Outlines

1. Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania.

2. Outlines • Introduction • Theoretical Perspective and hypothesis formulation • Research Methodology and Operationalization of Variables • Data Assessment (Preliminary screening, Discriminant validity and Reliability). • Research Model (Regression Model) • Regression Assumptions • Regression Estimation and Hypotheses Testing • Managerial Implications, Limitations and Areas for further Research

3. Introduction Background information • Main coffee buyers in Tanzania-Primary societies/Associations (KNCU, MBOCU). • Complaints from farmers> buyers no longer offering incentives (fertilizers, insecticides, equipment(CPU) and credits).

4. Introduction…Ctd. Research Problem • Buyers characterized: lying>insincerity>undervaluation of products. • These behaviors>reflection of buyers’ opportunistic behavior (John 1984; Williamson 1985). Research Question • What is the key factor affecting suppliers’ perception on buyers opportunism?

5. Introduction…Ctd. Objective of the study • Enhance relationship to reduce perception on buyers opportunism. • Specifically how supplier specific development (investment) affect suppliers’ perception on buyers opportunism.

6. Theoretical Perspective • A good theory is the best tool in understanding/solving practical business issues (problems). • Transaction Cost Theory (Douma & Schreuder Ch. 8, 2011) >The founder: Ronald Coase>1937: ‘‘Why do firms exist?’’ • What are Transaction Cost? • Control and monitoring costs (e.g. cost documentation) • Bargaining costs (e.g. haggling about terms of trade)

7. Theoretical Perspective…Ctd. • Transaction Cost is induced when SPI is deployed> It is not possible to avoid this cost>Challenge: Minimize them. • Basic assumptions> Bounded Rationality, Uncertainty/Complexity, Information Asymmetry and Opportunism. • Opportunism: ‘Self seeking with-guile’’ (Williamson 1975; p.6)>Take advantage upon a situation, charge unfair prices, reduce the original product quality.

8. Theoretical Perspective…Ctd. • Three Basic Elements> Specific Assets, Uncertainty/Complexity of Trade, Frequency or Volume of Trade. • Specific Assets: Investment of Buyer and /or seller in> specific knowledge>routines >machines >tools to serve a specific trade partner (Risky Investment) • SPI are sunk cost (irreversible). • Previous Studies on Opportunism>Focused on Suppliers Opportunism; no studies on Buyers Opportunism.

9. Research model SALESVOL SUDEV OPPOR REDURA Hypothesized effect Control Effect

10. Research hypothesis Hints: Transaction-Specific Supplier Development (SUDEV)>‘‘a long term cooperative effort between a buying firm and its suppliers to upgrade the suppliers’’ (Bucklin and Sengupta 1993; Parkhe, 1993). • SUDEV (SPI)-reduce opportunism (Joshi, 1998). • making visit;> discuss issues for performance improvement with respect to grading of my coffee beans; >recognizing farmers’ business for achievements/performance in the form of awards;> providing farm businesses with training/education; >providing farm businesses with equipment or tools for improvement, >providing farmers with credit/capital (Krause and Ellram, 1997; Wagner, 2006). • H1: There is a negative association between transaction-specific supplier development and buyer opportunism.

11. Research methodology Empirical research setting : Coffee industry in Tanzania • Cross sectional research design Cross sectional research design (Malhotra and Birks, 2006). • Questionnaire Instrument Developing and reviews of questionnaire (adapting items)=>Translation- 2 ways and validation • Sample Size, Data collection procedures and technique More than 400, 000 smallholders.=>Sample=123 each=>Key informants=>Finding the farmer for more than five years=>Personal interview

12. Operationalization of variables Constructs are operationalized as latent variables and all variables are measured as reflective scales> Variables were operationalized by question items with 7 points likert scale. • The question items for opportunism were adapted from Gundlach et al., (1995); Skarmeas et al., (2002) and Provan and Skinner, (1989). • While question items for Specific Supplier Development (SUDEV) were adapted from Krause (1999) and Ghijsen et al., (2009).

13. Discriminant Validity • Discriminant Validity: Exploratory Factor Analysis (Table 1.1) Rotated Component Matrix Extracted Principal Component Analysis. Rotated Method: Varimax with Kaiser Normalization. Rotation converged in 3 iterations

14. Reliability • Reliability: Correctness or exactness>internal consistency >Cronbach alpha (Table 1.2).

15. Regression Model (Research Model) Regression analysis • Statistical tool used to describe relationship between dependent and independent variables> bivariate (simple)>multivariate (multiple). Regression Model (Research Model) OPPOR = bo +b1REDURA +b2SALESVOL +b3SUDEV+ ԑ

16. Regression assumptions and Estimation Regression assumptions: • Multicollinearity (Correlation Matrix: OPPOR & SUDEV, REDURA) • Collinearity (Tolerance>0.10, Variance Inflation Factor (VIF)<10) • Normality (Histogram & Normal P-P Plot of Standardized Residual) • Homoscedasticity (Scatter Plot) Regression estimation: • OLS > to estimate parameters of our regression model (Table 1.3)

17. R2adj=.26 F (7, 65) = 4.54 p<.001 Values for REDURA and SATIS are mean centered scores **p<.05 t- values greater than 1.64 are significant at 0.05 one tail ***p<.01 t-values greater than 2.33 are significant at 0.01 one tail

18. Hypothesis Testing Hypothesis 1: • supported by coefficient term, b3 = -0.31, t value = -2.67, p ≤0.01.

19. Discussion, Managerial Implications, Limitations and Areas for Further Research Discussion • Training on :picking>pulping>washing,>fermentation>washing>drying. • Investment on: Machines (CPU)/Tools> Provision of Capital/Credit • Personnel visits to help improve on suppliers performance. • Invite farmers>discuss>performance improvement>grading of coffee beans.

20. Managerial Implications, Limitations and Areas for Further Research…Ctd. Managerial Implications • Lays out foundation on>stakeholders (buyers) >reduce opportunism. • Frequent communication and well established reporting system>SMS & telephone calls. • Establishment of training centers: seminars, establishing farms for training • increasing follow-up • Frequently>inviting farmers to discuss issues>on performance improvement with respect to grading system of coffee.

21. Managerial Implications, Limitations and Areas for Further Research…Ctd. • Providing farmers with equipment or tools for improvement. • Providing farmers with credit/capital. • Buyer Organizations should cooperate with supplier when deployment of SUDEV is appropriate/profitable. Limitations and areas for further research • Analyses only coffee industry • Cross sectional design