A Conceptual Model for Retailer-Vendor Relationships Based on

Commitment-Trust Theory

Donna Smith
Henley Management College
Greenlands
Henley-on-Thames
Oxfordshire, RG9 3AU
England

Telephone: 00-1-416-961-0228
Fax: 00-1-416-961-9450
Email: smithdra@rogers.com

Supervisors:
Professor Joe Hair
Email: jhair3@kennesaw.edu

Professor Moira Clark

Email: moira.clark@henleymc.ac.uk

16th EDAMBA Summer Academy

Soreze, France
July 2008
 A Conceptual Model for Retailer-Vendor Relationships Based on Commitment-Trust
Theory

ABSTRACT

Retailer-vendor relationships are a critical success factor for organizational and supply chain
performance. A conceptual model based on Commitment-Trust (C-T) theory as the focal
point, examines retailer-vendor Relationship Value Creation. Commitment-Trust
antecedents, Joint Power and Shared Values, recognize the importance of interdependence
and corporate culture. Decision-Making Uncertainty, Strategic Information Sharing, and
Market Orientation explore supply chain and strategic perspectives, as consequences of C-T.
Structural Equation Modeling will be used to test hypotheses and examine dyadic behaviour.
The model suggests managerial implications related to strategic partnering, corporate culture,
innovation, and competitiveness.

Keywords: Retail, channel relationships, information management, structural equation

modeling, dyads, power, shared values, buyer-supplier relationships, value creation and
supply chain relationships.

D. Smith Page 2 of 26 June 5, 2008

 A Conceptual Model for Retailer-Vendor Relationships Based on Commitment-Trust
Theory

1. Introduction
Exchange in a channel setting is characterized by economic and relational roots. In
traditional retailer-vendor1 relationships, vendors are value creators and retailers are
value appropriators; marketing best practices advocate the development of long-term
relationships with channel partners to achieve financial objectives (Bagozzi, 1975,
Houston and Gassenheimer, 1987, Kotler, 1972). In today’s global marketplace retailer-
vendor relationships are part of supply chain networks that compete with each other using
technology and data. Value is now viewed from a network perspective, with the retailer-
vendor dyad the hub of value co-creation (Ballantyne et al., 2003a, Ballantyne and
Varey, 2006, Patnayakuni et al., 2006).
The future North American retail environment will be characterized by hyper-change
in the context of a high mass consumption economy. Just-in-time manufacturing has
reduced cycle time, necessitating higher levels of new product development and
innovation. Strategic partnerships will become vital to innovation and competitiveness
(Pollack, 2007). Retailers and vendors will need a method of evaluating partnerships that
is timely, with an emphasis on criteria such as competitiveness and innovation.
This paper develops a conceptual model for retailer-vendor Relationship Value
Creation, based on Commitment-Trust (C-T) theory. The model explores key variables
that are antecedents and consequences of commitment and trust, recognizing the
importance of relational exchange in channel functioning and value creation. An
overview of the conceptual model is presented. Variables are introduced using C-T
theory as the focal point. A research design based on Structural Equation Modeling
(SEM) is discussed. Theoretical and managerial implications based on the conceptual
model are considered.

1
According to the American Marketing Association’s (AMA) Dictionary of Marketing Terms
(www.marketingpower.com/mg-dictionary.php), a vendor is “any firm from which a retailer obtains
merchandise.” It is important to note that the retailing literature uses the terms vendor and supplier
interchangeably. Hence, the terms, vendor and supplier will be used according to the AMA definition,
throughout this paper.

D. Smith Page 3 of 26 June 5, 2008

2. Overview of Model

The proposed model contains seven (7) variables (see Figure 1: Conceptual Model
for Retailer-Vendor Relationships Based on Commitment-Trust Theory).
Antecedents to trust and relationship commitment are behaviourally-based; joint power
impacts both trust and relationship commitment with shared values functioning as a
mediator. Consequences include decision-making uncertainty and strategic information-
sharing. These two variables are dependent on the use of technology in the organization
and are critical to the development of marketing strategy. Market orientation moderates
strategic information sharing and relationship value creation. Formal hypotheses are
found in Appendix 1: Hypotheses Statements.

Variables of the model are discussed below.

2.1 Trust and Relationship Commitment

Confidence in an exchange partner’s reliability, credibility, integrity, and

benevolence, results in trust (Morgan and Hunt, 1994, Doney and Cannon, 1997); the
latter is strongest when it is perceived to be reciprocal (Anderson and Weitz, 1992).
Trust, the foundation for business relationships, is a positive, powerful force in
stimulating channel relationships; it has been shown to increase long-term orientation and
influence relationship commitment (Ganesan, 1994, Ryu et al., 2007). When an
exchange partner believes that an ongoing relationship with another is so important as to
justify maximum efforts in order to maintain and endure it, relationship commitment is
manifested; a long-term orientation with future goals and outcomes that benefit both
exchange partners is an important characteristic of relationship commitment (Ganesan,
1994, Morgan and Hunt, 1994).

