Power Asymmetry, Adaptation and Collaboration in Dyadic Relationships Involving a Powerful Partner

• Author: Daniel F. Lynch,Donna Marshall,Eamonn Ambrose,Gilbert N. Nyaga
• DOI: http://doi.org/10.1111/jscm.12011
• Date: 01 July 2013
• Published date: 01 July 2013

POWER ASYMMETRY, ADAPTATION AND

COLLABORATION IN DYADIC RELATIONSHIPS

INVOLVING A POWERFUL PARTNER

GILBERT N. NYAGA

Northeastern University

DANIEL F. LYNCH

Dalhousie University

DONNA MARSHALL AND EAMONN AMBROSE

University College Dublin

Buyer–supplier relationships involve dyadic interactions, but there is a

dearth of empirical dyadic analysis of these relationships. While relation-

ships with a power balance between partners do exist, relationships typi-

cally occur in the context of power asymmetry. This study examines how

perceptions of power use and prevailing relationship quality in dyadic

relationships characterized by substantial power asymmetry affect behav-

ioral and operational outcomes. Hierarchical regression is used to analyze

data from a dyadic survey of relationships of a brand-name buying organi-

zation and its suppliers. Results indicate that power use affects partner

behavior and operational performance, but the nature of the relationship

dictates which power sources are most appropriate. In addition, the medi-

ation effect of power imbalance shows that both relational and transac-

tional factors can play an important role in supply chain exchanges.

Keywords: dyadic relationships; power asymmetry; adaptation; collaboration; rela-

tionship quality; transaction cost economics; social exchange theory

INTRODUCTION

Managing supply chain relationships continues to

be a challenge for many firms even as such relation-

ships become more prevalent in contemporary busi-

ness practice. Increasingly, companies of different

sizes, providing a variety of products and services and

with distinct organizational cultures, have to work

with other companies in complex supply chain net-

works. The firms often need to change their business

processes and systems in order to accommodate the

needs of their relationship partners. This may also

involve joint activities in which supply chain partners

share information, routines, planning, costs, etc. Such

adaptive and collaborative activities enable relation-

ship partners to develop transactional efficiencies,

which may enable them to garner greater returns than

they could generate individually (Dyer & Singh,

1998). However, the presence of power asymmetry in

such relationships affects partner adaptive and collab-

orative behavior, in part because it may encourage

opportunism or the stronger partner may use its

advantage to appropriate greater value in the relation-

ship.

Power asymmetry in supply chain relationships is

an important area for research as differences in power

among partners are generally inevitable. As Belaya,

Gagalyuk, and Hanf (2009) point out, the nature of

power in supply chain relationships presupposes an

asymmetrical distribution of power among partners

because of differences in expertise, size, switching

costs, dependence, contract structure, etc. The power-

ful partners may assume greater influence in the sup-

ply chain network, thereby providing some stability,

or they may leverage their power advantage at the

expense of weaker partners. Thus, power asymmetry

does not necessarily portend conflict in supply chain

relationships, but it does create greater risks and chal-

lenges for the weaker party. For example, the weaker

firm may be more vulnerable to opportunism because

it may not have effective mechanisms to monitor or

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influence the stronger partner’s performance. Due to

its weak position in the relationship, it is also likely

to comply with stronger partner requests for fear of

losing business. Where partners make relationship-

specific adaptations, the presence of power asymmetry

may amplify the risks and potential for conflict, disaf-

fection and relationship termination. As power asym-

metry in supply chain relationships is inevitable, there

is need to understand the nature of and effects of

power structure so as to provide win–win situations

for all partners in the supply chain exchange or net-

work (Cox, 2004).

