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RESEARCH PAPERS
1li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017
*-** Professor, Eastern Michigan University, Michigan.
ABSTRACT
Because an organization's visibility and decision-making abilities in a supply network is limited by its embeddedness,
managing the embedded activities may be affected by non-contractual forms of governance and capability.
Whatever the organization cannot see, it can't efficiently control. In this paper, the authors have studied non-contractual
governance, dependence, and reliance in a manufacturer-vendor dyad in light of logistics, spill-over customer-centric
service, and performance. Relational norms (information sharing and flexibility), trust, commitment, and bilateral
dependence were hypothesized to explain manufacturers' logistics capability and customer-centric services. Using
SEM-PLS (Structural Equation Modeling using Partial Least Squares) approach, all the hypothesized paths were proven 2 2with adequate R explained for each construct; R for financial performance was low.
Keywords: Material Transaction, Embeddedness, Dependence, Reliance, Performance.
HARASH SACHDEV * RUSSELL MERZ **
By
MANAGING MATERIAL AND LOGISTICS EMBEDDEDNESS: MATERIAL BUYERS' PERSPECTIVE
INTRODUCTION
It is common knowledge among procurement
professionals that the percentage quantity of material 1purchased by manufacturers over making them in-house is
high enough to deserve consistent managerial attention
(Supply Chain Quarterly, 2015 & 2016). Although several
research studies have focused on material management
issues (e.g., Jap, 2001), limited attention has been paid on
manufacturers' logistics that is embedded in this material
transfer, which has performance implications for material
exchange. Since supply-chain organizations are complex
adaptive systems (Mena, Humphries, & Choi, 2013), in this
empirical study, the authors have explained manufacturers'
adaptiveness through the embeddedness and resource-
based view (RBV) lens. How improving a manufacturer's
overall logistics capability and its customer-centric services
with its downstream customers may improve supply-chain
performance?
1 The manufacturer buys processed or component material from a vendor
(industrial distributor / supplier) while contemplating its spill-over effect with
downstream customers (vendors).
The logistics transaction that is embedded in this material
transfer from the vendor to the manufacturer deserve
special attention because logistics and customer-centric
services may be used as strategic differentiating tools
(Skjøtt-Larsen, 2000). To that extent, RBV proponents
suggest that the more such resources are valuable, rare,
immobile, and non-substitutable, the more an
organization's strategic competitive advantage and
performance value. These resources include knowledge
and capability and organization processes that give it an
identity in the market place (Barney, 1991; Sachdev,
2012). Since a supply-chain solution for each customer's
needs is generally situation-specific, complex, and
difficult to imitate, any transaction convolution should be
identified and understood to avoid loss of sales,
profitability, and dissatisfied customers (Tuli, Kohli, &
Bharadwaj 2007).
However, logistics efficiency studies have focused on cost
reductions and customer delivery improvements over
inept control practices and tension that may lead to the
demise of a business (Chen et al., 2015).One of the
Date Received: 25/07/2016 Date Revised: 18/01/2017 Date Accepted: 17/04/2017
RESEARCH PAPERS
2 i-manager’s Journal o Management, n l lVol. 11 No. 4 March - May 2017
reasons maybe that such studies are being understood
from logistics service providers or their customers’
(shippers) perspective rather than the material buyer's
perspective. Furthermore, researchers have pointed out
that logistics providers primarily focus their managerial
efforts on interpreting contracts, leveraging pricing, and
discussing service failures instead of improving the logistic
transactions (Halldo’rsson & Skjøtt-Larsen, 2006). Since
such material and logistics transactions are on the rise,
manufacturers and vendors will need to learn how to
improve and sustain themselves in this embeddedness, or
face inefficiencies that will defeat the purpose of material
exchange.
Embeddedness refers to an organization's dependence
and reliance on its supplier and customer in its supply
network (Ghoshal & Bartlett, 1990; Gulati, 1998). However,
dependence may only sow the seeds for non-contractual
attributes to exist (e.g., relational norms, trust,
commitment) rather than having a direct impact on them
(Sachdev, Bello, & Verhage, 1995). Hence, it may be
interesting to know how dependence and non-
contractual governance play out in improving logistics
and customer-centric services for this form of
embeddedness. Organizations may then reduce
committing to wasteful energy in overanalyzing
contractual agreements. Had Mattel Toys, Inc. practiced
non-contractual governance in improving logistics and
customer-centric services, would they have experienced
such fallacies (e.g., Wisner, 2011)?
“…Whenever one addresses the supply chain for a
particular agent (i.e., a company), one would have to
specify the referent (e.g., Apple iPod touch, Intel 3rd
Generation Xeon processor) for that agent as the unit of
analysis” (Carter, Rogers, & Choi, 2015, p 91). Marketing
channel theorists suggest that clarifying a business
exchange from a channel captain's viewpoint (the party
that has the expertise and creates the channel) may be
an initial step in improving its performance (e.g., Mehta,
Dubinsky, & Anderson, 2003). Based on these arguments,
the authors study this embeddedness from the
manufacturer's perspective (initiators and receivers of the
material transaction).
1. Objectives of the Paper
Because an organization's visibility and decision-making
abilities in a supply network is limited by its embeddedness
( the way the embeddedness under analys is
isconfigured), managing the embedded activities may
be affected by non-contractual forms of governance
(Mena et al., 2013). Whatever an organization cannot
see, it can't efficiently control. Empirical studies or meta-
analysis are still needed to explain embeddedness for the
different sets of supply-chain configurations and their
performance contributions (Choi & Kim, 2008; Carter et
al., 2015). If differences in the sets of buyer-seller
exchanges are expected, studies should be conducted
to determine the necessary managerial adaptations
(Kumar, Scheer, & Steenkamp, 1995; Lusch & Brown 1996).
Through empirical research, the authors illustrate why
interdependency differences exist in a manufacturer-
vendor logistics and material transaction, and ways of
managing it towards improved performance.
Since the role and posit ion predetermines a
manufacturer's structure (power, control, and information
flow) in its supply network (e.g., Zafeiropoulou &
Koufopoulos, 2013), the authors study non-contractual
governance, dependence, and reliance for this
embeddedness in light of logistics and customer-centric
services (Figure 1). Because of the high frequency of
adjustments made to logistics transactions, which are
time-based, information sharing and flexibility are two
major non-contractual governance discussed in isolated
ways in purchasing and logistics (Vickery, Calantone, &
Dröge, 1999; Sohail, Bhatnagar, & Sohal, 2006; Fawcett,
Calantone, & Smith, 1997). Trust and commitment are the
typical forms of reliance among trading partners
(Halldo´rsson & Skjøtt-Larsen, 2006; Zafeiropoulou &
Koufopoulos, 2013). In addition, since capability and
customer-centric services are necessary contributors to
this embeddedness, the authors have studied these
constructs.