D. Smith Page 4 of 26 June 5, 2008

2.1.1 Commitment-Trust Theory

Morgan and Hunt (1994) posit that commitment and trust mediate variables
essential to understanding relationship marketing; relational exchange is the
conceptual basis for the theory. The vital bond between commitment and trust
signifies that channel partners avoid opportunistic behaviour and work towards
mutual benefit and long-term gain, establishing the foundation for a positive,
productive relationship (Dwyer et al., 1987, Fontenot and Wilson, 1997).
Furthermore, trust and commitment are antecedents for strategic partnering; the
latter is defined by Mentzer et al (2000) as long-term interfirm relationships based on
identifying and achieving strategic goals, with the objective of delivering value and
profitability to stakeholders. This paper examines retailer-vendor relationships in the
context of strategic partnerships.

2.2 Joint Power

Joint power denotes situations where a firm and its partner are equally dependent and
interdependence and bonds between firms are high. It is constructive because
commitment and trust are stimulated as equal dependency and interdependence increase
(Frazier, 1999, Kumar et al., 1995). Whilst an increase in interdependence occurs,
shared values and governance structures emerge as part of the relationship development
process (Dwyer et al., 1987). Reciprocity is a mutual exchange of positive interactions or
benefits between two or more actors in a channel relationship (Lee et al., 2008, Mavondo
and Rodrigo, 2001, Tong et al., 2008). It is included as a measure of joint power because
it denotes sharing, helping, and equality. Reciprocity in exchange relationships is
important because it establishes patterns of behaviour, revealing and reinforcing personal
and organizational norms and values (Houston and Gassenheimer, 1987).

2.3 Shared Values

As the only antecedent to both commitment and trust, shared values is defined as
“…the extent to which channel partners have beliefs in common about what behaviours,
goals and policies are important or unimportant, appropriate or inappropriate, and right or
wrong” (Morgan and Hunt, 1994, p. 25). Yet, the measurement scales used by Morgan
and Hunt (1994) focus on corporate and personal ethical behaviour, an important, but
narrow view of the construct.

D. Smith Page 5 of 26 June 5, 2008

 Shared values are also viewed as the cornerstone of corporate culture; they are used
to set norms in organizational environments, resulting in corporate stability, efficiency,
and effectiveness (Schein, 1996, Wiener, 1988). When employee and organizational
values are congruent, managerial commitment is enhanced, resulting in a stronger, more
focused work effort, and a greater regard for organizational objectives (Posner et al.,
1985). This paper posits that shared values between channel members will strengthen
relationship commitment and its foundation, trust.

2.4 Decision-Making Uncertainty

Decision-making uncertainty, defined as “…the degree to which an individual or

organization cannot anticipate or accurately predict the environment,” has two
components, environmental volatility and environmental diversity (Ganesan, 1994, p. 5).
The former relates to rapidity and velocity of specific market or customer demand
changes; the latter pertains to uncertainty in the competitive environment.

Trust reduces decision-making uncertainty (Gao et al., 2005, Morgan and Hunt,
1994). Gao et al (2005) posited that commitment also reduces decision-making
uncertainty. However, commitment did not have a direct effect on the construct. This
study posits that relationship commitment will reduce decision-making uncertainty. The
combined effects of joint power and shared values will have a strong, indirect effect and
will reduce decision-making uncertainty through relationship commitment.

2.5 Information Sharing

Retailers and vendors who enter into strategic partnerships use data and technology
to integrate demand and supply chains. While competition has traditionally been
between organizations, it is now among networks (Patnayakuni et al., 2006). Information
sharing enables retailers and vendors to function as a network. It can be defined as the
extent to which retailers and vendors openly share operational, tactical and strategic
information that will benefit the retailer-vendor relationship, enhance supply chain
coordination and ultimately enhance end-use customer satisfaction (Cannon and
Homburg, 2001, Patnayakuni et al., 2006). This paper will focus on strategic
information sharing; it is characterized by both parties having a high level of integration
in the operation and a long-term orientation (Patnayakuni et al., 2006). Examples:

D. Smith Page 6 of 26 June 5, 2008

 Sharing consumer behaviour data, evaluating, selecting and implementing new
technologies.

2.5.1 Market Orientation

Market orientation the most significant form of strategic information sharing; it

pertains to gathering and disseminating marketing intelligence and using this
information to innovate and plan for the long term. It is defined as the generation and
dissemination of marketing intelligence related to current and future customer-related
responsiveness and competitor-related responsiveness (Homburg et al., 2007, Kohli
and Jaworski, 1990). Examples: Sharing data for the purpose of new product or new
market development.