Recent studies on the use of power and influence

in supply chain relationships have focused on its

effects on relationship commitment (Zhao, Huo,

Flynn, & Yeung, 2008), relationship strength (Benton

& Maloni, 2005; Maloni & Benton, 2000), opportun-

ism (Brown, Grzeskowiak, & Dev, 2009), compliance

(Payan & McFarland, 2005), value creation (Terpend,

Tyler, Krause, & Handfield, 2008) and performance

(Crook & Combs, 2007). With few exceptions (i.e.,

El-Ansary & Stern, 1972; Wilkinson, 1979), the stud-

ies have mostly examined one side of the relation-

ship dyad. In a departure from this, this study

examines dyadic relationships involving a brand-

name high-tech firm and its suppliers to determine

how power structure and the underlying relationship

quality in dyadic settings influence partners’ adaptive

behavior (i.e., willingness to adapt processes or sys-

tems to suit partners’ needs), collaborative behavior

(i.e., willingness to collaborate in joint activities with

supply chain partners) and ultimately operational

performance. Past studies suggest that adaptive

behavior enables a firm to build social credit or

indebtedness, which it may then use to extract favor-

able transactional terms or compliance from partners

(Griffith, Harvey, & Lusch, 2006; Zhang, Henke, &

Griffith, 2009). Moreover, it may also enable the

firm to build better bargaining power because of

higher switching costs (Crook & Combs, 2007) and

the social credit that may make the partner feel obli-

gated to reciprocate the commitment shown through

adaptive behavior.

However, although relationship-specific adaptations

and collaboration between buyers and suppliers

have received attention in the literature (Anderson

& Weitz, 1992; Daugherty et al., 2006; Doney &

Cannon, 1997; Gulati & Sytch, 2007; Hallen, Johan-

son, & Seyed-Mohamed, 1991; Min et al., 2005),

their mediating role in relationships characterized by

substantial power asymmetry has not been conclu-

sively determined. For example, the effect of reward

power, coercive power and legal power in relation-

ships has been mixed—positive in some studies

(Benton & Maloni, 2005) and negative or nonsignif-

icant in others (Zhao et al., 2008). Indeed, the

influence of power structure on a relationship part-

ner’s willingness to adapt processes or systems given

the prevailing relationship quality has not received

much attention.

In addition, the notion that exercise of power is

more important than structure of power relations

(Crook & Combs, 2007; Frazier & Summers, 1986) is

rarely addressed in as far as it influences relationship

partners’ willingness to adapt and/or collaborate.

Firms have power to the extent that other firms

depend on them for resources (Crook & Combs,

2007; Pfeffer & Salancik, 1978). These resources

include financial, expertise, information, services,

legitimacy or status as well as one firm’s possession of

attributes (e.g., attractiveness) or rightful claims (e.g.,

contract obligations) that may motivate its partners to

comply (Dwyer, Schurr, & Oh, 1987). Firms may use

their power advantage to coerce their partners to do

what they would otherwise not do or they may for-

bear use of power and still get better results. How-

ever, although the use of power advantage may be

beneficial to the stronger partner in terms of enabling

it to appropriate greater relationship value, it may

negatively impact the value-generating potential of

the relationship and/or irrevocably damage the rela-

tionship (Gulati & Sytch, 2007; Johnson, Sakano,

Cote, & Onzo, 1993). Consequently, it is not merely

the possession of power that may drive partner adap-

tation and collaboration; rather, it is the way that

power advantage is perceived to be exercised and in

what context.

Most studies on use of power in supply chain rela-

tionships examine one side of the relationship dyad,

which limits evaluation of perceptual congruence

(Anderson & Weitz, 1992) between partners. Several

studies suggest that partners have differences in their

perceptions and expectations in supply chain relation-

ships (Corsten & Kumar, 2005; Gundlach, Achrol, &

Mentzer, 1995; Nyaga, Whipple, & Lynch, 2010) and

these differences may have significant negative effects

on performance. In effect, perceptions of power and

how it is used may not be shared across the relation-

ship dyad and could significantly influence buyers’

and suppliers’ willingness to adapt, their willingness

to collaborate and operational performance. Thus, this

study examines the effects of power asymmetry, con-

sidered inevitable in supply chain relationships, on

partners’ adaptive behavior, collaborative behavior

and operational performance.

The next section is a review of theoretical founda-

tions of the conceptualized relationships and literature

on study constructs. Next, the study’s research meth-

odology is presented followed by a discussion of the

results. Finally, managerial and theoretical implica-

tions, and opportunities for future research are

presented.

July 2013

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