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dissertation entitled

THEORETICAL PERSPECTIVES OF SUPPLIER-BUYER
LONG-TERM RELATIONSHIPS IN INDIA

presented by

Jong Pil Yu

has been accepted towards fulﬁllment
of the requirements for the

Ph. D degree in Philosophy

 

 

 

 

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THEORETICAL PERSPECTIVES OF SUPPLIER-BUYER LONG-TERM
RELATIONSHIPS IN INDIA

By

J ong Pil Yu

A DISSERTATION

Submitted to
Michigan State University
In partial fulﬁllment of the requirements
For the degree of

DOCTOR OF PHILOSOPHY

Department of Advertising, Public Relations and Retailing

2006

ABSTRACT

THEORETICAL PERSPECTIVES OF SUPPLIER-BUYER LONG-TERM
RELATIONSHIP IN INDIA

By

Jong Pil Yu

The results of this study can be summarized by ﬁve main points. First, this
study demonstrated the differential effects of satisfaction and conﬂict in Indian
supplier—buyer relationships. Both conﬂict and satisfaction have an economic and
non-economic dimension. Second, Indian suppliers’ coercive power sources
negatively inﬂuence satisfaction (economic and non-economic), and positively
inﬂuence conﬂict (economic and non-economic). Also, suppliers’ performance
positively inﬂuences satisfaction (economic and non-economic), and negatively
inﬂuences conﬂict (economic and non-economic). Third, economic satisfaction and
non-economic satisfaction positively inﬂuence cooperation and switching costs, while
economic conﬂict and non-economic conﬂict negatively inﬂuence cooperation and
trust. Satisfaction and conﬂict mediate the relationship between power sources and
performance, and cooperation and trust. Fourth, cooperation and trust positively
inﬂuence commitment, whereas switching costs do not. Speciﬁcally, trust and
cooperation act as mediating factors between satisfaction and conﬂict, and
commitment. Fif’th, the Indian processed food markets are in transition from a

sellers’ market to a buyers’ market. Although buyers reported high dependence on

their major supplier (an indicator of a sellers’ market), the results of this study show
that Indian suppliers use non-coercive power sources more frequently than coercive
power sources, which is an indication of a buyers’ market. Practical applications of

the ﬁndings are discussed.

Copyright by
J ONG PIL YU
2006

To My Family &
Dr. Pysarchik

ACKNOWLEDGEMENTS

I wish to thank the important individuals who made the completion of this
dissertation possible. My deep thanks and appreciation go to Dr. Dawn T.
Pysarchik who has been my committee chairperson. I really appreciate her
dedication and inspiration.

I gratefully acknowledge Dr. Brenda Sternquist, Dr. Richard Spreng, and Dr.
Kyoung-Nan Kwon, my other committee members for their help and valuable
comments. My fellow graduate students deserve my thanks for having read and
commented on many parts of this dissertation.

I reserve my very special thanks for my family. My father and mother
always supported me and encouraged me to do my best. Indeed, for everything I
have today, I am deeply indebted to them. I would be remiss if I did not thank my
younger brother.

Speciﬁcally, my greatest debt is to my wife, Hye Seon J eong, for her love,
support, and endless sacriﬁces throughout the process of my graduate studies.
Without her patience and support, this dissertation would never have been completed.
I would like to thank to my lovely son, Su-Han, and daughter, A-Han, for the full joy
they brought me.

Finally, I would like to thank God for blessing me to accomplish all these

things.

