Two Faces of Collaborative BuyerSupplier Relationships

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• Two Faces of Collaborative Buyer-Supplier
  Relationships
• Social Capital versus Social Liability
• Verónica H. Villena M.
• IE Business School
• Committee Members
• Elena Revilla (IE Business School) Advisor
• Thomas Choi (Arizona State University) Advisor
• Fabrizio Salvador (IE Business School)
• Manuel Becerra (IE Business School- Strategy)
• Luis Gomez-Mejia (Texas AM University-
  Strategy)

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Executive Summary Introduction Gaps
Theoretical Framework Hypotheses
Methodology Contributions Limitations

• I. EXECUTIVE SUMMARY
• This study aims to consider the positive and
  negative sides of building social capital within
  collaborative buyer-supplier relationships (BSRs)
• Research questions
• How does building social capital with
  collaborative suppliers improve a buyers ability
  to deliver the value customers expect?
• How and when does accumulated social capital
  become a social liability?
• In particular, what could SCEs do to manage the
  dark side of social capital?

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Executive Summary Introduction Gaps
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• I. EXECUTIVE SUMMARY (2)
• Survey research coupled with archival data
  analysis.
• Unit of analysis Buyer-Supplier Relationship
  (BSR)
• Practical contribution
• When actively pursuing social capital within
  BSRs, managers should be cautioned about the
  potential risks and associated costs involved in
  excessive levels of social capital.
• Theoretical contributions
• Consideration of a curvilinear relationship
  between social capital and performance.
• Joint analysis of cognitive, relational and
  structural forms of social capital in a single
  model.
• Inclusion of innovation as a key outcome variable
  and of performance type as a contingency factor.

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Executive Summary Introduction Gaps
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• II. INTRODUCTION
• Todays supply chain executives (SCEs) are
  interested in obtaining a good understanding of
  how firms create and appropriate value while
  working jointly with their partner suppliers
  (Sytch and Gulati, 2008).
• Social capital offers an opportunity to increase
  our understanding of the complexities involved in
  supply chain relationships (Autry and Griffis,
  2008 Krause et al., 2007) due to
• It offers better explanations about the ambiguous
  difficulties of frictions caused by both
  cooperation and conflict (Schuller et al., 2000).
• It serves as the facilitating mechanism that
  enhances interpersonal relations through which a
  buyer can gain access to and leverage resources
  provided by its collaborative suppliers.

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Executive Summary Introduction Gaps
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• III. GAPS
• Recently scholars have focused primarily on the
  benefits of building social capital in
  collaborative BSRs (Autry and Griffis, 2008
  Lawson et al., 2008 Min et al., 2008 Krause et
  al., 2007), largely ignoring the dark side of
  social capital (Portes and Sensenbrenner,1993Port
  es and Landolt, 1996).
• Previous studies have limited the analysis of
  social capital to its relational (Cousin et al.,
  2006 Johnston et al., 2004 Artz, 1999) and
  structural dimension (Capaldo, 2007). Very few
  studies have investigated the three suggested
  forms of social capital in a single model.
• Previous research has suggested to further
  analyze innovation (Hult et al., 2006 Krause et
  al., 2007) as a primary performance outcome of
  value creation (Nahapiet and Ghoshal, 1998).
• Previous research has not analyzed how the social
  capital-performance relationship differs when
  partners build social capital to improve
  operative performance compared to when they
  pursue innovative performance.

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Executive Summary Introduction Gaps
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• IV. THEORETICAL FRAMEWORK
• Social Capital
• A set of resources that accrue to the buyer and
  its supplier through a history of relations that
  facilitate actions (Coleman,1990Granovetter,1992)
  .
• Forms of social capital
• (Inkpen and Tsai, 2005 Nahapiet and Ghoshal,
  1998Coleman,1990)
• Cognitive (C) The resources providing shared
  representations, interpretations and systems of
  meaning among parties such as institutionalized
  norms/rules and congruent goals.
• Relational (R) The assets created and leveraged
  through relationships in the form of trust,
  respect, friendship, sanctions, etc.
• Structural (S)The overall pattern of connections
  between actors -that is, who you know and how you
  reach them.

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• IV.1 The Bright Side of Social Capital

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IV.2 The Dark Side of Social Capital
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• IV. 2 The Dark Side of Social Capital (2)
• A) Loss of objectivity
• Risk of discrimination
• High levels of solidarity and trust between
  partners reduces their willingness in the search
  for new suppliers with potentially better ideas
  (Kern, 1998).
• Discrimination might increase the risks for the
  buyer of losing touch with better alternative
  suppliers.
• Risk of complacency
• High level of commitment (familiarity) reduce the
  likelihood of exit.
• Parties are less likely to objectively
  acknowledge the deterioration in performance and
  take longer to use corrective action(Gargiulo and
  Ertug,2006)
• ? Complacency risks might lock the buyer in a
  relationship that struggles to accomplish
  changing market needs

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• IV.2 The Dark Side of Social Capital (3)
• B) Loss of learning
• Loss of valuable feedback
• Partners systematically avoid exchanging
  negative (critical) information because it might
  endanger the good atmosphere.
• Partners systematically avoid conflicts due to
  fear that cultivated relationships are
  jeopardized (Selness and Sallis, 2003).
• Isomorphism or collective thinking
• The routines and mental models create rigidities
  that discourage independent thinking and
  creativity (Das, Naransimhan, Talluri, 2006).
• Isomorphism produces forms of collective
  blindness that sometimes has disastrous
  consequences (Janis, 1982 Uzzi, 1997).
• Goal congruence may lose its salience, moving
  from the foreground to the background of the
  relationship and assuming to be taken for granted
  (Jap and Anderson, 2003).

