Coping With Dependence: A Logistics Strategy Based on Interorganizational Learning for Managing Buyer–Supplier Relations

• Date: 01 December 2016
• Published date: 01 December 2016
• DOI: http://doi.org/10.1111/jbl.12146
• Author: Thomas J. Kull,Scott C. Ellis

Coping With Dependence: A Logistics Strategy Based on

Interorganizational Learning for Managing Buyer–Supplier

Relations

Thomas J. Kull

1

and Scott C. Ellis

2

1

Arizona State University

2

Georgia Southern University

The rise of outsourcing has heightened interest in the role of logistics managers in coping with dependence in buyer–supplier relations. Buy-

ing firm dependence on a supplier potentially reduces supplier performance to expectations because the buying firm cannot leverage power

to capture value in the relationship. Drawing from interorganizational learning theory, we advance a logistics strategy that consists of supplier

cost analysis and supplier integration as a means to create value and thereby mitigate the negative effects of dependence. By facilitating the

acquisition and use of knowledge, supplier cost analysis and supplier integration enable buying firms to identify improvement opportunities

while engaging in collaborative supplier relations. Using survey responses from 222 buying firms, we find that while buyer dependence

decreases the buyer’s perceived supplier performance, supplier integration suppresses these negative effects. Furthermore, we show that supplier

cost analysis is a valuable knowledge acquisition tool that logistics managers can use to enable supplier integration as a relational form of gov-

ernance. As such, we provide new insights into interorganizational learning theory and suggest to logistics managers the important role supplier

cost analysis plays in managing buyer–supplier relationships.

Keywords: logistics strategies; supplier integration; supplier cost analysis; interorganizational learning; buyer–supplier relationships; structural

equation modeling; buyer dependence

INTRODUCTION

The logistics function includes a variety of boundary-spanning

roles, including sourcing and procurement,

1

and plays a promi-

nent role in directing supply management activities (Stank et al.

2005). As such, logistics managers need to be aware of strategies

that assure sourcing can facilitate competitive capabilities by

avoiding the negative consequences from dependence on suppli-

ers (Maltz and Ellram 1997; Petersen et al. 2008). Dependence

on a supplier decreases the buying firm’s ability to capture value

in a supply relationship because suppliers substantially mediate a

buying firm’s access to needed inputs (Kumar et al. 1998). An

alternative to value capture, as Priem and Swink (2012) note, is

for buying firms (i.e., buyers) and suppliers to seek opportunities

to cocreate value.

2

Indeed, supply chain research suggests that

buyers may mitigate the ill-effects of buyer dependence through

the adoption of closer relational structures via supplier integra-

tion activities (Zsidisin et al. 2003; Crook and Combs 2007).

In this study, we examine how buyer dependence decreases the

value buyers can capture in a relationship while examining

strategies logistics managers may use to increase the value

buyers can create in a relationship.

The strategy of supplier integration represents a potent depen-

dence-coping mechanism: the buyer remains dependent on the

supplier for services or materials, but the supplier becomes reli-

ant on the buyer for performance improvement. For example,

research shows that firms dependent on third-part logistics (3PL)

service suppliers will more likely partner with those suppliers

(Hofer et al. 2009). As suggested by Pfeffer and Salancik

(1978), codependence (i) increases suppliers’relational exit

costs; (ii) leads to a more equitable distribution of power

between firms; and (iii) subsequently dampens the negative

effects of unilateral dependence. However, interfirm integration

can be difficult; it is an intensive learning activity that requires

knowledge of collaborative opportunities and approaches that

reduce waste and improve value (Gustin et al. 1995; Modi and

Mabert 2007). While supply chain literature predominantly

assumes that firms have this requisite knowledge, we challenge

this assumption and propose that a boundary-spanning process

of interorganizational learning is needed that the logistics func-

tion can facilitate.

In particular, we posit that the acquisition of relationship-

specific knowledge, through the means of supplier cost analysis,

is an essential enabler of supplier integration activities. Increas-

ingly, organizations are turning to interorganizational cost analy-

sis as an important, strategic approach to more fully understand

the underlying costs of purchased goods and services (Dubois

2003). In this study, we posit that supplier costs analysis is

inherently a knowledge acquisition activity. Supplier cost analy-

sis helps buyers acquire a systems-oriented understanding of rele-

vant supply costs, generate novel ideas by assimilating supplier

expertise and experience, and make essential interorganizational

Corresponding author:

Thomas J. Kull, Department of Supply Chain Management, WP

Carey School of Business, Arizona State University, Tempe, AZ

85287-4706, USA; E-mail: thomas.kull@asu.edu

1

http://cscmp.org/about-us/supply-chain-management-definitions

2

Value creation in our context relates to the benefits that can

be appropriated within an exchange relationship (often related to

the funds committed to the exchange), while value capture

relates to the degree to which that value is appropriated (typi-

cally related to relational structure and resource ownership)

(Bowman and Ambrosini 2000; Lepak et al. 2007; Priem 2007).

Journal of Business Logistics, 2016, 37(4): 346–363 doi: 10.1111/jbl.12146

© Council of Supply Chain Management Professionals

trade-offs to meet supply chain goals (Zsidisin et al. 2003).

Thus, supplier cost analysis helps buyers acquire a better under-

standing of the exchange conditions to enable relational struc-

tures that better create value. Together, supplier cost analysis and

supplier integration form the basis of a logistics strategy that

enables interorganizational knowledge acquisition and use to

allow firms to manage supply chain dependencies.