vi

TABLE OF CONTENTS

LIST OF TABLES .............................................................................................................. x
LIST OF FIGURES ........................................................................................................... xi
CHAPTER I
INTRODUCTION ............................................................................................................. 1
Indian Economy ..................................................................................................... 4
Market Potential ....................................................................................................... 6
Market Structure Changes ........................................................................................ 7
Processed Food Industries in India .......................................................................... 7
Indian Supply Chain ................................................................................................ 8
Statement of the Problem and Signiﬁcance of Study ............................................ 11
Research Objectives ............................................................................................... 13
CHAPTER H
LITERATURE REVIEW ................................................................................................. 15
Power and Inﬂuence Strategies .............................................................................. 15
Power ....................................................................................................... 16
Power Sources .......................................................................................... 16
Inﬂuence Strategies .................................................................................. 18
Dependence and Role Performance in Buyers' and Sellers' Markets ........ 20
Conﬂict .................................................................................................................. 24
Conﬂict in Channel Relationship Studies .................................................. 24
Functional Conﬂict and Dysfunctional Conﬂict ........................................ 25
Economic Conﬂict and Non-economic Conﬂict ........................................ 25
Satisfaction ............................................................................................................. 26
Satisfaction in Channel Relationship Studies ............................................ 26
International Channel Relationship Studies ............................................... 27
Economic Satisfaction and Non-economic Satisfaction ............................ 29
Relationship Between Satisfaction (economic and non-economic) and
Conﬂict (economic and non-economic) ..................................................... 3O
Disconﬁrmation of Expectations Model of Satisfaction ............................ 33
Customer Perceived Value ......................................................................... 36
Power Theory Issue ................................................................................................ 41
Correlation Between Coercive and Non-coercive Power Sources .......... 41
Attitudes and Performance ....................................................................... 43
Power Sources in India .............................................................................. 45

vii

Trust ....................................................................................................................... 48

Trust, Satisfaction and Conﬂict ............................................................... 48
Commitment .......................................................................................................... 51
Trust and Commitment .............................................................................. 51
Long-term Orientation ............................................................................... 53
Cooperation ............................................................................................................ 55
Cooperation, Satisfaction, and Conﬂict ..................................................... 55
Cooperation, Trust, and Commitment ........................................................ 59
Switching Costs ..................................................................................................... 60
Switching Costs, Satisfaction and Conﬂict ................................................ 61
Switching Costs, Trust, Cooperation, and Commitment ........................... 62
CHAPTER III
RESEARCH METHODS ................................................................................................ 66
Sample Selection and Data Collection ................................................................... 66
Instrument .............................................................................................................. 70
CHAPTER IV
RESULTS AND DISCUSSION ......................................................................................... 77
Demographic Characteristics of the Sample .......................................................... 77
Reliability ............................................................................................................... 8O
Validity ................................................................................................................... 83
Conﬁrrnatory Factor Analysis .................................................................... 83
Convergent Validity ................................................................................... 83
Discriminant Validity ................................................................................. 85
Hypothesis Testing ................................................................................................. 85
Discussion .............................................................................................................. 97
Processed Food Market Environment ........................................................ 97
Impact of Suppliers' Coercive Power Sources, Non-coercive Power
Sources, and Performance .................................................................. 98
Impact of Economic Satisfaction, Non-economic Satisfaction,
Economic Conﬂict, and Non-economic Conﬂict ............................. 100
Impact of Cooperation, Trust, Switching Costs and Commitment .......... 101
CHAPTER V
SUMMARY AND CONCLUSIONS ............................................................................... 103
Summary of Introduction and Research Objectives ............................................ 103
Summary of Literature Review ............................................................................ 105
Summary of Research Methods ........................................................................... 105
Summary of Results ............................................................................................. 106
Summary of Discussion ....................................................................................... 108
Managerial Implications ...................................................................................... 109
Limitations and Future Studies .......................................................................... 111

viii

APPENDICES ................................................................................................................. 113
Appendix A: Survey Instrument ........................................................................ 113

BIBLIOGRAPHY ............................................................................................................ 1 18

LIST OF TABLES

Table 1. Correlation Coefficients between Coercive and Non-coercive Power Sources...42

Table 2. Original Items of Coercive and Non-coercive Power Sources ............................ 43
Table 3. Characteristics of Data Collection Sites ............................................................... 67
Table 4. Rural-Urban Household Income Distribution Comparison ................................. 69
Table 5. Modiﬁed items ..................................................................................................... 71
Table 6. Measurement of Constructs ................................................................................. 74
Table 7. Demographic Characteristics of the Sample ........................................................ 78
Table 8. Reliability and Conﬁrmatory Factor Analysis Results ........................................ 81
Table 9. Correlations among Variables .............................................................................. 86
TablelO. Structural Parameters .......................................................................................... 87
Table 11. Summary of Hypotheses Testing ........................................................................ 94