2.5.2 Information Sharing and Model Relationships

Information sharing takes place under conditions where both trust and
commitment are present. Trust in supplier was positively related to information
sharing in a study on channel partners’ trust and dependency (Sezen and Yilmaz,
2007). Both trust and commitment have been identified as prerequisites for strategic
partnering; information sharing is an example of the implementation of partnering
objectives (Mentzer et al., 2000). Long-term orientation, a significant component of
commitment, was found to be a driver for information flow and integration in the
supply chain (Patnayakuni et al., 2006). Information sharing has a direct, negative
relationship with decision-making uncertainty by virtue of its definition; best
practices in information sharing should reduce decision-making uncertainty.
Based on the benefits, roles and impact of information sharing in retailer-vendor
relationships, the variable is vital for channel relationship functioning and it is
predicted to advance retailer-vendor relationship value creation. The essence of
market orientation lies in its power to achieve a higher level of responsiveness in the
marketplace. Research by Sigauw et al (1998) found that a supplier’s market
orientation had a positive effect on a distributor’s market orientation and it
strengthened channel relationships. Strategic partners that adopt a market orientation
reap the benefits of collaboration such as joint problem solving, closer
communication links and total quality improvement (Day, 1994). This study posits
that market orientation will function as a moderator variable, strengthening the link
between strategic information sharing and relationship value creation.

D. Smith Page 7 of 26 June 5, 2008

2.6 Relationship Value Creation

Strategy is a process where partners co-create with the end goal of producing value
through innovation (Lindgreen and Wynstra, 2005, Normann and Ramírez, 1993). The
writings by Ballantyne et al (2003b) and Ballantyne and Varey (2006) support this
notion. Customer value in business relationships was defined by Ulaga and Eggert
(2006) as a series of trade offs with five benefits and two sacrifices. Organizational
innovation was identified as a characteristic of high performing channel relationships and
as a safeguard for competitive advantage. Satisfaction with economic outcomes is also
important to organizational growth and has been emphasized throughout marketing
literature (Tuominen and Hyvönen, 2004, Walter et al., 2001). Based on these notions,
relationship value creation is defined as a series of trade offs in a retailer-vendor
relationship as perceived by key decision-makers in each organization, taking into
consideration the available alternative relationships; organizational innovation and
economic goals are planned and satisfied (Tuominen and Hyvönen, 2004, Vázquez et al.,
2005, Ulaga and Eggert, 2006).

3. Research Approach
The proposed structural model expresses interrelationships based on the premise that
the channel is a social and economic system with behavioural, marketing and strategic
influences (Weiss and Jacobson, 1955, Alderson, 1965, Rosenberg and Stern, 1970,
Etgar, 1978). The focus of the study is on retailer-vendor strategic partnerships,
suggesting a dyadic approach to data collection. In support of this, Grewel and Levy
(2007) advocate that retail researchers’ understanding of behavioural nomological
frameworks in channels of distributions will be improved with further investigation into
dyadic behaviour.
The unit of analysis will be the Divisional Merchandise Manager (Retailer) and Sales
Manager (Vendor), representatives of their organizations who play key roles in
maintaining strategic partnerships. Variations in roles and responsibilities along with
differences in job titles will be screened through the questionnaire. Retailers will be the
first point of contact, in recognition of their pivotal position in the supply chain. Dyadic
behaviour is usually measured using a matched pair method. See Appendix 2: Overview
of Dyadic Research.

D. Smith Page 8 of 26 June 5, 2008

3.1 Construct Definitions and Measurement Development

Construct definitions for each of the variables have been identified; measures and
their reliability (where possible) have been indicated. See Appendix 3: Measurement
and Scale Development. Based on the inventory of scales, academic experts who have
conducted research in this area will be consulted to determine which scales are most
appropriate; questions will be reviewed and revised. Gaps will be filled through personal
interviews. Two questionnaires (one for retailer and one for vendor firms) will be
developed; they will be as identical as possible.

3.2 Interviews

Semi-structured in-person interviews with senior staff at the Retail Council of Canada
(RCC) will be conducted to: seek interest in the subject, explore issues related to the
subject in order to ensure the questionnaire meets industry needs, aid in the development
of questions where gaps exist, and to seek feedback on the answerability of questions
(Easterby-Smith et al., 2004, Shah and Corley, 2006). The RCC will be asked to provide
key retailer and vendor contacts for the same purpose. The U.S.-based, Vendor
Compliance Federation and its sister organization, the Retail Compliance Council will
also be contacted for semi-structured telephone interviews.

3.3 Structural Equations Modeling (SEM)

Through SEM a researcher can develop a model which depicts relationships among
independent and dependent variables under study; some dependent variables become
independent variables in subsequent relationships (Hair et al., 2006). Because a channel
of distribution is a social and economic systems impacted by market-driven factors (Stern
and Reve, 1980), the structural model will be used to express proposed interrelationships
of variables within the system. The technique requires a two-step process. First,
Confirmatory Factor Analysis (CFA) is conducted. CFA relates to the measurement of
the reliability and validity of each construct in the model; then, SEM provides evidence
of causality (Hair et al., 2006).

D. Smith Page 9 of 26 June 5, 2008

4. Potential Contributions of the Research

4.1 Theoretical

There is a proliferation of research on the impact of power in channel relationships.