The contributions of this research are the following: First,
since an organization allocates its resource and
capabilities based on its embeddedness, drawing from
several research literature, this research flushes the
RESEARCH PAPERS
importance of dependence, trust, commitment, and
non-contractual governance by integrating these
concepts through the eyes of a manufacturer in material
and its accompanying logistics transaction. Second,
researchers generally sum, subtract, or multiply the
individual items of dependence from each side of the
dyad to form a composite dependence scale. Based on
the objectives of this study, bilateral dependence is
measured as a second order construct comprising
separate buyer and seller's dependence scores. This
second-order approach may better portray the
importance of dependence in logistics and material
convolution. Third, the authors extend marketing channel
literature (Sachdev & Merz, 2012) to material transactions
by composing flexibility and information sharing as
second order construct. These actions may reduce the
probability of such buyer-seller exchanges to be
ineffective or terminated.
To explain these contributions, the theoretical aspects of
embeddedness (logistics convolution with material
transaction) and RBV are first explored. Next, the
hypotheses are developed linking the constructs
contained within this embeddedness. Then, the
methodology for this study is unfolded. Subsequently,
using SEM-PLS, the hypotheses are tested and the results
are presented. Finally, the findings and managerial
implications are addressed.
2. Vendor-Manufacturer Embeddedness
The conceptual framework was developed using supply
chain literature in line with organization structure-
behavior-performance, where behavior emanates from
an organization's structural embeddedness (e.g., Gulati,
1998).Drawing from the above research studies, the
authors treat the manufacturer as the fundamental driver
of its network. The network is controlled by adding
manufacturing content to the purchased material while
considering its spill-over effect with the next set of buyers in
the supply network (Jap, 2001). The manufacturer buys the
material and implements its logistics activities (e.g. order
processing; MRP, DRP) using its upstream vendor.
“Logistics is not merely a primary driver of time and place
utilities but also a core enabler of form and possession
utilities” (Fawcett, Waller, & Closs, 2011, p.116).
To explain embeddedness, Granovetter (1985) states that
“… the behavior and institutions to be analyzed are so
constrained by ongoing social relations that to construe
Figure 1. Research Hypothesis
3li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017
RESEARCH PAPERS
them as independent is a grievous misunderstanding”
(p.482). Extrapolating this comment, researchers visualize
supply-chains as configurations comprising sets of
organizations (Mena et al., 2013). Each organization is
positioned as playing a physical and/or supportive role
while contributing to its supply-chain network. Moreover,
the visibility and perceptions of reality of each
organization depends on its position and role,
necessitating understanding the governance and
capabilities of these organizations in enhancing
performance (Carter et al., 2015).
The principal difference between material transaction
and its accompanying logistics activity is that the bundle
of goods, services, and resources transferred are unique
to their situations. First, the manufacturer buys the material
to achieve its target growth and implements logistics while
contemplating customer-centric services with its
downstream customer. The logistical activities may
include MRP, DRP, packaging, transportation, storage,
handling returns, and the work-in-process inventory. The
change of material possession between the vendor and
manufacturer may require activities such as gathering
market intelligence, providing market coverage, and
changing the form of a material by the manufacturer.
Second, the accounting practices for the logistics and
material buying may be different. For example, the
inbound logistics cost are rolled into the purchase price
for the manufacturer, but its outbound logistics cost is
considered a delivery expense. Third, the reasons for
bilateral dependence for material and logistics
transactions may be different because of the dissimilarity
in the division of labor and activities to achieve
economies of scale and scope for adequate
performance. For logistics consummation, dependency
arises because of service issues (e.g., timely loading and
unloading of cargo; inventory count); in the material
buying, dependency arises because the purchased
material gets integrated into the manufacturer's product.
Thus, the manufacturer needs to determine whether this
change in the form of the product performs functionally
well. Therefore, from a complex adaptiveness
perspective, how logistics capability and customer-
centric service interact within this material transaction
may need to be understood.
Whereas the material sales process may be isolated and
understood, the logistics transactions get submerged
during the interaction (since multiple logistics tasks are
performed using several organizations and government
agencies). These tasks may need trucking, warehousing,
packaging, homeland security, and infrastructure, and
the logistics inefficiencies (e.g., receiving wrong parts and
documentation) may easily get diffused. Thus,
understanding logistics capability may be necessary.
3. RBV and Embeddedness
RBV proponents suggest that organizations conduct
business through the bundle of resources they control. The
more a resource is valuable, rare, immobile, and non-
substitutable, the greater the chances for an organization
to obtain a strategic competitive advantage, which has
performance-bearing implications. These resources may
be classified into physical, human, and organization
capital. Physical capital is an organization's control over
items such as technology, plant, location, and raw
materials. Examples of human capital are knowledge,
training, experience, and skills of the employees.
Organization capital encompasses the organization
structure and assets for running the organization (Barney,
1991; Dyer & Singh, 1998).
The RBV proponents use capabilities and resources
interchangeably (Ray et al., 2004). In this research, the
following authors' suggestions are followed. Capabilities are
an organization's skills, knowledge, and processes that are
used to conduct business in the supply chain (Makadok,
2001). Moreover, these capabilities are entrenched in an
organization's routines and practices and act as a glue to
integrate and advantageously utilize organizational assets
(Day, 1994). These capabilities have causal ambiguities
that are complex and situation-specific, and, therefore are
not only difficult to replicate but are also time-based that
make their transferability difficult to other exchanges
(Barney, 1991). Logistics is a capability for order fulfillment
filling and service delivery, which includes placing and
receiving an order (Day, 1994).
4 i-manager’s Journal o Management, n l lVol. 11 No. 4 March - May 2017
RESEARCH PAPERS
In summary, logistics may be an unnecessary but
required capability to fulfill the needs of the material
transfer, and, therefore, it should have its own identity in
material buying-selling studies. The manufacturer is
passing on the levels of relational norms, trust, and
commitment built with its upstream supplier to its
downstream customer. In this context, the manufacturer
needs to coordinate its upstream buying and logistics
capabilities with its downstream customer-centric
activities to manage the vendor-manufacturer dyad.
Mena et al. (2013) compared three different supply-chain
configurations (one set each from the pork, beer, and bread
industry) in suppliers' suppliers, suppliers, and buyers'
embeddedness. Using a case study and examples, they
illustrate that relationship stability (trust, commitment, and
communication) and inter dependence grow from less to
more as these sets of supply-chains move from an open (one
way link to form the chain) to closed (the three organizations
linked through a closed loop) system. Since embeddedness
was only discussed for the goods exchanged, they suggested
to conduct relational embeddedness studies across other
sets of supply-chain activities.