Our study, therefore, seeks to answer the following research

question: does the interorganizational learning process of supplier

cost analysis and supplier integration suppress the negative

effects of buyer dependence? In answering this question, we seek

evidence for a viable strategy that logistics managers can use for

improving performance in their supply chains.

LITERATURE REVIEW

Organizations are not self-sufficient; they depend on other organi-

zations for critical resources, and this dependence increases their

vulnerability and weakness within an exchange relationship (Pro-

van and Gassenheimer 1994). Dependence results when one

party’s goals are mediated by another party (Emerson 1962) and

limits a firm’s ability to capture value in the exchange relationship

(Priem and Swink 2012). For example, Kumar et al. (1995) sug-

gest that firms leverage punitive actions by enacting, harsh treat-

ments, withholding information, and providing poor service to gain

benefits from dependent exchange partners. Similarly, Gundlach

and Cadotte (1994) find that firms employ operational and financial

punishments to influence the behaviors of their more dependent

exchange partners. Accordingly, Gulati and Sytch (2007) associate

high levels of dependence with decreased relational performance.

A complementary stream of logistics research suggests that firms

can adopt integrative mechanisms, such as closer relationships

(Golicic and Mentzer 2005), relational norms (Cai and Yang 2008),

and just-in-time (JIT) systems (Handfield 1993), to mitigate (i.e.,

mediate) the performance uncertainties associated with higher

dependence. Yet, support for the linkages among dependence, sup-

plier integration, and coordination is inconclusive. For example,

Golicic and Mentzer (2005) find numerous relational factors that

can prevent close relations. And while Cai and Yang (2008)

advance results that support the link between buyer dependence and

collaborative relationships, Handfield (1993) finds no empirical evi-

dence linking increased buyer dependence (i.e., supply base reduc-

tion) with interorganizational integration (i.e., JIT system adoption).

In sum, while studies of dependence suggest the importance of inte-

gration, its utility in mitigating dependence remains unclear.

We investigate the mediating role of integration by applying

organizational learning theory (Cohen and Levinthal 1990; Zahra

and George 2002) to the study of interorganizational relationships.

Drawing from the conceptual approach of Yli-Renko et al. (2001),

we suggest that the interorganizational learning process consists of

two fundamental activities: knowledge acquisition and knowledge

use.

3

In the interorganizational context, knowledge acquisition rep-

resents the attainment of new knowledge from an external firm,

improving the understanding of cause-effect relationships (Weick

1969), resolving situational ambiguities and increasing the range

of potential behaviors (Huber 1991), and cultivating superior

courses of action (Lewin et al. 1999). By contrast, in an interorga-

nizational context, knowledge use refers to the externalization of

new knowledge across firm boundaries through the execution of

actions and production of outputs (Holsapple and Joshi 2003).

Knowledge use activities refine “existing capabilities, processes,

[and] technologies”(Lewin et al. 1999, 536) to enable efficiency

gains and attain interorganizational goals. Together, knowledge

acquisition enables knowledge use so to embed new knowledge

into boundary-spanning operations and create value (Zahra and

George 2002).

In a complementary stream of supply chain literature, learning

(i) refers to knowledge sharing, collaborative processes that

enable joint problem solving across multiple firms within a sup-

ply chain (Flint et al. 2008, 258) and (ii) is particularly important

for achieving supply chain goals (Flint et al. 2005; Panayides

2007). These studies suggest that buyer–supplier relationships

provide ample opportunity to acquire and use knowledge. That

is, interactions with partners enable firms to attain external

knowledge that can be integrated with internal knowledge

resources (Flint et al. 2008). As well, supply chain relationships

provide a context for the application of newly acquired knowl-

edge within boundary-spanning, waste-reducing activities (Yli-

Renko et al. 2001; Flint et al. 2008).

Our review of the learning literature yields an important

insight: interorganizational learning represents a salient value cre-

ation strategy within exchange relationships. While extant

research draws this same conclusion (Priem and Swink 2012),

Lepak et al. (2007) advance specific rationale that conceptually

links interorganizational learning and value creation by noting

that the determination of value is firm- and context-specific,

driven by users’assessments of novelty and appropriateness.

Whereas novelty refers to users’perceptions of newness, appro-

priateness reflects the extent to which actions effectively address

the task, problem, or opportunity. The contextual nature of value

suggests the importance of acquiring specialized, relationship-

specific knowledge to understand how exchange partners per-

ceive the novelty and appropriateness of interorganizational

activities. Thus, firms obtain know-how and know-why that is

embedded within interorganizational actions to create value for

exchange partners.

Drawing from the learning literature, we adopt a process view

of interorganizational learning with a supplier-facing perspective.

Much empirical research has advanced a customer-facing per-

spective (Yli-Renko et al. 2001; Flint et al. 2008). Building on

these studies, we assert that suppliers similarly represent a salient

source of complementary external knowledge that may be

acquired and used to create value in an exchange relationship.

Accordingly, we advance a logically consistent, supplier-facing

view of interorganizational learning in which supplier integration

constitutes knowledge use and supplier cost analysis constitutes

knowledge acquisition. Furthermore, we assert that buyer depen-

dence serves as a trigger mechanism that stimulates an organiza-

tion’s external search for new knowledge, thereby motivating the

initiation of the interorganizational learning process (Zahra and

George 2002; Holsapple and Joshi 2003). Dependent buyers are

threatened by the loss of control of important resources for

3

Yli-Renko et al. (2001) employ the term “exploitation”

instead of “use,”but we prefer “use”as a more accessible term

for managers since it does not connote opportunistic behavior.

Coping with Dependence 347