LIST OF FIGURES

Figure 1. Power Sources, Conﬂict, and Satisfaction ......................................................... 32
Figure 2. The Conceptual Model of Patterson, Johnson, and Spreng (1997) .................... 35
Figure 3. The Conceptual Model of Patterson (2000) ....................................................... 37
Figure 4. The Conceptual Model of Patterson and Spreng (1997) ............ ' ........................ 3 8
Figure 5. The Conceptual Model of Eggert and Ulaga (2002) .......................................... 40
Figure 6. Performance, Satisfaction, and Conﬂict ............................................................. 46
Figure 7. Satisfaction, Conﬂict, and Trust ......................................................................... 50
Figure 8. Trust and Commitment ....................................................................................... 53
Figure 9. Satisfaction, Conﬂict, Trust, Cooperation, and Commitment ............................ 58
Figure 10. Satisfaction, Conﬂict, Trust, Switching Costs, and Commitment ................... 63
Figure 11. The Holistic Conceptual Model ........................................................................ 65
Figure 12. Data Collection Sites in India ........................................................................... 68
Figure 13. Signiﬁcant Relationships among Variables ...................................................... 96

xi

CHAPTER I

INTRODUCTION

For several decades, the study of channel relationships has been considered
an important academic ﬁeld in the marketing literature. Most channel relationship
studies have focused on explaining how relational processes lead to outcomes such as
conﬂict, satisfaction, trust, dependence, long-term orientation, and commitment.

The purpose of such studies is to observe, analyze and interpret the relationships
between suppliers and buyers in order to track channel members’ performance and to
optimize goals.

During the 70s and 808, such concepts as power sources, satisfaction and
conﬂict were studied widely. Most studies investigated the relationships among
power sources, satisfaction, and conﬂict, and found that coercive power sources have
a positive effect on conﬂict and a negative effect on satisfaction, whereas non-
coercive power sources have a negative effect on conﬂict and a positive effect on
satisfaction (Brown and Frazier, 1978; Gaski, 1984, 1986; Gaski and Nevin, 1985;
Hunt and Nevin, 1974; Lusch, 1977; Michie and Sibley, 1985; Wilkinson, 1981).

Since the 905, studies of channel relationships have begun to turn away from
focusing on the constructs of power, satisfaction and conﬂict, and are more likely to
highlight the important aspects of a long-term relationship between suppliers and
buyers, that is, cooperation, switching costs, trust, long-term orientation and

commitment. Several researchers empirically found that cooperation, trust, and

switching costs are positively related to long-term orientation or commitment
(Anderson and Narus, 1990; Ganesan, 1994; Geyskens etal., 1999; Morgan and Hunt,
1994; Olsen and Granzin, 1993; Skinner et al., 1992; Yu and Pysarchik, 2002).

In fact, many studies considered the supplier-buyer long-term relationship to
be the most critical construct to establish optimal business relationships, because
suppliers and buyers need to work together in ways that increase beneﬁts and mutual
performance, while at the same time reduce costs (Burt and Doyle, 1993; Ganesan,
1994; Morgan and Hunt, 1994; Landeros and Monczka, 1989; Lorange and R005,
1992)

For example, Ganesan (1994) stressed that the retailer (buyer) can realize
competitive advantages such as faster delivery of merchandise, new and better
product information, competitive activities, better prices, and promotion and mark-
down allowances through a long-term relationship. Likewise, the seller (supplier)
can obtain competitive advantages through a long-term relationship, for example,
information on better selling products, cooperative promotions, or special in-store
merchandise displays.

Despite the importance of channel member satisfaction and conﬂict, almost all
of the previous channel relationship studies have used composite and/or uni-
dimensional measurements that have resulted in inconsistent results (Geyskens et al.,
1999; Ruekert and Churchill, 1984). Thus, the necessity of multi-dimensional
measurements of satisfaction and conﬂict has been raised. Speciﬁcally,
investigation of “economic and non-economic satisfaction” (Geyskens et al., 1999;

Geyskens and Steenkamp, 2000) and “economic and non-economic conﬂict” (Yu and

Pysarchik, 2002) has increased in channel relationship studies. Geyskens et al.
(1999) were the ﬁrst to theorize the separate constructs of economic satisfaction and
non-economic satisfaction, and found differential effects. Similarly, economic
conﬂict and non-economic conﬂict, as investigated by Yu and Pysarchik (2002), were
found to have differential effects on trust, dependence, and long-term orientation.