One broad area is based on the French and Raven (1959) taxonomy of sources of social
power (e.g. Brown et al 1983, Hunt and Nevin 1974, Rawwas et al 1997). Another is
based on the work of Emerson (1962) which explores control and dependency
relationships (e.g. El-Ansary, 1975, Etgar, 1976, Kim, 2000). Scant research has
been conducted that pertains to the positive impact of power. The use of expert power
is the focus of research by Sahadev (2005) and it is a component of a study by Rawwas
et al (1997). This study will examine joint power, a constructive, positive use of power.
Relationship value has been an elusive concept; this is surprising, given the deep
roots that value has in marketing literature. Alderson (1957) initially conceptualised
exchange as a discrete action based on utility with an outcome of value. The concept of
exchange was broadened to include the social and economic relationships that are
found in channels of distribution (Bagozzi, 1975); despite this, relationship value in a
channel context was not specifically defined or investigated. The services and
relationship marketing literature adopted the concept of relationship value (Payne and
Holt, 1999) but it was explored from the perspective of the lifetime value of the
customer (Kumar et al., 2006, Peppers and Rogers, 2004) .
Relationship value, as it pertains to channel outcomes, has not been significantly
advanced by researchers (Lindgreen and Wynstra, 2005, Ulaga and Eggert, 2006). It
was not considered by Morgan and Hunt (1994) or by Anderson and Narus1990).
While the latter study did not measure value, it did measure satisfaction. Retail
researchers have examined channel members’ satisfaction from a variety of
perspectives, but with no common ground (c.f. Geyskens and Steenkamp, 2000, Lewis
and Lambert, 1991, Ping Jr., 2003, Schul et al., 1985). This study will create and
measure, relationship value creation.

4.2 Managerial

The model might be used to monitor retailer-vendor relationship performance

over time or at different points in time. Organizations may use the model to compare
their strategic partnerships, or as a diagnostic tool to improve relationships.

D. Smith Page 10 of 26 June 5, 2008

 Shared values, along with an organization’s corporate culture and vision, are
inextricably linked; they have been found to positively impact organizational
performance (McDonald and Gandz, 1992). Firms that have a strong corporate culture
might examine which of their shared values are important to maintaining and
developing channel relationships. Which values might clash with those of a potential
strategic partner?
The model potentially explains how retailer-vendor partnerships become a means
for attaining competitive advantage. Through market orientation, retailers and vendors
may be able to gain insight into their strengths and weaknesses with respect to
competitiveness. Relationship value creation can be used to analyze the level of
innovation that the strategic partnership generates, compared to goals that are set.
Relationship value creation can be correlated with performance measures such as
shareholder value, profitability, return on investment, or market share. With reduced
cycle times, a transaction-orientation and an emphasis on the short term, innovation is
predicted to be “…a sustainable driver of growth” in the retail industry (Pollack, 2007,
p. 17).

D. Smith Page 11 of 26 June 5, 2008

 Appendix 1: Hypotheses Statements

HYPOTHESIS NO. HYPOTHESIS STATEMENT LITERATURE SUPPORT

H1 There is a positive relationship between trust Ganesan (Pollack, 2007, p.
and relationship commitment. 17)
Morgan and Hunt (1994)
Ryu et al (1994)
H2 There is a positive relationship between joint Morgan and Hunt (2007)
power and trust. Frazier (1994)
Kumar et al (1999)
H3 There is a positive relationship between joint Morgan and Hunt (1995)
power and relationship commitment. Frazier (1994)
Kumar et al (1999)
H4 There is a positive relationship between joint Dwyer et al (1995)
power and shared values.
H5 The relationship between joint power (JPT) and Dwyer et al (1987)
trust is mediated by shared values. Posner et al (1987)
Schein (1985)
H6 The relationship between joint power (JPRC) Dwyer et al (1990, 1996)
and relationship commitment is mediated by Posner et al (1987)
shared values. Schein (1985)
H7 There is a negative relationship between trust Gao et al (1990, 1996)
and decision-making uncertainty. Morgan and Hunt (2005)
H8 There is a negative relationship between Gao et al (1994)
relationship commitment and decision-making Mentzer et al (2005)
uncertainty.
H9 There is a positive relationship between trust Mentzer et al (2000)
and strategic information sharing. Sezen and Yilmaz (2000)
Patnayakuni et al (2007)
H10 There is a positive relationship between Mentzer et al (2006)
relationship commitment and strategic Patnayakuni et al (2000)
information sharing.
H11 There is a negative relationship between Cannon and Homburg (2006)
strategic information sharing and decision- Ganesan (2001)
making uncertainty. Patnayakuni et al (1994)
H12 There is a positive relationship between Lee et al (2006)
strategic information sharing and relationship Mentzer et al (2000)
value creation. Patnayakuni et al (2000)
H13 Market orientation moderates strategic Day (2006)
information sharing and relationship value Siguaw et al (1994)
creation.

