Pressure or Pamper? The Effects of Power and Trust Dimensions on Supplier Resource Allocation

• Author: Holger Schiele,Henk Sierksma,Jasper Veldman,Niels J. Pulles
• DOI: http://doi.org/10.1111/jscm.12049
• Published date: 01 July 2014
• Date: 01 July 2014

PRESSURE OR PAMPER? THE EFFECTS OF POWER AND

TRUST DIMENSIONS ON SUPPLIER RESOURCE

ALLOCATION

NIELS J. PULLES

University of Twente

JASPER VELDMAN

University of Groningen

HOLGER SCHIELE

University of Twente

HENK SIERKSMA

TSM Business School

Leveraging the supply chain for competitive resources remains a key chal-

lenge for supply chain management. Drawing on social exchange theory, this

study examines SCM practices that help firms to acquire better supplier

resources than rival firms that source from the same supplier. We provide a

clearer picture of coercive and competence power, and goodwill and compe-

tence trust as key mechanisms to improve supplier resource allocation of

physical and innovation resources. We analyze survey data of 185 supplying

firms using structural equation modeling. Our analyses yield several interest-

ing findings. First, contrary to other studies, we find that coercive tactics do

not necessarily affect supplier resource allocation negatively and goodwill

trust does not inherently affect supplier resource allocation positively.

Second, the results of a multigroup analysis indicate that the dependence of a

supplier on the buying firm—in terms of share in turnover—affects the rela-

tionship between the trust dimensions and supplier resource allocation more

than it does the power dimensions. Third, goodwill trust only affects sup plier

resource allocation when the buyer has a large share in the supplier’s turn-

over, while competence trust is more effective if buyers account for a small

share in the supplier’s turnover. The contributions of our study for the supply

chain management and social exchange theory literature are discussed.

Keywords: supplier resource allocation; social exchange theory; power; trust

INTRODUCTION

The relationships between a buying firm and its sup-

pliers are crucial in acquiring resources that are essen-

tial for achieving firm-level competitive advantage

(Ellram, Tate & Feitzinger, 2013; Hitt, 2011). This is

especially the case when that buying firm’s rivals

source from shared suppliers (i.e., suppliers that

simultaneously supply rival firms). In fact, when rival

firms clash, it is not merely their internal resources,

but rather the collective resources of their supply

chains that determine the outcome (Hult, Ketchen &

Arrfelt, 2007). It would therefore be extremely difficult

for firms to attain competitive advantage when

competitors acquire better resources from a shared

supply chain (Dyer & Hatch, 2006; Takeishi, 2001).

For example, Takeishi (2002) explains how automak-

ers lose their competitive edge because their high-level

knowledge is diffused to competitors through shared

suppliers. Terpend and Ashenbaum (2012) provide an

example of how, in the beginning of the 1990s, GM’s

key suppliers became reluctant to share their latest

technologies with GM and were shifting their brightest

Volume 50, Number 316

engineers to Chrysler and Ford, due to GM’s aggres-

sive supply chain practices (Kelly & Kerwin, 1993).

These examples illustrate how supply chain manage-

ment (SCM) practices can influence resource

allocation decisions of suppliers. However, the litera-

ture that examines resource rivalry mainly is concep-

tual (e.g., Capron & Chatain, 2008; Ellram et al.,

2013; Markman, Gianiodis & Buchholtz, 2009). Some

empirical works (e.g., Gimeno, 2004; Lavie, 2007) do

seek to explain the concept of rivalry but provide little

insight into the strategies firms might adopt to win

the resource competition. Thus, it is unclear what

SCM strategies firms might adopt to improve their

resource position in the presence of competition.

