in time. To overcome this
challenge one can classify the relationships by their phase and use
this information for quasi-longitudinal analysis (Anderson, 1995).
Table 1
Descriptive statistics and correlations.
Variable
Items
Scale
Alpha
Mean
S.D.
(1)
(2)
(3)
(4)
(5)
(1)
(2)
(3)
(4)
(5)
1
1
5
1
7
US $
5-point
5-point
Years
5-point
–
–
0.81
–
0.90
1.56 bn
3.82
2.63
10.2
3.53
4.14 bn
1.24
1.03
5.9
1.06
1.00
0.04
0.26*
0.03
0.11
1.00
0.03
0.13
0.32**
1.00
0.02
0.30**
1.00
0.15
1.00
Annual sales
Strategic importance
Supplier development
Relationship length
Performance improvement
Notes: N ¼60.
n
Correlation significant at the 0.10 level.
Correlation significant at the 0.05 level.
nn
S.M. Wagner / Int. J. Production Economics 129 (2011) 277–283
In my study, I applied the squared term for relationship length as a
proxy for the relationship life-cycle stage.
In order to eliminate undesired sources of variance that confound research findings, two control variables were included in the
analysis. First, since the financial resources of larger firms could
make them more successful in their supplier development activities, firm size can be a potential source of variance. Therefore,
I included firm size – measured by a single item asking respondents
for their firms’ annual sales volume in US dollars – as control
variable in my analysis when I tested the effect of supplier
development activities on supplier firm improvements. Second,
since buying firms might pay particular attention to suppliers of
strategic items and initiate supplier development in different
situations (e.g., even in case of minor supplier deficiencies)
and support supplier development activities more intensively
(as opposed to suppliers of non-strategic items), another control
variable was included. The respondents had to indicate in a single
item to which degree the ‘‘delivery of Supplier X was of strategic
importance for my firm.’’
281
the linear by curvilinear interaction by including the product of
supplier development and the squared term for relationship length.
To support the linear by curvilinear interaction, the standard
estimate should be negative and significant, with a significant
change in the model’s explained variance. The results in Model 3 in
Table 2 support my hypothesis (b¼ 1.91, po0.05) and show that
the degree of linearity of the relationship of supplier development
to performance improvement depends curvilinearly upon relationship length. This relationship is depicted in Fig. 2 for medium
(mean), low ( 1 standard deviation) and high (+ 1 standard
deviation) levels of supplier development. Upon entering the linear
by curvilinear interaction term, the overall model is highly
significant (p o0.01), and the explained variance increases by
0.07 (p o0.05).
5. Discussion and managerial implications
The analysis presented in this article refines and extends
previous work on the performance implications of supplier
Following the procedure proposed by Cohen et al. (2003,
pp. 292–295) and Jaccard and Turrisi (2003, pp. 60–65) I employed
hierarchical regression analysis and estimated three models in
order to test my research hypothesis that a linear by curvilinear
interaction exists among supplier development, relationship
length, and performance improvement. Since interactions are
involved, the variables were standardized prior to the analysis
(Bauer and Curran, 2005; Cohen et al., 2003). Table 2 presents the
standardized parameter estimates and t-values resulting from
these models.
Model 1 – the baseline model – includes the control variables
and is significant (p o0.05). The strategic importance of the
purchased item is significantly related to performance improvement (b¼0.32, po0.05). Model 2 estimates the main and linear
interaction effects of the buying firm’s supplier development
activities and relationship length. Supplier development is significantly related to performance improvement (b¼ 0.35, p o0.05).
Relationship length in itself is not related to performance improvement. The overall model is significant (p o0.05). In Model 3 I tested
Performance
improvement
4. Analysis and results
High
Medium
Low
Relationship length
Fig. 2. Performance improvements depending on relationship length at different
levels of supplier development.
Table 2
Regression analysis.
Independent variables
Controls
Annual sales
Strategic importance
Model 1
Model 2
b
t-value
b
t-value
b
t-value
0.12
0.32nn
0.91
2.38
0.19
0.28nn
1.39
2.17
0.28nn
0.30nn
2.06
2.36
0.35nn
0.07
0.06
0.14
2.62
0.13
0.11
1.07
1.70nn
0.07
0.19
1.14n
2.61
0.14
0.36
1.84
1.91nn
2.11
Lower order components
Supplier development
Relationship length
Relationship length2
Supplier development Relationship length
Linear by curvilinear component
Supplier development Relationship length2
R2
R2 change
F
n
0.10.
0.05.
nnn
0.01.
nn
Model 3
0.11
0.11nn
3.17nn
0.26
0.15n
2.63nn
0.33
0.07nn
3.07nnn
282
S.M. Wagner / Int. J. Production Economics 129 (2011) 277–283
development by supporting my hypothesis that the linear relationship between supplier development and performance is maximized at intermediate relationship life-cycle stages. As such,
drawing on social capital theory and the relationship marketing
literature, I show that neither relationship length as a direct
antecedent of performance (Krause et al., 2007) nor as a moderator
in the link between supplier development and performance
(Kotabe et al., 2003) account sufficiently for the dynamics of
buyer–supplier relationships (Dwyer et al., 1987) and the path
dependence of social capital evolution (Rhee, 2007).