Wu, Choi, and Rungtusanatham (2010) surveyed an
aerospace-related manufacturer to understand
collaborative synergies and market efficiencies of co-
opetition (two suppliers of goods simultaneously
collaborating and competing). The authors concluded
that as supply managers promoted the use of business
social interaction, supplier co-opetition (information
exchange and joint participation) improved. However,
supplier co-opetition negatively affected overall
performance, leaving the authors to conclude the need
for other forms of embeddedness empirical studies in
order to reinforce their study.
Surveying forty-two logisticians, Large, Kramer, and
Hartmann(2011) concluded that customer-specific
adaptations (behavior and asset specific) improved their
client's loyalty and relationship performance; however,
adaptations reduced satisfaction although loyalty and
relationship performance improved it. The focus of the
study, however, was only on logistics service providers
rather than the logistics synergies needed in material
transaction. The authors recommended conducting
additional studies in the purchasing area to demonstrate
the importance of logistics and customer-centric service.
Wang et al. (2006) demonstrated the importance of
focusing on strategic logistics issues that improve long-
term contracts between parties over short-term, cost
cutting approaches. “It is interesting to note again that all
companies believe improving service quality and
customer service are very important for the future, with
ranks of 1 and 3” (Wang et al., 2006, p.809).
The recommendations from these embeddedness
supply-chain studies along with Carter et al.'s (2015) call
for launching logistics studies that support physical supply
chains corroborate the purpose of this research. An
organization's role and position sets its visibility within its
supply-chain network. Embeddedness sets an
organization's dependence on other organizations in the
network; organizations need to rely on each other to
managing their capabilities within their configuration.
Thus, it is important that the manufacturer needs to
recognize, understand, and admit its perceptions of
reality of visibility; a manufacturer and its vendor should
realize how each one of them is fulfilling its prophecies
without over-pushing its agendas. How should they grow
material and logistics transactions in this embeddedness
while improving performance? Reliance, non-contractual
governance, dependence and their ties with logistics and
customer service provide an answer.
3.1 Reliance
Although an organization's supply-chain network
establishes the way it participates, reliance through trust
and commitment makes the exchange open and fair
(Zafeiropoulou & Koufopoulos, 2013). Since superior
benefits are highly desired from an exchange,
organizations in the supply chain are inclined to commit
themselves to maintain the relationships. Gundlach,
Achrol, and Mentzer (1995) argue that commitment is an
energizing force that motivates organizations to make
relatively long-term focused decisions, which strengthen
their involvement in future transactions. It defines the
closeness of a relationship and the willingness of partners
5li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017
RESEARCH PAPERS
to make short-term sacrifices for long-term, stable
relationship (Morgan & Hunt 1994). Manufacturers need
both pre and post-sales service over the duration of the
warranty period, which are long-term.
Trust is a state rather than something fluid, which is tied
with the conditions emanating from trustful over
mistrustful forms of governance (Nooteboom, 1996).
The presence of trust acts as an informal form of control,
which demotivates parties from overanalyzing
contracts in inter-organizational transactions (Lui & Ngo,
2004). In addition, trust makes parties keep their business
secrets intact, be overly cautious about competitive
interference, and thickens their bonds (Katsikeas,
Skarmeas, & Bello, 2009). High trust minimizes
vulnerability, increases cooperation, and long-term
orientation of a relationship (Zhao & Cavusgil, 2006).
Trust is defined as a manufacturer's belief that its
vendor/shipper is honest, fair, and reliable in its dealings
(Bloemer, Pluymaekers, & Odekerken,2013).
Trust is a condition that directly and indirectly affects an
exchange through commitment. “The strength of this belief
may lead the firm to make a trusting response or action,
whereby the firm commits itself to a possible loss, depending
upon the subsequent actions of the other company”
(Anderson & Narus 1986, p.326). Moreover, when trust and
commitment partake in the same transaction, they
contribute to productive over tension behaviors as well as to
the confidence and belief that the parties will not callously
destroy an exchange (Lui & Ngo, 2004).
By committing to utilize the material properly while
changing its form, the manufacturer trusts that the vendor
will release the material in the agreed-upon form. The
vendor needs to provide reliable information about the
material's properties, availability, future design, or price
change. The manufacturer is committed to track the
material, worker productivity, safety practices, actual
versus documented reasons for delays, type of pilferage,
and type of cargo and packaging in close contact with
the material.
Hypothesis 1: The greater the vendor's trust, the greater
the manufacturer's commitment.
3.2 Non-Contractual Governance
The term governance “is a shorthand expression for the
institutional framework in which contracts are initiated,
negotiated, adapted, enforced, and monitored” (Palay,
1984, p.265). Inter-organizational governance may be
envisioned as occurring along a hierarchical continuum.
The polar ends of this continuum are arms-length
transaction and hierarchical governance. Operating
within this continuum are different forms of non-
contractual governance. Interpreting contracts in inter-
organizational relations, Macneil (1980) suggests that the
sole purpose of contracts is to implement a set of norms
which guide the exchange. From a governance
perspective, these norms envelope contracts (Macneil,
1978), simulate hierarchical governance (Grossman &
Hart, 1986), and provide governance value for
implementing strategies that have competitive
advantages (Ghosh & John, 1999).
When the focus is relationships, the reference point for
disagreements is not the original contract but “the entire
relation as it had developed to the time of the change in
question” (Macneil, 1978, p.840). Moreover, even though
contracts contain written clauses for performing
exchanges, certain normative behaviors operate within the
relationship to control for the unforeseen not specified in the
contracts. Adjustments are made to preserve the longevity
of the relationship. Relational norms help the manufacturer
manage a non-integrated channel as its own subsidiary.
Higher levels of relational norms imply higher levels of
governance (Noordewier, John,&Nevin, 1990).
However, norms have their attached motivation and
coordination costs for inter-organizational transactions
(Castaldi et al., 2015). Motivation costs refer to imperfect
information sharing and commitment between parties.
Coordination costs arise from operational difficulties such
as the final delivery (e.g., the last mile), change of
possession, and final price (Baudry & Chassagnon, 2012).
Unlike corporate governance where the management
styles are preserved even if an employee exits (Castaldi et
al., 2015), the time and resources for inter-organizational
relationship is lost if the exchange is terminated (Palmatier,
Dant, & Grewal, 2007; Hartmann & Grahl, 2011).