D. Smith Page 12 of 26 June 5, 2008

 Appendix 2: Overview of Dyadic Research
AUTHOR DESCRIPTION
Anderson & Narus Model for distributor and
(1998) manufacturer firm working
partnerships in 110
industries.
Ganesan (1990) Model for long-term
orientation in retail buyer-
vendor relationships in five
regional department store
chains.
Kim (1994) Model for power, channel
climate and solidarity in
industrial distributor-
supplier dyads.
Sahadev (2000) Studied economic
satisfaction and relationship
commitment of 101 mobile
service providers in India.
D. Smith Page 13 of 26
SAMPLE SURVEY
RESPONSE
RATE
Initial Mailing: 5,000 Distributor Initial: 10%
Research Education Foundation to Overall: 70% (based on
wholesaler-distributor firms completed and returned
Response: 504→488 sets of firms or questionnaires)
1,952 informants
Completed and Returned
Questionnaires: 1,365 (2 from each
organization)
Usable Matched Questionnaires: 253
distributor firms and 217 manufacturer
firms
Initial Mailing: Five department Initial: 83%
stores were sent 30 questionnaires to Matched: 42%
buyers
Response: 124 retail buyers
Usable Matched Questionnaires
from Supplier: 52
Initial Mailing: 1,000 to Distributors Initial: 32.3% (based
(Random sample based on SIC codes) on 945 located
Response: 276 distributors questionnaires)
Usable Matched Questionnaires Matched: 50.7%
from Supplier: 67
Data was collected from 101 channel Matched: 100%
partners through structured through personal
questionnaires that were interviews
administered in person, over a 3-
month period.
June 5, 2008
 Appendix 3: Measurement and Scale Development
CONSTRUCT, DEFINITION &
SOURCE(S)
TRUST (in organization)
Trust exists when one party has
confidence in an exchange
partner’s reliability, credibility,
integrity and benevolence (Doney
and Cannon, 1997, Morgan and
Hunt, 1994).
Reliability = Confidence,
consistency, fair, honest,
benevolent (Morgan and Hunt,
1994, Doney and Cannon, 1997).
Integrity = Ethical principles,
honesty (Morgan and Hunt, 1994).
Credibility = Word or written
statement can be relied on (Morgan
and Hunt, 1994).
Benevolence = Interested in other
partner’s welfare and motivated to
seek joint gain (Doney and
Cannon, 1997).
Notes: Use these scales as a
foundation to create dyadic
measures. Minimize negatives, so
people don’t get confused.
D. Smith
MEASURES UNDER CONSIDERATION
Strongly Disagree →Strongly Agree
Morgan & Hunt:
In our relationship, my major vendor:
-Cannot be trusted at times. (R) (General)
-Can be counted on to do what is right. (Integrity)
-Has high integrity. (Integrity)
-is perfectly honest and truthful. (Reliability, Integrity)
-Can be trusted completely. (General)
-is always faithful. (Reliable)
-is someone that I have great confidence in. (Reliable)
-has high integrity. (Integrity)
α = .949
Doney & Cannon:
-This vendor keeps promises it makes to our firm. (Reliability)
-This vendor is not always honest with us. (R) (Reliability, Integrity)
-We believe the information that this vendor provides us. (Credibility)
-This vendor is genuinely concerned that our business succeeds. (Benevolence)
-When making important decisions, this vendor considers our welfare as well as its
own. (Benevolence)
-This vendor is trustworthy. (General)
-We find it necessary to be cautious with this vendor. (R) (Credibility)
α = .94
Ganesan:
Retailer’s trust in vendor (Vendor’s credibility):
1. This resource’s representative has been frank in dealing with us.
2. Promises made by this resources representative are reliable.
3. This resource’s representative is knowledgeable regarding his/her products.
4. This resource’s representative does not make false claims.
5. This resourc’s representative is not open in dealing with us. (R)
6. If problems such as shipment delays arise, the resource’s representative is honest
about the problems.
7. This resources’s representative has problems answering our questions.
Cronbach’s alpha: .90
Vendor’s trust in retailer (retailer’s credibility):
1. The buyer representing this retailer has been frank in dealing with me.
2. Promises made by the buyer representing this retailer are reliable.
3. The buyer representing the retailer is knowledgeable about the product.
4. The buyer representing this retailer has problems understanding our position.
Cronbach’s alpha: .80
Retailer’s trust in vendor (vendor’s benevolence):
1. This resource’s representative has made sacrifices for us in the past.
2. This resource’s representative cares for us.
3. In times of shortages, this resource’s representative has gone out on a limb for us.
4. This resource’s representative is like a friend.
5. We feel the resource’s representative has been on our side.
Cronbach’s alpha: .88
Vendor’s trust in retailer (retailer’s benevolence):
1. The buyer representing this retailer has made sacrifices for us in the past.
2. The buyer representing this retailer cares for my welfare.
3. In times of delivery problems, the buyer representing this retailer has been very
understanding.
Cronbach’s alpha: .76
Page 14 of 26 June 5, 2008
CONSTRUCT, DEFINITION &
SOURCE(S)
COMMITMENT
Relationship commitment is
manifested when an exchange
partner believes that an ongoing
relationship with another is so
important as to justify maximum
efforts in order to maintain and
endure it; a long-term orientation
with future goals and outcomes
that benefit both exchange partners
is important (Ganesan, 1994,
Morgan and Hunt, 1994).
Notes: Take best of each.
D. Smith
MEASURES UNDER CONSIDERATION
Strongly Disagree →Strongly Agree
Morgan & Hunt:
The relationship that my firm has with my major vendor:
-is something we are very committed to. (Strength of effort)