This study focuses on power and trust as key mecha-

nisms that can be used by firms to improve their

resource position by acquiring better supplier

resources (e.g., best ideas, key technological informa-

tion, scarce materials) than competitors. Prior research

identifies power and trust as main mechanisms that

can be used simultaneously to influence the supplier

(Bachmann, 2001; Ireland & Webb, 2007; Terpend &

Ashenbaum, 2012). For instance, firms might use

power to force their suppliers to shorten delivery times,

or buyers could build trust to ensure that the supplier’s

best ideas are shared with them instead of with their

competitors. The concepts of power and trust are multi-

dimensional, and it is important to differentiate

between these different dimensions. For example, the

coercive and reward dimensions of buyer power are

shown to relate differently to the supplier’s perfor-

mance (Terpend & Ashenbaum, 2012), supplier com-

mitment (Zhao, Huo, Flynn & Yeung, 2008), and

relationship cooperation (Benton & Maloni, 2005). In

addition, several conceptual works emphasize the

importance of differentiating between the goodwill and

competence dimensions of trust (Bachmann, 2001;

Das & Teng, 2001; Ireland & Webb, 2007). However,

the current SCM literature mainly discusses the effect of

the power and trust dimensions on the absolute perfor-

mance of the buyer, without taking the position of

the rival into account. What is missing in the literature

is a discussion of the impact of the different dimen-

sions of power and trust on supplier resource allocation.

This study builds on social exchange theory (SET) to

examine power and trust as the mechanisms that can

help firms to obtain better resources from suppliers

that are shared with competitors. SET is driven by the

central concept that behavior of a company and

resource exchanges in relational exchanges can be

explained by relational mechanisms (Blau, 1964;

Thibaut & Kelly, 1959; Zhao et al., 2008). We build

on SET to hypothesize on the effects of coercive

power, reward power, goodwill trust, and competence

trust on the supplier’s allocation of physical resources

and innovation resources. In addition, we examine the

effects of the power dimensions on goodwill trust and

how the effects of power and trust differ depending on

the buying firm’s share in the supplier’s turnover. Our

study makes several contributions. We contribute to the

SCM literature that focuses on power and trust as ante-

cedents of firm behavior by combining the different

dimensions of both power and trust in one empirical

model, by examining the link between the power

dimensions and goodwill trust, and by examining the

effect of the buying firm’s share in the supplier’s turn-

over. Specifically, a key contribution is that we identify

power and trust as key mechanisms for buying firms to

acquire better supplier resources than competitors. In

addition, we make an empirical contribution to the SET

literature by showing the different effects of power and

trust on different types of supplier resource allocation.

This paper is structured as follows. In the following

sections, we discuss the concept of supply base rivalry,

explain how SET can explain supplier resource alloca-

tion behavior, and review the relevant power and trust

literature. Then, we develop our hypotheses and

research model. Subsequently, we detail this study’s

methodology and results. We conclude with a discus-

sion of the results, this study’s limitations, and direc-

tions for future research.

SUPPLY BASE RIVALRY

This study’s research questions originate from the

stream of literature that has stressed the importance

of resources that are acquired externally (Das & Teng,

2000; Dyer & Singh, 1998; Gulati, Nohria & Zaheer,

2000). Resources can be defined as “the tangible and

intangible entities available to the organization that

enable it to produce efficiently and/or effectively a

market offering that has value for some market seg-

ment” (Hunt & Davis, 2008, p. 13). Because competi-

tive advantage is a relative notion that is derived from

superior resources (Peteraf, 1993), resources can be

seen as the “axes of competition” (Markman et al.,

2009, p. 425). Consequently, a firm that attains com-

parative advantage (relative to competitors) in sup-

plier resource allocation will more easily gain

competitive advantage in its market position (Hunt &

Davis, 2008). Therefore, if a firm wants to attain com-

petitive advantage through resources obtained from its

supply chain, this firm needs to obtain better supplier

resources than competitors.

As a result, firms—knowingly or unknowingly—

engage in a competition with their rivals to acquire

superior resources (Obloj & Capron, 2011). In the

strategic management literature, various perspectives

emerged stressing the importance of taking into

account competitors’ resource positions when assess-

ing a firm’s ability to attain competitive advantage

from its resources (Adegbesan, 2009; Capron &

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Power, Trust and Supplier Resources

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