6 i-manager’s Journal o Management, n l lVol. 11 No. 4 March - May 2017
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3.2.1 Relational Norms - Information Sharing and
Flexibility
Timely information sharing or flexibility towards consumer
response, continuous replenishment, and delivery are
crucial supply-chain practices (Vickery et al., 1999; Bello,
Lohtia, Sangtani, & 2004; Fawcett et al., 1997). These
norms are communicative, non-evaluative, and promote
the shared interest in the exchange that prevent intruders
from interfering using genuine or malicious competitive
intent (Sachdev & Merz, 2012).
How much should organizations trust each other in order
to be comfortable with the visible and invisible portion of
the material buying and logistics tasks that occur along its
chronological, cost calculus journey? Meaningful
communication between organizations is a prerequisite
for trust (Anderson & Narus 1990). Moreover, trust is
enhanced if interactions between partners are influenced
by non-evaluative means (Klimoski & Karol, 1976).
Manufacturers build a vendor's trust by sharing
information and flexible manufacturing to improve
forecast accuracy. Vendors and manufacturers may
need to plan safety stock at their respective locations to
meet uncertainties, which require flexibility and
information sharing. One of the reasons for their alliance is
that the motivation and coordinating cost to build trust is
less than the in-house monitoring cost. Petersen et al.
(2008) found manufacturers' supplier integration (buyer's
information exchange and degree of strategic
partnership) to positively affect relational capital (trust,
mutual respect, and interaction).
Hypothesis 2: The higher the relational norms (information
sharing and flexibility) between the manufacturer and its
vendor, the greater the vendor's trust.
A committed organization espouses its willingness to
pursue self-disciplined shared governance and interests
(Anderson & Weitz, 1992). A manufacturer primarily
commits to change the form and possession of the
material by providing the time and place utility functions
to complete the logistics movements. The manufacturers'
buying and logistics role make them strongly tied to
material management at the vendors and manufacturers'
site. Based on a sample of U.S. export manufacturers and
their distributors, Sachdev and Merz (2012) concluded
that manufacturers' relational norms (information sharing
and flexibility) increased commitment. Relationship
practices enhance mutual understanding and
commitment to plan and implement logistics activities
(Wong & Karia, 2010).
Hypothesis 3: The higher the relational norms (information
sharing and flexibility) between the manufacturer and its
vendor, the greater the commitment.
3.2.2 Relational Norms and Logistics Capability
In material transactions, logistics service is a capability
since it is crucial, strategic, and reflects the vendor and
manufacturer's brand value. Its consistent presence is a
primary reminder to the manufacturer of material sales
between procurement cycles. By being present up to the
last point in a material's journey, a capable logistics
service resolves the time and place utilities for a customer
and may be viewed as a resource (Sohail et al., 2006;
Adams et al., 2014). In addition, it is an enabler for form
and possession of the material transfer. It is not easy to
mimic logistics processes to create similar brand value.
For example, Fawcett et al., (2011) cite companies such
as UPS, Toyota, Wal-Mart, Frito-Lay, Zara, and IKEA to
illustrate the power of logistics capability as a sustainable
competitive advantage. In particular, they emphasize
that it is not tangible resource in itself but the skill-based
(intangible) resource that provides the logistics value.
Furthermore, logistics skills are developed through
learning-by-doing and cannot be identified, imitated, or
transferred across industries (Adams et al., 2014).
Manufacturers expect flexibility from their vendors to
support order releases, emergency orders, after-sales
service, and unforeseen supply-chain risks. “A firm's
logistical competency is directly related to how well it is
a b l e t o a c c o m m o d a t e s u c h u n e x p e c t e d
circumstances” (Bowersox et al. 2013, p. 62). To financially
manage its material/ logist ics convolution, the
manufacturer rolls its logistics cost into its material cost to
make it part of its asset management. Purchasing cost
may need to be adjusted to improve each other's
7li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017
RESEARCH PAPERS
balance sheet and /or income statement, which brings
information sharing and flexibility in the forefront. Flexibility
may be regarded as a potential driver of competitive
advantage for a logistics strategy (Fawcett et al., 1997).
Hypothesis 4: Greater relational norms (information
sharing and flexibility) between the manufacturer and its
vendor lead to greater logistics capability.
3.2.3 Relational Norms and Customer-Centric
Customers do not buy products and services but the
utilities derived from them. The service-dominant logic
(SD-L) literature also suggests that organizations should
collaboratively identify and cultivate value-added
activities, gauge market feedback, and evaluate
performance (Lusch, Vargo, & Malter, 2006). Therefore,
customer-centric service needs to be incorporated as
part of the value-creation activity in any line of business.
Moreover, customer-centric service affects the brand
image of the organization and/or its product.
Logistics service tied with customer service reflects how
well an organization utilizes logistics activities in retaining
its customer (Oflaç, Sullivan, & Baltacioğlu, 2012).
Studying one without the other may not capture the
overall serviceability of the organization. In addition, in
order to understand the spill-over effect, customer service
is important to manufacturers. Furthermore, if logistics is
not partitioned from material transaction, “…failure
situation can create considerable shifts in the responses
of consumers, especially in the attribution behavior for
cause of failure” Oflac et al. (2012, p. 51). Therefore, the
authors treat logistics service capability and customer-
centric as two related but separate issues.
Collaborative efforts in relationship development
enhances the chances of differentiating one’s services
(Adams et al., 2014). However, more research is needed
to determine which types of relationship improve
customer-centric service relative to competitors in
different relationship context (Daugherty, 2011). For
supply-chains, continuous acquisition and integration of
information is needed to be customer-centric (Homburg,
Wieseke, & Hoyer,2009; Kumar, Heide, & Wathne, 2011).
Manufacturers develop relational norms after taking the
sales and after sales services requirements into
consideration. The more the manufacturer can socially
identify with its upstream vendor, the higher the probability
of transferring this social identity to its downstream
customers (Homburg et al., 2009).
Hypothesis 5: The greater the relational norms
(information sharing and flexibility) between the
manufacturer and its vendor, the greater the
manufacturer's customer-centric behavior.
3.2.4 Commitment, Logistics Capability, and Customer-
Centric Service
The manufacturer contracts and co-creates material
value with its vendorto enhancing its downstream
customer-centric experience. This customer-centric
experience is transferred through the manufacturer to the
downstream customer (Kumar et al., 2011). Hence, the
manufacturer needs to commit to its material
transactions with the vendor before it can provide the
customer-centric experience. A customer-centric
organization focuses on collecting customer feedback
and resolving conflict while playing a strong commitment
role (Bradford & Weitz, 2009). An optimistic post-sales
customer service may be positively affected by
commitment (Challagalla, Venkatesh, & Kohli, 2009).
Hypothesis 6: The greater the manufacturer's
commitment towards his vendor, the greater its
customer-centric service.