-is something my firm intends to maintain indefinitely. (Strength of commitment)
-deserves our firm’s maximum effort to maintain. (Strength of effort)
-is very important to my firm. (Importance to firm)
-is of very little significance to us. (R) (Effort to maintain)
-is very much like being family*. (Benefit both partners) *Inappropriate use of word?
-is something my firm really cares about. (Importance)
α = .895
Ganesan:
Retailer’s long-term orientation:
1. We believe that over the long run, our relationship with the vendor will be
profitable. (Future goals- profitability)
2. Maintaining a long-term relationship with this vendor is important to us.
(Relative importance of long-term orientation)
3. We focus on long-term goals in this relationship. (Long-term vs. short-term)
4. We are willing to make sacrifices to help this vendor from time to time.
(Strength of commitment)
5. We are only concerned with our outcomes in this relationship. (R) (Relative
benefits to both partners)
6. We expect this resource to be working with us for a long time. (Long-term
orientation)
7. Any concessions we make to help out this resource will even out in the long run.
(Benefit both partners)
Cronbach’s alpha = .94
Vendor’s long-term orientation:
1. We believe that over the long run our relationship with the retailer will be
profitable.
2. Maintaining a long-term relationship with this retailer is important to us.
3. We focus on long-term goals in this relationship.
4. We are willing to make sacrifices to help this retailer from time to time.
5. We share our long-term goals with this retailer.
6. We would like to develop a long-term relationship with this retailer.
Cronbach’s alpha: .82
Page 15 of 26 June 5, 2008
CONSTRUCT, DEFINITION &
SOURCE(S)
JOINT POWER
Each firm is equally dependent;
interdependence and bonds
between firms are high (Frazier,
1999).
Note: Symmetric interdependence
occurs when channel partners are
equally dependent. One firm’s
dependence on a partner is a source
of power for that partner. This is
very similar to joint power
(Frazier, 1999). The scales from
Kumar et al (1995) will be used.
Reciprocity
A mutual exchange of positive
interactions or benefits between
two or more actors in a channel
relationship (Lee et al., 2008,
Mavondo and Rodrigo, 2001, Tong
et al., 2008).
D. Smith
MEASURES UNDER CONSIDERATION
Symmetric Interdependence (Kumar et al., 1995):
Supplier Dependence:
1. In our trade area, there are other firms that could provide the supplier with
comparable distribution.
2. In our trade area, the supplier would incur minimal costs in replacing our firm with
another dealer.
3. It would be difficult for the supplier to replace the sales and profits our dealership
generates.
Dealer Dependence:
1. There are other suppliers who could provide us with comparable product lines.
2. Our total costs of switching to a competing manufacturer’s line would be
prohibitive.
3. It would be difficult for our firm to replace the sales and profits generated from this
supplier’s line.
Reciprocity (Lee et al., 2008):
-We are willing to do them a favour because we know it will be returned.
-They help and support us, and in turn we help and support them.
-They are willing to do us a favour because they know that it will be returned.
-In this relationship, both partners feel that one good turn deserves another.
-They make sure that they do their part in the relationship, because they realize that we
will do ours.
-We feel obligated to do our part extremely well because they have done their part
well.
Page 16 of 26 June 5, 2008
CONSTRUCT, DEFINITION &
SOURCE(S)
SHARED VALUES
“The extent to which channel
partners have common beliefs
about behaviours, goals and
policies that are important and
unimportant; appropriate and
inappropriate; and right and
wrong” (Morgan and Hunt, 1994).
McDonald and Gandz (1992)
emphasized the importance of the
relevance of shared values. They
identified 24 shared values
relevant to 28 private businesses,
including retailers, distributors,
consumer products, and light
manufacturing businesses. These
shared values will come into play
during the semi-structured
interviews. This section needs
further development.
Notes: Needs development.
D. Smith
MEASURES UNDER CONSIDERATION
Strongly Disagree →Strongly Agree
Morgan & Hunt:
Please indicate the degree to which you feel that (1) your vendor would agree with the
following statements, and (2) you would agree with the following statements:
-To succeed in this business, it is often necessary to compromise one’s ethics.
-If an employee is discovered to have engaged in unethical behaviour that results
primarily personal gain (rather than corporate gain), he or she should be promptly
reprimanded.
-Top management in a business must let it be known in no uncertain terms that
unethical behaviours will not be tolerated.
-If an employee is discovered to have engaged in unethical behavior that results
primarily in corporate gain (rather than personal gain), he or she should be promptly
reprimanded.
-Employers should assure that their employees are behaving in a business-like manner.
α = .868
Shared values is defined as “…and enduring mode of behaviour which emphasizes:
Adaptability-being flexible and changing in response to new circumstances.
Aggressiveness- being aggressive and pursuing goals vigorously.
Autonomy-being independent and free to act.
Broad-Mindedness-accepting different viewpoints and opinions.
Cautiousness-being cautious and minimizing exposure to risk.
Consideration-being caring, kind and considerate.
Cooperation- being cooperative and working well with others.
Courtesy-being polite and having respect for individual dignity.