Instead, given that I used the squared term of relationship
length as a proxy for the life-cycle of the buyer–supplier relationship I show that the effectiveness of a buying firm’s supplier
development activities is moderated by the relationship life-cycle.
Using the relationship life-cycle as a moderator, I account for the
fact that for supplier development to be successful, established and
partnership-like buyer–supplier relationships are required (Araz
and Ozkarahan, 2007; Talluri and Narasimhan, 2004). Critical
constituent and building-blocks of supplier development are trust,
communication and information exchange, and relation-specific
investments (time, resources, know-how). In buyer–supplier relationships, establishing trust, strong communication and information links, and building up relation-specific assets is time bound
(Fichman and Levinthal, 1991; Jap and Anderson, 2007; Kogut and
Zander, 1992). In an initial acquaintance phase (initiation phase),
the buyer and supplier develop relation-specific routines so that
they are better able to engage in supplier development activities
(e.g., exchange of tacit knowledge) (Dwyer et al., 1987; Ring and
Van De Ven, 1994). When a buyer–supplier relationship is in the
decline phase (e.g., due to a discomfort, discontent or disagreement
about the collaboration, or simply because of the phase-out of a
product sourced from the supplier) and approaches the termination of the relationship, both parties will engage less in relationspecific routine and reduce relation-specific investments. That is,
the critical constitutes of supplier development vanish and supplier
development will become less effective (Dwyer et al., 1987; Ring
and Van De Ven, 1994).
My study has several important implications for managerial
practice. First, prior to investing in supplier development activities,
the buying firm should carefully assess the status of the buyer–
supplier relationship, because the effectiveness of supplier development depends on the life-cycle (e.g., initiation, maturity, or
decline) of the buyer–supplier relationship. Second, the buying
firm should stay away from direct supplier development (which
I investigate in the present study) in the very early and very late
stages of the relationship with a supplier. My life-cycle perspective
confirms previous recommendations that direct supplier development activities should be preceded by indirect supplier development activities (Giunipero, 1990; Krause et al., 2000; Wagner,
2006). That is, in the early stage of a buyer–supplier relationship
the buying firm should consider indirect supplier development
(e.g., supplier assessment, evaluation, or feedback) and then
gradually move into direct development activities (e.g., training,
consulting, or staff transfer). On the contrary, in declining buyer–
supplier relationships the buying firm should gradually move from
direct to indirect development activities.
6. Methodological implications and recommendations
From my research I can draw some valuable implications and
recommendations for future studies. First, I show that it is vital to
account properly for the path dependence in the evolution of social
capital and the theoretically well-established dynamic nature of
buyer–supplier relationships in studies on supplier development,
because the relationship life-cycle might moderate the relationship
between supplier relationship management practices and performance outcomes. Second, the quasi-longitudinal study design put
forward in this research is a useful way to account for the dynamics
of buyer–supplier relationships in light of the resource and time
constraints of academic research. Third, by having used the squared
term for relationship length as a proxy for relationship life-cycle
stage I want to point out that a curvilinear interaction effect of
relationship length is equivalent to a linear interaction effect of
relationship life-cycle. As a consequence, future research could
either use objective measures of relationship length or subjective
measures of relationship life-cycle in order to account for the
dynamic nature of the buyer–supplier relationship in studies on
supplier development practices and its effects on performance.
Both measures have their strengths and shortcomings. While
researchers might obtain objective relationship length measures
from a second data source (e.g., a firm’s ERP system), thus reducing
the threat of common source bias, such data might not be available.
A subjective assessment of the relationship life-cycle can be
obtained by collecting information about the strength and direction of growth. More specifically, measuring the intention to
expand the business with a supplier (e.g., the purchasing volume
with a supplier) can serve as a reverse coded proxy for the maturity
of the buyer–supplier relationship. A high intention to expand
business with a supplier would indicate a buyer–supplier relationship in its initiation phase, a low intention to expand business with
a supplier would indicate a mature relationship, and the intention
to reduce business would indicate a declining buyer–supplier
relationship.
I hope that my findings will encourage other scholars in
production and operations management to embark on research
into the life-cycle of buyer–supplier relationships.
Appendix A
See Table A1.
Table A1
Exploratory factor analysis.
Survey items
Supplier
Performance
development improvement
Our firm has undertaken supplier development
Giving manufacturing related advice (e.g.,
processes, machining process, machine set
up).
Training of employees from Supplier X.
Giving product development related advice
(e.g., processes, project management).
The transfer of employees to Supplier X.
Giving technological advice (e.g., materials,
software).
with Supplier X through y
0.800
0.097
0.793
0.718
0.003
0.202
0.699
0.690
0.080
0.128
Through the development of Supplier X our firm was able to y
Improve our delivery reliability.
0.076
0.847
Reduce time-to-market.
0.017
0.843
Reduce production downtimes.
0.349
0.782
Increase the satisfaction of our customers.
0.162
0.773
Improve the reliability of our products.
0.188
0.733
Improve the quality of our products.
0.292
0.724
Offer more innovative products to our
0.033
0.721
customers.
Notes: All items were measured on five-point Likert scales ranging from 1 (‘‘strongly
disagree’’) to 5 (‘‘strongly agree’’).
S.M. Wagner / Int. J. Production Economics 129 (2011) 277–283
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