3.3 Dependence and Commitment
Dependence sows the seed for distribution and logistics
management (Sachdev et al., 1995). “The dependence
of actor P upon actor O is (1) directly proportional to P's
motivational investment in goals mediated by O, and (2)
inversely proportional to the availability of those goals to P
out-side of the O-P relation” (Emerson, 1962, p. 32-33). This
dependence definition focuses on two factors:
commitment and alternatives available to the parties
being influenced (Beier & Stern, 1969).Dependence is
tied with goal accomplishment, replaceability issues, and
longevity of the relationships to recover the motivational
investment and not a principal driver of trust between
parties (Katsikeas et al., 2009).
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RESEARCH PAPERS
A manufacturer becomes dependent on his vendor to
complete the buying process. The dependence to
commitment path arises because the vendor needs to
accept the purchase order and may provide financial
incentives. The vendor's dependence lies on how well the
manufacturer transforms the purchased material before
shipping it to the next set of customers.
When bilateral dependence between organizations is
low, there may be little reason to build commitment. The
interests of such parties are divergent and the motivation
to conduct business is pure arms-length. The
manufacturer may shop around for emergency orders to
meet its short-term goals of storing and moving inventory
and may delay or cut back on vendor material purchase.
In the case of high bilateral dependence, each party has
an economic stake in the outcome, and convergence of
self-interest to pursue opportunities prevails. In addition, if
partners value the benefits from each other's resources,
they are less likely to replace each other and instead be
motivated to increase the on-going partnership.
Commitment will replace reasons for generating
vulnerability. High levels of bilateral dependence
between partners result in less likelihood for negative
sentiments (Kumar et al., 1995). It also encourages the
formation of normative compliance and extendedness
to a relationship (Lusch & Brown, 1996).
Hypothesis 7: The higher the bilateral dependence
between the manufacturer and its vendor, the higher the
manufacturer's commitment.
4. Performance Hypotheses
Through performance one distinguishes successful from
unsuccessful B-S relationships. Moreover, positive
outcomes ensure that valuable resources flow
appropriately through one's supply chain for extended
periods (Chen, Daugherty, Landry, 2009). Performance
should be measured from both the buyer and seller's side
(Kumar, Stern, & Achrol, 1992). In addition, performance
may be measured through hard, contribution to profit
measures or soft, perceptual measures such as the
degree of success with a partner. Hard measures of
performance are more closely linked with the product
and the attached services sold than soft measures (Large
et al., 2011). The manufacturer is interested in improving
its financial statements through appropriate B2B pricing
strategies, adjusted for logistics cost.
Although resources and capabilities strengthen an
organization's competitive advantage, they become a
relational rent for the giver (Dyer & Singh, 1998). The
manufacturer aligns its order processing and inventory to
match its DRP with its MRP. Efficient logistical interactions
and activities reduce costs and enable the participating
organizations to better utilize their assets and improve
performance (Lynch, Keller, & Ozment, 2000).
Hypothesis 8: As a manufacturer's logistics service
capability improves, its financial performance improves.
How well an organization attracts new customers or retains
existing ones is determined by its service-quality (Oflaç et
al., 2012). “Value is not produced in the supplier's factory
but in the buyer's use of the goods, services, information
and other inputs the seller provides. Customer relationship
marketing involves getting close to customers,
understanding their agendas, determining how to
profitably facilitate those agendas, then working
collaboratively with customers to accomplish their goals”
(Fung, Chen, & Yup, 2007, p.167).
The manufacturer needs to coagulate its downstream
customer experience as well as its own, learn from it, and
share the knowledge with its vendor. It is through gauging
market feedback that one improves performance (Vargo
& Lusch, 2004).
Hypothesis 9: As a manufacturer's customer-centric
service improves, perceived performance with its vendor
improves.
4.1 Commitment and Performance
It is through commitment, exchange partners simulate the
benefits, avoid the bureaucratic inefficiencies, and
realize the economies of scale of vertical integration
(Gilliland & Bello, 2002). Bloemer et al. (2013) state that
commitment motivates an entire organization to develop
the skills and competencies, which are necessary for its
success.
If a manufacturer foresees a committed relationship with
9li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017
RESEARCH PAPERS
its vendor, it may hedge its business activities over a longer
duration. The manufacturer may better contemplate its
spill-over effect through the continued availability of its
vendor's brand, and plan strategies and generate
potential sales without the fear of losing future business.
A committed relationship may integrate each
organization's expertise in creating and delivering value
and enhancing supply-chain performance. Organizations
are less fearful of being exploited and are more willing to
share their capabilities and resources (Wallenburg et al.,
2011). Moreover, committed buyers and sellers may
readily access market information needed for creating
and delivering value. It also encourages a partner to
allocate more time to the relationship and increases
performance (Anderson & Weitz, 1992). In addition,
commitment signals by one party motivates the other to
efficiently engage in the role requirements for the
exchange (Kim & Frazier, 1997). Commitment increases
the chances of a party to be less short-run focused,
knowing that the overall performance balances in the
end (Bello, Chelariu & Zhang 2003).
Hypothesis 10: As a manufacturer's commitment
improves, its perceived performance with its vendor
improves.
5. Methodology
A survey was distributed via email to pre-identified
manufacturers using the services of a market research
firm (an Internet-based provider that had access to a
panel comprising a variety of U.S. manufacturers). To
qualify for the final sample, the key informant needed to
be a decision-maker for a manufacturer purchasing
processed materials and or/component parts from
vendors. Based on the resources set aside for data
collection, a list of 200 randomly selected purchasing
managers, who worked for a manufacturer, were
contacted by the marketing research firm. The first 150
manufacturers who respond to this survey were included
in the sample. Considering the time, effort, and
complexity in gathering data from supply-chain
professionals, several research studies have used the
assistance of a data collecting agency with the
involvement of the principal researcher (e.g., Zacharia,
Nix, & Lusch, 2009).
All questionnaire items were borrowed from supply-chain
literature: Commitment from Palmatier et al. (2007);
information sharing from Zhao, Dröge, and Stank (2001);
flexibility from Noordewier et al., (1990); logistics service
and financial performance from Lynch et al. (2000);
customer-centr ic ser v ice f rom Khong (2005);
dependence and perceptual performance from Jap
and Ganesan (2000); and trust from Judge and Dooley
(2006).Wordings were adjusted to ensure that the
manufacturer was focusing on its primary vendor. Each
questionnaire item was measured on a 7 point Likert
agree/disagree scale.