Creativity-developing new ideas and applying innovative approaches.
Development-achieving personal growth, learning and development.
Diligence-working long and hard to achieve results.
Economy-being thrifty and careful in spending.
Experimentation-taking a trial and error approach to problem solving.
Fairness-being fair and providing just recognition based on merit.
Forgiveness-being forgiving and understanding when errors occur.
Formality-upholding proper ceremony and maintaining tradition.
Humor-creating fun and being light hearted.
Initiative-seizing opportunity and taking responsibility without hesitation.
Logic-being rational and thinking in terms of facts and figures.
Moral integrity-being honourable and following ethical principles.
Obedience-complying with directions and conforming to rules.
Openness-being straightforward, sincere and candid in discussions.
Orderliness-being neat, tidy and well-organized.
Social Equality-being equal to others and avoiding status differences” (McDonald and
Gandz, 1992, p. 68).
Page 17 of 26 June 5, 2008
CONSTRUCT, DEFINITION &
SOURCE(S)
DECISION-MAKING
UNCERTAINTY
Decision-making uncertainty is
“…the degree to which an
individual or organization cannot
anticipate or accurately predict the
environment” (Morgan and Hunt,
1994, p. 25).
Notes: If use Morgan and Hunt,
use a set of decisions everyone
would make.
D. Smith
MEASURES UNDER CONSIDERATION
Ganesan (Ganesan, 1994, p. 5):
Retailer side measures:
Environmental diversity:
How would you describe the market for the product you buy from this vendor compared with
other products in general?
1. Few new products – Many new products
2. Few new competitors – Many new competitors
Cronbach’s alpha: .57
Environmental volatility:
How would you describe the market for the product you buy from this vendor compared with
other products in general?
1. Unpredictable demand – Predictable demand (R)
2. Sales forecasts are accurate – Sales forecasts are inaccurate
3. Stable industry volume – Volatile industry volume
4. Easy to monitor trends – Difficult to monitor trends
5. Complex – Simple
Cronbach’s alpha: .72
Vendor side measures:
Environmental diversity:
How would you describe the market for the product you sell to this retailer compared with other
products in general?
1. Few new products – Many new products
2. Few new competitors – Many new competitors
Cronbach’s alpha: .56
Environmental volatility:
How would you describe the market for the product you sell to this retailer compared with other
products in general?
1. Unpredictable demand – Predictable demand (R)
2. Sales forecasts are accurate – Sales forecasts are innacutate
3. Stable market shares – Volatile market shares
Cronbach’s alpha: .56
Environmental Uncertainty (Kumar et al., 1995):
How would you describe the market environment in your sales area for the supplier’s products?
1. Easy to monitor trends → Difficult to monitor trends
2. Stable industry volume → Volatile industry volume
3. Sales forecasts are quite accurate → Sales forecasts are quite inaccurate
4. Predictable → Unpredictable
Morgan & Hunt 1994 (Indicator is a summate of the items shown):
To what extent do you now have adequate information for making future decisions regarding:
(information is very inadequate →information is very adequate)
(a) The amount you should spend on local sales promotions and advertising?
(b) How sales promotions and advertising dollars should be spent?
How confident are you in your ability to make future decisions regarding: (1=I have no
confidence and 11= I have complete confidence)
(c) The amount you should spend on local sales promotions and advertising?
(d) How sales promotions and advertising dollars should be spent?
To what extent do you now have adequate information for making future decisions regarding:
(1=information is very inadequate and 11=information is very adequate)
(a) Which products or brands to carry in stock?
(b) How much inventory to carry?
(c) Which products or brands should be the focus of your sales efforts?
How confident are you in your ability to make future decisions regarding: (1=I have no
confidence and 11= I have complete confidence)
(a) Which products or brands to carry in stock?
(b) How much inventory to carry?
(c) Which products or brands should be the focus of your sales efforts?
Page 18 of 26 June 5, 2008
CONSTRUCT, DEFINITION &
SOURCE(S)
INFORMATION SHARING
The extent to which retailers and
vendors openly share a)
operational, b) tactical and c)
strategic information that will
benefit the retailer-vendor
relationship, enhance supply chain
coordination and ultimately
enhance end-use customer
satisfaction. Adapted from
Cannon and Homburg (1994) and
Patnayakuni et al (2001).
D. Smith
MEASURES UNDER CONSIDERATION
Strongly Disagree →Strongly Agree
Strategic:
-This vendor frequently discusses strategic issues with us. (Item reliability = .71
Cannon and Homburg, 2001) – Specific and future oriented goals.
-This vendor rarely talks with us about its business strategy (R) (Patnayakuni, 2008) (α
=.76) Note: Cannon and Homburg, 2001 item reliability was .42 for this statement –
Specific and future oriented goals.
-This vendor openly shares confidential information with us. (Item reliability = .53
Cannon and Homburg, 2001) Implies a high level of integration.
-We have long-term relationships with our strategic partners (Lages et al., 2005).
(Factor structure and loading = .766) Long term orientation.
Both sides in the relationship do not make any demands that can hurt the relationship
(Patnayakuni, 2008). (Factor structure and loading = .745) – Benefit both sides of the
relationship.