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• IV.2 The Dark Side of Social Capital (4)
• C) Lower decision making
• Information overload
• More than required information exits, (1)
  creating a cognitive burden on the receiver
  (Hiltz and Turoff, 1985 Malhotra, 1982Simon,
  1968), (2) ensuring no one will have the right
  information when is needed (Liker and Choi, 2004)
  and (3) often being redundant and obsolete (Koka
  and Prescott, 2002)
• Information equivocality
• Inconsistent information giving multiple,
  conflicting views of a phenomenon (Weick, 1979
  Daft and Lengel, 1986). This increases the
  difficulty in estimating the true value of
  conflicting information.

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• IV.2 The Dark Side of Social Capital (5)
• D) Opportunism
• Blind trust refers to the deficit of monitoring
  which increase both the opportunities for
  malfeasance and the amount of damage such
  malfeasance might cause (Granovetter,1985Jap and
  Anderson, 2005Gargiulo and Ertug,2006)
• Monitoring
  mechanism by levels of trust

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• IV.2 The Dark Side of Social Capital (6)
• D) Opportunism
• Free-riding problems create unnecessary
  obligations that commit resources and constrain
  partners choices beyond would have been optimal.
  (Gargiulo and Benassi, 1999 Gargiulo and Ertug,
  2006 Uzzi,1997) ?
• Obligations by
  levels of trust

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• IV.2 The Dark Side of Social Capital (7)
• D) Opportunism
• Power imbalances Rossetti and Choi (2005)
• Privileged suppliers realized they have developed
  specific capabilities and knowledge ? They have
  gained a total control of the supply (i.e.,
  oligopoly and monopoly) ? The buyer loss its
  leverage that it initially had. (e.g., GM and
  Fisher Body in 1920 inflation of prices)
• Endless feuds Uzzi (1997)
• High levels of trust and cooperation? better
  understanding of the relationship ? It is very
  likely that one of the parties obtains something
  that is off-limits ?Inter-firm conflicts might
  escalate to a highly destructive level, releasing
  intense negative emotions of spite and revenge.

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• V. HYPOTHESES
• H(1-3) There is an inverted curvilinear
  relationship
• between (the three forms of) social capital and
  performance

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• V. HYPOTHESES (2)
• H4 The inverted curvilinear relationship between
  (the three forms of) social capital and
  performance is attenuated more in the case of
  innovation-oriented performance than in the case
  of execution-oriented performance.

Innovation-oriented performance
Execution- oriented performance
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• VI. METHODOLOGY
• Data collection Survey research Archival Data
  (SABI for the 2005-2008 period)
• Unit of analysis The buyer-supplier relationship
• Key respondent SCEs of the buying firm (Krause,
  1999 Shin, Collier and Wilson, 2000 Tan, Lyman
  and Wisner, 2002 Chen and Paulraj, 2004).
• Population Large Spanish companies (aprox. 3,800
  firms) with important supply chain operations.
• Common method variance Survey-based and
  archival measures will be cross-checked and
  validated
• Non-response bias

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• VI. METHODOLOGY (2)
• MeasuresMulti-item scales were developed for all
  constructs (Apendix1).
• Performance Cost reduction, efficiency and
  innovation will come from the survey while
  inventory turnover and total cost will come from
  the SABI database.
• Control variables
• Firm size Employee numbers (Henderson and
  Cockburn, 1994 Cohen, 1995 Benton and Maloni,
  2005 Subramani and Venkatraman, 2003)
• Firm age Years (Yli-Renko et al., 2006 Song and
  Di Benedetto, 2008).
• Firm prior performance ROA for the 2005-2007
  period (Hill and Rothaermel, 2003 Subramaniam
  and Youndt, 2005).
• Industry Dummy variables (Yli-Renko et al.,
  2006 Liker and Choi, 2004 Rowley et al., 2000).
• Regression Analysis

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• VII. INTENDED CONTRIBUTIONS
• This research
• examines the complexities of social capital by
  developing a research framework and examining
  empirically both the bright and dark sides of
  social capital in collaborative BSRs. (e.g.,
  Gulati and Syntch, 2007 Cousin et al., 2006
  Yli-Renko et al., 2006).
• investigates the three forms of social capital in
  a single model.
• includes an important performance outcome (i.e.,
  innovation) in addition to those used in previous
  research.
• analyzes how the social capital-performance
  relationship might differ when partners aim to
  pursue risky, albeit profitable and innovative
  outcomes compared to when they seek to achieve
  operative improvements.

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• VIII. LIMITATIONS
• This research
• analyzes social capital between a buyer and its
  supplier, ignoring that both firms are embedded
  within larger social networks.
• examines the viewpoint of a buying firms SCE in
  relation to its supplier to evaluate social
  capital.
• investigates the direct effect of social capital
  in performance without paying sufficient
  attention to the mediating variables.
• is a cross-sectional study.
• uses information sharing as a measure of
  structural social capital, but recognizes that
  network measures of social capital might offer
  richer analysis to formalize the notion of
  structural social capital.
• empirically tests the Spanish context.

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Verónica H. Villena Martínez PhD Candidate at IE
Business School Department of Operation and
Technology Management Maria de Molina 12 Bajo
28006 Madrid, Spain Email veronica.villena_at_ie.edu


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