In supply-chain literature, dependence has been
measured as the sum or difference between each
partner's dependence. However, Peter, Churchill, Jr., and
Brown (1993) exhibit caution when a single respondent
provides his/her perception on attitudinal items pertaining
to both sides of a dyad and the difference computed as
the final measure. They instead offer two suggestions: use
direct comparison (e.g. agree/disagree scale – the
organizations are highly dependent on each other), or
frame the question as a difference in perception. In this
study, the authors have offered a third suggestion:
bilateral dependence is a second-order construct
consisting of the perceptions of each side's dependence
from a single respondent. In addition, since information
sharing and flexibility are general forms of collaboration
for purchase and logistics (Bowersox et al., 2013),the
authors integrate them into a second order construct
(Sachdev and Merz, 2012).
6. Analysis
To test the hypotheses, Structural Equation Model (SEM)
using the partial least squares (LV-PLS) algorithm (Ringle,
Wende, & Will, 2005) and Smart PLS was used. A path-
weighting scheme with initial weights of 1.0, 300 iteration
maximum, and an abort criterion of 1.0E-5 were used to
estimate the model reported here (Hair et al. 2012). In
addition, t-statistics for all the paths, weights, and loadings
were generated by a bootstrapping routine using 5000 re-
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RESEARCH PAPERS
samples of the cases available for modeling (Hair et al.,
2012).
The path model that consisted of ten first-order latent
variables with a total of 48 items (reflective) were subject
to an exploratory factor and reliability analysis. Evaluation
criteria of Eigenvalue greater than one, minimal cross-
loadings, and reliability (coefficient alpha) greater than
0.7 were used (Hair et al., 2010). Of the four perceptual
performance items, two were dropped as they were not
contributing to the success of supply chains. The 10
customer-centric items were loaded on three separate
factors. Two factors, comprised marketing research and
in fo rmat ion gathe r ing /ana ly s i s, re spect i ve l y ;
consequently, they were dropped. Four items related to
the delivery and management of customer-centric
service were retained. The resulting four-item, customer-
centric and two-item,per formance scales had
coefficient alphas of greater than 0.7 for the sample
(Nunnally, 1978).
Table 1 displays the measurement model (LV-latent
variables; MV-manifest variables; item loadings, average
variance explained, composite and Cronbach alpha
reliability). Based on Fornell and Larker (1981) guidelines,
manifest items meet greater than 0.7 loading criteria. The
Average Variance Extracted (AVE) exceeded the 0.5
criteria except the composite reliabilities and alpha
coefficients which exceeded their suggested greater
than 0.7 criteria.
In addition, for convergent validity, the manifest measures
should load greater than 0.6 on their single latent
construct and exhibit minimal cross-loadings. An
examination of the cross-loadings did not reveal any
severe levels of cross correlations among the predictor
constructs, so, overall, the construct validity of the models
is satisfactory. Furthermore, the Average Variance
Extracted (AVE) measures the variance captured by the
indicators relative to the measurement error and should
be greater than 0.5 to justify using a construct (Barclay,
Thompson, & Higgins, 1995).
Discriminate validity is assessed by comparing the square
root of the AVEs for the latent variables against the
correlations of the other latent variables in the model. The
self-explained Table 2 shows the results of this assessment.
The AVEs are larger than the off diagonal correlations with
the other latent variables in the model, demonstrating
acceptable discriminant validity.
7. Structural Model
The structural model was assessed by examining the 2coefficients of determination (R ) as indicators of overall
predictive strength along with the significance levels of
LVs MVs Loadings AVEsComposite
Rel.
Cronbach’s Alpha
Flexibility FLEX1 0.86
0.80 0.92 0.87FLEX2 0.91
FLEX3 0.90
Information Sharing
INTINFO1 0.71
0.63 0.87 0.80INTINFO2
INTINFO3
0.90
0.80
INTINFO4 0.74
Dependence DEP1 0.88
0.73 0.92 0.88DEP2
DEP3
DEP4 0.80
Supplier Dependence
SUPD1 0.91
0.86 0.96 0.95SUPD2
SUPD3
SUPD4 0.93
Logistics Capability
LOG1 0.77
0.70 0.94 0.93
LOG2 0.87
LOG3 0.76
LOG4 0.85
LOG5 0.83
LOG6 0.88
LOG7 0.88
Customer Service
CUSSERV1 0.82
0.71 0.91 0.86CUSSERV2
CUSSERV3
CUSSERV4 0.77
Commitment COMT1 0.93
0.84 0.94 0.91COMT2 0.89
COMT3 0.93
Trust TRUST1 0.92
0.85 0.96 0.94TRUST2
TRUST3TRUST4 0.94
Financial Performance
FINP1 0.88
0.73 0.93 0.91
FINP2 0.86
FINP3 0.87
FINP4 0.83FINP5 0.84
Supplier Performance
PERF10.88 0.94 0.86
PERF3
Relational 2Norms
1Flexibility0.52 0.88 0.841InfoShare
Bilateral 2Dep.
1Dependence0.56 0.91 0.881Supplier Dep.
1 2 First Order LV, Second Order LV
0.79
0.87
0.86
0.87
0.93
0.95
0.89
0.95
0.88
0.90
0.94
0.95
0.87
0.87
Table 1. Measurement Model Summary
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RESEARCH PAPERS
the coefficients for the hypothesized paths. The 2coefficients of determination (R ) (see Table 2) show that
the model explains a substantial part of the variance in
logistics capability (0.351), customer service (0.352),
commitment (0.612), trust (0.234), and vendor/client
performance (0.517). Financial performance is only 2weakly explained with an R of 0.095.
The significance of the path coefficients was evaluated
by t-statistics generated from a bootstrapping routine that
produced sample parameter estimates and its standard
errors (S.E.- Initial estimates - I). The results of this procedure
including the Initial path coefficients (I), bootstrap path
coefficient standard errors (S.E. of initial path - I), t-statistics
(using the initial S.E.), and p values are displayed in Table 3.
All hypotheses are supported (see Table 3).