-In key partner relationships, trust and goodwill have the same, or greater significance
than formal contracts (Patnayakuni, 2008)*. (Factor structure and loading = .867)
Long term orientation.
Page 19 of 26 June 5, 2008
CONSTRUCT, DEFINITION &
SOURCE(S)
MARKET ORIENTATION
The generation and dissemination
of marketing intelligence related to
current and future customer-
related responsiveness and
competitor-related
responsiveness.” Adapted from
Kohli and Jaworski (Patnayakuni,
2008) and Homburg et al (1990).
Notes: “We” should be “my
company,” “my division,” “my
department.” It might also refer to
“management” or “senior
management.”
D. Smith
MEASURES UNDER CONSIDERATION
Strongly Disagree →Strongly Agree
Homburg et al 2007:
-We systematically gather information about our customers (competitors)
-We collect information about customers (competitors) in a comprehensive and
holistic way.
-We systematically and constantly keep track of the behaviour of our customers
(competitors).
α = .84 (.86)
-Our personnel spend a fair amount of time to exchange newest customer (competitor)-
related developments with other functional departments.
-We regularly circulate documents (e.g. reports, newsletters) that provide relevant
information on customers (competitors).
-Members of all hierarchical levels in our business unit regularly receive information
about the newest customer-related (competitor-related) developments.
α = .78 (.80)
-We are aware that customers (competitors) are important factors that influence the
success of our company.
-We emphasize customer- (competitor) related activities and success.
-We have a customer-(competitor-) oriented culture.
-Our customers (competitors) are a focal point of our activities.
-We have a strategy that is based on the understanding of customers (competitors).
-We have realized that customer needs are constantly evolving and that it is necessary
to be informed about trends and customer demands.
-We have realized that competitors’ activities change the market environment and that
it is necessary to be informed about latest shifts in the competitive environment.
-We intend to constantly keep track of the activities of our customers (competitors).
α = .91 (.89)
Page 20 of 26 June 5, 2008
CONSTRUCT, DEFINITION &
SOURCE(S)
RELATIONSHIP VALUE
CREATION
Is trade off between product,
service, know-how, time-to-market
and social benefits, as well as price
and process costs in a supplier
relationship, as perceived by key
decision-makers in the customer’s
organization, and taking into
consideration the available
alternative supplier relationships
D. Smith
MEASURES UNDER CONSIDERATION
Ulaga and Eggert:
Compared to our second best supplier:
-supplier A provides us with better product performance.
-supplier A provides us with better product quality.
-supplier A provides us with superior service quality.
-supplier A provides us with better product reliability.
-supplier A provides us with superior service reliability.
-working with supplier A provides me with more personal satisfaction.
-working with supplier A is of more personal value to me.
-working with supplier A provides me with more personal recognition.
-supplier A provides us with more transfer of his know-how.
-supplier A assists us more in developing our core competencies.
-supplier A helps us to launch more rapidly new products on the market
-supplier A assists us more in increasing our speed to market.
-supplier A is more innovative.
-supplier A costs us more in terms of time.
-supplier A costs us more coordination efforts.
-supplier A makes us pay higher prices.
Reflective measures of relationship value:
-supplier A provides value
-supplier A offers good value taken into consideration the benefits and sacrifices.
-supplier A provides more value.
Strongly Disagree →Strongly Agree
Our relationship with this supplier has met the goals we have established for it (2007).
Tuominen and Hyvönen (Artz, 1999) – Innovation Capability Items (Cronbach’s alpha
= .87)
-We are more innovative than our rivals in deciding what methods to use in achieving
our targets and objectives.
-We are more innovative than our rivals in initiating new procedures or information.
-We are more innovative than our rivals in developing new ways of accomplishing our
targets and objectives.
-We are more innovative than our rivals in initiating changes in the job contents and
work methods of our staff.
Vázquez et al (2004) – Satisfaction with Economic Results- α =.9198:
Results far below those achieved with a different distributor/manufacturer
→results far above those obtained with a different distributor/manufacturer
-Sales volume and income.
-Total profit.
-Reduction of logistic costs.
-Improved service for the client.
Non-Economic Satisfaction - α =.9634
-We are pleased with the services of this distributor (manufacturer).
-We are satisfied with our day-to-day dealings with this distributor (manufacturer).
-We are satisfied with the personal relationships with this distributor (manufacturer).
-We are satisfied overall with the relationship we have with this distributor
(manufacturer).
Realized Competitive Advantage - α =.9413
-A large volume of joint profit has been obtained which would not otherwise have
occurred working in isolation.
Thanks to the cooperation between our company and this distributor (manufacturer)
both parties have obtained strategic advantages over their competitors that would not
have been reasible working individually.
-Both parties have obtained performances that allow them to compete more efficiently
in the market place as a consequence of cooperation.
Page 21 of 26 June 5, 2008
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