Cooperative Buyer-Supplier Relationships: The Missing Link

Cooperative Buyer-Supplier Relationships: The Missing Link Presenter: Dr. Walid Belassi Associate Professor, Management Science Athabasca University, Canada

Presentation Outline • Introduction & Literature review • Organizational culture • Research Question • Empirical results

“A skilled and loyal supplier base can be a key source of competitive advantage”Cole and Yakushiji, 1984

Literature Review • Advantages of cooperative buyer-supplier relationships • Quality • Cost/financial performance • Delivery • Speed (Stanley and Wisner 2002; Tan 2002; Dong et al., 2001; Elmuti 2002; Huit et al., 2002 and 2005; Fredendal et al., 2005; Petersen et al., 2005; Cole and Yakushiji, 1984; Lyons et al, 1990)

Literature Review (Cont..) • Buyer’s Practices Ex. efforts by DaimlerChrysler, Toyota and Nissan, B/S in Taiwan (Lyons et al., 1990; Dale, 1991; Richeson, 1995; Green, 200; Dawson 2001; Stundza2001; Hung-Yi et al.)

Literature Review (Cont..) • B/S in the light of other theories • Transaction cost economics (Dyer, 1997; Krause 1999; Kauffman et al., 2000) • Agency Theory (Lassar & Kerr, 1996) • Conflict theory (Kale et al., 2000) • Exchange theory (Holme et al., 1999) • Game theory (Cool and Henderson, 1998)

Literature Review (Cont..) • Determinants of successful buyer-supplier relationships • Inter-organizational communication (Paulrajet al. 2008) • Contractual clauses including supplier certification, supplier training, and visits to the suppliers(Forkeret al., 1999; Germain et al., 1999; Kannan and Handfield, 1998) • Trust: buyer-supplier relationships follows an evolutionary path that entails a trust building process. (Zaheeret al., 1998; Ellram and Edis, 1996; Shaohan and Zhilin, 2008)

Literature Review (Cont..) • Commitment (Moore 1998), • expectation of continuity (Krause et al. 1998) • cooperation (Ellram and Edis 1996)

Literature Review (Cont..) • Studies opposing cooperative B/S relationships • In some cases, such closely knit relationships lead to violations of the autonomy of one or both partners…affecting corporate autonomy (Rolof and Aßla¨nder, 2010) • While some companies have been able to develop supply chain management strategies, this does not mean that everyone else can do so. (Cox, 2004)

Literature Review (Cont..) • Studies opposing cooperative B/S relationships • Progress toward strategic collaboration within supply chain relationships has proven difficult for many companies, particularly if it requires changes to organizational culture and structure. “Game changing Trends in Supply Chain: Part III: Adversarial to Collaborative Relationships, Tate and Autry, Supply Chain Management Review, March 2013”

Organizational Culture Numerous definitions of organizational culture have been suggested in the literature: • Schein (2010 and 2004) defines organizational culture as a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.

Organizational Culture (Cont..) • Sathe (1985) defines it as the set of important assumptions, often unstated, that members of a community share in common • Drennan(1990) defines organizational culture as how things are done in an organization • It guides and shapes behaviors and attitudes of all employees (Hofstede, 1980; Handy, 1985; Schein, 1985; O'Reilly and Chatman, 1996; Burnes et al., 2003)

Research Question Does organizational culture affect buyer-supplier relationship?

Hofstede’s Organizational Cultural Dimensions • Process oriented vs. result oriented cultures • Employee oriented vs. job oriented cultures • Parochial vs. professional cultures • Open systems vs. closed systems cultures • Loose control vs. tight control cultures • Normative vs. pragmatic cultures

Hofstede’sNational Cultural Dimensions • Power distance • Uncertainty avoidance • Collectivism vs. individualism • Femininity/masculinity • Long term orientation Kluckhohnand Strodtbeck (1961)

Result Oriented Job Oriented Open Culture Cooperative Buyer-Supplier Relationship Tight Control Power Distance Normative Culture Uncertainty Avoidance Collectivism Long Term Orientation

Research Methodology • The population of this study includes all organizations that develop new products • A sample of organizations is selected and studied using direct mail collection procedure • Questionnaire was mailed to upper level managers responsible for (or involved in) developing new products in 800 organizations located in the U.S. and Canada

Research Methodology (Cont..) • Organizations were selected from the Mergent Online database and the Fortune 500 list • Managers were asked to inform us about the culture of their organization and their common practices in developing and implementing NPDs

Research Methodology (Cont..) • The questionnaire was designed and tested using an iterative process including expert validation and pretest using a small number of business executives not included in the sample frame • Out of the 800 questionnaires sent out 195 questionnaires returned (190 were usable), resulting in a response rate of 23.75 percent

Regression Analysis Results

Conclusion Organizations are able to leverage further their cooperative behavior “with their suppliers” by improving a limited set of cultural dimensions

Questions? Thank you!

Organizational Culture & B/S Relationship: The Link • It has been reported that as many as three-quarters of reengineering, total quality management, strategic planning, and downsizing efforts have failed entirely or have created problems serious enough that the survival of the organization was threatened (Cameron, 1997) • Several studies reported that the most frequently cited reason was the neglect of the organization’s culture. In other words, failure to change the organization’s culture doomed the other kinds of organizational changes that were initiated (Schein, 2010; Caldwell, 1994; Pascale and Athos, 1993; Kotter and Heskett, 1992)

Notes • By checking the literature review in these slides it shows that the focus is not on strategic B/S relationship. It is more tactical and on a deal by deal bases. What we is discussing is strategically why organizations are more inclined to deal with supplier (play with the S) in a more collaborative (rather than rivalry) manner. • Cooperative B?S leads to lost autonomy: perception of autonomy and cultural differences between organizations that felt so and others that felt the other way around

Cooperative Buyer-Supplier Relationships: The Missing Link