8. Findings and Implications
Most organizations in the supply chain focus their efforts
on pricing their respective transactions, reasons for
service failure, and complaints of the parties involved
rather than understanding the relational embeddedness
and ways of improving it (Halldo´rsson & Skjøtt-Larsen,
2006). Since embeddedness may vary according to the
nature of the transaction, an organization needs to
analyze its transacting embeddedness to better manage
its exchange(Choi & Kim 2008). The authors explore
mate r ia l and log i s t ics embeddedness f rom
manufacturers' perspective. These manufacturers
purchased processed materials or components from
Manufacturers Latent Variables- Rel Norms Bilat Dep Log Cap CusServ Commit Trust Percept Perf Fin Perf
Relational Norms 0.728
Bilateral Dependence 0.18 0.746
Logistics Capabilities 0.593 0.056 0.835
Customer Service 0.552 0.103 0.557 0.843
Commitment 0.606 0.27 0.349 0.508 0.917
Trust 0.48 0.146 0.344 0.471 0.709 0.924
Supplier Performance 0.469 0.183 0.396 0.538 0.679 0.821 0.938
Financial Performance 0.179 0.135 0.308 0.317 0.104 0.226 0.308 0.853
AVE 0.519 0.557 0.698 0.711 0.841 0.854 0.880 0.728
Composite Reliability 0.882 0.909 0.942 0.907 0.941 0.959 0.936 0.931
R Square 0.000 0.000 0.351 0.352 0.612 0.234 0.517 0.095
Cronbachs Alpha 0.843 0.884 0.927 0.863 0.906 0.943 0.864 0.907
Diagonal elements are the square roots of the variance shared between the constructs and their measurements (AVE). Off Diagonal elements are the correlations among the constructs. Diagonal elements should be larger than the off-diagonal elements in order to obtain the discriminant validity.
Table 2. Indicators of Model
Table 3. Model Path Coefficients and Hypothesis Tests
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Manufacturer -Bootstrap with 5000 samples of 150 cases
Path Coef-initial (I) Path Coef-Bootstrap S.E (initial) T Stats (I/S.E.) P H
Trust -> Commit 0.534 0.532 0.074 7.248 0.00 1b
RelNorms -> Trust 0.469 0.470 0.096 4.914 0.00 2b
RelNorms -> Commit 0.326 0.329 0.072 4.501 0.00 3b
RelNorms -> Log Cap 0.593 0.594 0.068 8.691 0.00 4b
RelNorms ->CusServ 0.386 0.384 0.112 3.452 0.00 5b
Commit ->CusServ 0.274 0.280 0.100 2.747 0.00 6b
InterDep -> Commit 0.133 0.133 0.057 2.337 0.01 7b
Log Cap ->FinPerf 0.308 0.317 0.087 3.556 0.00 8b
CusServ ->Perf 0.216 0.218 0.074 2.906 0.00 9b
Commit ->Perf 0.539 0.537 0.072 7.504 0.00 10b
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their vendors. Information sharing, flexibility, dependence,
trust, commitment, logistics service, customer-centric
service reflected embeddedness. All the 10 hypothesized
paths were supported.
8.1 Embeddedness
The proven hypotheses indicate that it is important to
study the type and degree of embeddedness. A
manufacturer and his vendor have a choice between
short-term buying and long-term relationship. If the overall
goal of these organizations is disintermediation, a
participant may gradually assume more supply-chain
activities over its trading partners as its business grows. “The
supply chain as a network operates as a complex
adaptive system, where every agent grapples with the
tension between control and emergence” (Carter et al.,
2015, p.91). For instance, Mena et al. (2013) traced food
industries to exemplify open, transition, and closed
systems as a means of an organization to garnish control
within one's immediate set of supply chains.
However, several researchers argue that inter-
organizational transactions may benefit from relationship
techniques to sustain an open over a closed system
through continuous learning to resolve tension and overly
controlling issues (e.g., Macneil, 1980; Noordewier et al.,
1990). Our results attest that by using the relational
embeddedness to one's advantage, supply chains may
co-exist as open systems. Organizations may learn to be
dependent and use non-contractual forms of
governance that fits with one's structural embeddedness
(role and position). In the case of material and logistics
embeddedness in a vendor-manufacturer interaction,
information sharing, flexibility, trust and commitment may
generate the same effect as of a closed system.
8.2 Dependence and Commitment
Bilateral dependence, construed as second-order,
di rect ly affected commitment. As discussed,
dependence may set the stage for collaboration.
Sachdev and Merz (2012) found manufacturers'
dependence to increase commitment with export
distributors although trust was not a part of the model.
Zacharia et al. (2009) found manufacturers and their
collaborative partners' interdependence to positively
affect collaboration (information sharing and joint effort);
collaboration, in turn, affected relational outcome (trust,
commitment, credibility, and relationship effectiveness).
Utilizing a sample of import distributors, Katiskeas et al.
(2009) found overseas manufacturer- importer
interdependence to moderate the effect of trust on
performance.
Therefore, the reasons and degree of each organization's
dependence should be delineated before resources are
developed and deployed in an exchange. These reasons
help to understand the interplay between dependence
and other constructs within a framework. Dependence
may affect exchanges based on how it is measured and
the type of embeddedness (role, position, and
relationship degree between the exchange parties).
8.3 Relational Norms
Since relational norms may not be equally applicable to
every buyer-seller exchange, the results indicate that an
organization should select the norms that will be helpful in
deploying capabilities according to the organization's
position and role. Relational norm (information sharing
and flexibility) affected trust and commitment.
Manufacturers and vendors should empower their
employees to jointly utilize flexibility and information
sharing to improve trust and commitment. Myriad logistics
sub-tasks may need to be performed in order to fulfill each
material transaction. On occasions, more visionary
thinking may be needed. Flexibility and its corresponding
information sharing (second-order) reminds the
manufacturer-vendor of the trustworthiness and
commitment in this line of business.
Morgan and Hunt (1994) found communication
(information sharing and exchange expectations) to
affect tire dealers' trust with their vendors; however,
communication's path to commitment was not
hypothesized in their study. Using sample buyers from
different manufacturing industries, Zacharia et al. (2009)
found higher degrees of collaboration (information
sharing and joint effort) between manufacturers and their
collaborative partners (sellers) to result in higher relational
13li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017
RESEARCH PAPERS
outcome (an additive scale comprising trust,
commitment, credibility, and relationship effectiveness
items). The authors illustrate that information sharing and
flexibility jointly affect commitment and corroborate the
reason for contextual-based embeddedness research.
Organizations need to recognize their role in their
respective supply-chains,and establish policies for their
employees to provide the proper category and
combination of relational norms.
8.4 Trust and Commitment
“A positive influence of trust on commitment is at the core
of the commitment-trust theory” Wallenburg et al., 2011,
p. 85).Although trust-commitment are important
parameters and essential for long-term relationships, few
researchers incorporate both constructs in a study and
directly interrelate them (e.g. Morgan and Hunt, 1994;
Wallenburg et al.,2011). Moreover hardly any study
measures commitment's impact on performance in the
presence of trust. For instance, Katsikeas et al. (2009)
found trust to strengthen the density and thickness of
overseas' manufacturer-importers.Skarmeas, Katsikeas,
and Schlegelmilch (2002) found commitment to be
positively related to performance in their manufacturer-
overseas' distributor study. Lages, Lancastre, and Lages
(2008) demonstrated relationship performance to be a
higher-order concept comprising commitment, trust,
mutual cooperation, and satisfaction for B2B e-
marketplace transactions.
8.5 Logistics Service Capabilities
Flexibility and information sharing, in unison, positively
affected logistics services capability. However, in their B2B
study, Palmatier et al. (2007) found manufacturers and
distributor capabilities to be affected by different sets of
governance parameters: Distributors' relationship-
specific investment (e.g., knowledge and special
procedures) was affected by communication but
manufacturers' relationship-specific investment (e.g.,
training and customized support) was affected by both
communication (timely and accurate) and relational
norms (flexibility, solidarity, and mutuality).
Service provided as a result of logistics operations is often
considered an appropriate yard stick for competitive
advantage and an intermediate outcome to
performance (Adams et al., 2014). Because not all
resources or capabilities have a sustainable competitive
advantage and some may be neutral or negatively affect
performance, this study extends RBV by illustrating why
each type of buyer-seller embeddedness may need
different type of capabilities for its sustenance. In addition,
different non-contractual governance may be needed to
guide the different capabilities.
Generally, vendors and manufacturers encounter
dynamic conditions that need accommodative
strategies. Being flexible and disclosing detailed
proprietary and non-proprietary information guide
logistics service capability. Although manufacturers'
logistics service capability was positively affected by
relational norms, they may need to pay close attention to
their tactical logistics service (MRP, inner-plant
transportation systems, etc.) to reap the benefits of time,
place, form, and possession utilities.
8.6 Relational Norms, Commitment, and Customer-
Centric Service
Service Dominant-Logic (SD-L) proponents proclaim that
buyers are more interested in the benefits from an
exchange than the physical assets that contribute to it. In
addition, the co-created value is derived from customer's
perception of these values and the organization's
application of its resources in delivering the value (Vargo &
Lusch, 2004; Adams et al., 2014). The findings of this study
attest that irrespective of the type of transaction, the SD-L
approach holds true. From the material buyers'
(manufacturers) perspective, relational norms (information
sharing and flexibility), positively affected customer-
centric services. Hartmann and Grahl, (2011) research
findings reveal that, from logistics buyers' perspective,
flexibility positively related customer loyalty across
German-based industries.
8.7 Performance
Since performance has been related to several traits in
business literature, researchers generally select the closet
trait within a framework that affects it. As discussed earlier,
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RESEARCH PAPERS
financial performance closely relates with the material
and logistics tied with it, and perceptual, global measures
more closely relate with the customer services received
as a result of the material sales transaction. Based on
these performance-related ideologies, manufacturers
increased their financial performance that emanated
from their logistics capabilities. Being customer-centric
also enhanced thei r percept ive-per formance
assessment of vendors. Commitment had its individual
impact on perceived performance as hypothesized.
Hardly any B2B empirical study has examined
commitment's effect on performance. For instance,
Skarmeas et al. (2002) found importer commitment to
improve performance with its overseas manufacturers. A
few researchers prefer splitting commitment into
attitudinal categories (affective and calculative) to show
each category's direct and indirect effect on perceptual
performance. Bloemer et al. (2013) found calculative
commitment to affect export performance for general
Netherlands exporters. However, these studies do not
include both trust and commitment as part of the model.
The authors found trust to have a direct impact on
commitment and the global measure of commitment to
directly affect perceived performance.
If supply chains are envisioned as configurations of their
larger supply network, then, the organization that
initiates its configuration(e.g. a manufacturer with its
upstream vendor and spill-over effect with its
downstream customer) is accountable to rest of its
supply network for the continued existence of its
configuration. An organization's financial performance
relative to its competitor is one way of demonstrating the
popularity of its configuration. Perceptual performance
is also one of the ways of guaranteeing that an
organization in the configuration will not lose its position
(Mena et al., 2013). Through positive perceptual
performance, the authors of this study illustrated why
and how the vendor will not by-pass the manufacturer or
vice-versa (disintermediation).
9. Limitations and Directions for Future Research
This study is not without its limitations. First, the data was
gathered using the service of an Internet-based
marketing research organization, who had a preselected
set of purchasing managers in their data base. Second, a
key informant was identified in each case and self-
reported measures were gathered of the questionnaire
items. Hence, self-reported bias may not be ruled out
since some questionnaire items captured the self-
informant's perceptions of his/her own organization
whereas others captured his /her perceptions about the
vendor's attributes. Nevertheless, this exploratory study
does contribute to a gap in literature that supply-chain
organization's role and position and transaction
embeddedness should be taken into consideration
before allocating resources.
Although tangible resources were not discussed in this
study, their impact should not be ignored. Future research
should identify tangible resources and study them in
conjunction with the intangible capabilities. For example,
tangible information technological resources may
interact with intangible human resource (skills of using
technology) to explain performance. It is common
knowledge that different employees using the same
machine tools and materials may create different
degrees of quality. In addition, this study focused on a
material buyer's perspective with respect to its exchange
(manufacturer-vendor) and a downstream customer with
whom it would presumably conduct business. This study
did not gather any information about this downstream
customer. Future studies may benefit by gathering
information from the three supply-chain organizations.
Lastly, in this research, supply chain was defined as any
manufacturer (OEM (Original Equipment Manufacture),
component part, processed material) purchasing
material from any type of supplier/vendor (OEM, raw
material, component part). Future research may benefit
from measuring compatible sets of supply chain. For
example, a compatible chain may be processed from
material manufacturers purchasing raw materials from a
mining industry.
Conclusion
The purpose of this study was to elaborate how
15li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017
RESEARCH PAPERS
embedded organizations should strive for continuity by
simulating a hierarchical structure of governance. The
authors explored embeddedness efficiency resulting
from the material and logistics transactions in a
manufacturer and vendor dyad. The social adaptive tools
of relational norms (information sharing and flexibility),
trust, commitment, and dependence were hypothesized
to explain the manufacturers' logistics capability and
customer-centric services that are embedded in material
buying between a vendor and a manufacturer. Practicing
such behaviors may prevent supply-chain failures such as
those experienced by Mattel Toys, Inc.
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ABOUT THE AUTHORS
Harash J. Sachdev (Ph.D. in Marketing, Georgia State University) is a Professor of Marketing at Eastern Michigan University, Michigan. He teaches in the areas of Marketing Strategy and Supply Chain Management. His research interests include writing cases and research papers in the areas of Supply Chain Management and Marketing Management.
G. Russell Merz (Ph.D. in Marketing, Michigan State University) is a Professor of Marketing at Eastern Michigan University, Michigan. He teaches and consults in the areas of New Product Development, Brand Management, Marketing Research, and Marketing Strategy. His research interests include Statistical Modeling Applications, Website Interactivity, Brand Management and Customer Satisfaction.
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