In the current study, therefore, both of the satisfaction and conﬂict constructs
will be separated into the respective economic and non—economic dimensions
(economic satisfaction, economic conﬂict, non-economic satisfaction, and non-
economic conﬂict) to examine the differing effects on power sources, performance,
cooperation, switching costs, trust, and commitment.

Although a signiﬁcant number of buyer-supplier relationship studies have
been conducted, most were focused on Western countries. As a result, the
generalizability of supplier — buyer relationship theory to non-Western countries is
questionable. Thus, the current study was conducted to research supplier-buyer

relationships in a non-western country — India‘.

 

‘Population: 1.1 billion (UN, 2005)

Capital: New Delhi

Area: 3.1 million sq. km. (1.2 million sq. miles), excluding Indian-administered Kashmir
(100,569 sq. Inn/38,830 sq. miles)

Major languages: Hindi, English and 17 other ofﬁcial languages

Major religions: Hinduism, Islam, Christianity, Sikhism, Buddhism, Jainism

Life expectancy: 62 years (men), 65 years (women) (UN)

Monetary unit: 1 Indian Rupee = 100 paise ($1 = 45 Rupees, January 9, 2006)

Main exports: Agricultural products, textile goods, gems and jewelry, software services and
technology, engineering goods, chemicals, leather products

0 Gross National Income per capita: US $620 (World Bank, 2005)

Source:http://news.bbc.co.uk/1/hi/world/south_asia/country_proﬁles/1154019.3tm, Dec 7, 2005

INDIAN ECONOMY

The Republic of India (India), attaining its independence in 1947, was a
latecomer to economic reforms. In 1950, the Indian government adopted a “mixed
economy” approach, emphasizing private and public enterprise. However, this
approach prohibited both entrepreneurship and global competitiveness in a mistaken
idea that it needed to keep foreign investment and trade out while it built up its own
national economy (Budhwar, 2001). A good example of this was in the area of
imported consumer goods for which special licenses were needed that required a
lengthy and cumbersome application processes. This not only limited the
availability of such consumer goods, but failed to satisfy the growing consumer
demand for such products, especially among the young, middle, and upper-middle
class population (India: Becoming a global player, 2001).

In the early 19905, India lifted its decades-old economic system, and adopted
a “free market economy” model. During the 19808, the precipitated balance of
payment (BOP) crisis made economic reform inevitable. Therefore the New
Economic Policy (NEP) of the Indian government in 1991 had to accept the
IMF/IBRD’s conditions for a structural adjustment loanz. Many reforms such as
changes in industrial licensing and convertibility of currency were adopted to open
India’s long protected market to international competition (Srinivas, 1997).

This dramatic and economically liberal change opened up new opportunities
for foreign trade and business, and set in motion profound changes in the Indian

market system. Since opening its markets to foreign business, the Indian economy

 

2Structural Adjustment Loan (SAL) is a type of loan to developing countries. SAL is one of the
economic tools supported by the World Bank for structural adjustment.
(http://en.wikipedia.org/wiki/Structural_adjustment_loan)

continues to respond positively, making India one of the largest emerging markets in
the world. As one researcher noted, “The average [annual] growth rate in the ten-
year period from 1992 to 2002 was about 6% which has put India among the fastest
growing developing countries” (Ahluwalia, 2002, p. 67). The total GDP rose from
$576 billion in 2003 to $648 billion in 2004, and the average GDP grth for 2005
was estimated to be between 6.5% and 7.0% (Travel document systems, 2005).
Actually, India's gross domestic product (GDP) grew by 8.1% for the fourth quarter
of 2005, making it the world's second fastest growing economy aﬁer China. In
2005, India was the world’s fourth largest economy in purchasing power parity (U.S
$3.678 trillion) behind the United States, China, and Japan (Wikipedia, 2005).
Because of economic and trade reforms, India has become an attractive
market for many multinational ﬁrms. Now, India is the world’s third most desirable
country for Foreign Direct Investment (F DI), after China and the United States (Dutta,
2006). FDI has risen from $3.5 billion in 2004 to $6 billion in 2005 (Dutta, 2006, p.
B3). Foreign companies are allowed to become major stockholders in various Indian
ventures and foreign companies doing business in India are able to acquire property,
employ domestic workers, and buy and sell shares in Indian companies. FDI of up
to 100% is already allowed in many sectors (e.g., non-news publications such as
magazine and journals, and airport), and the G01 continues to raise the limits on
foreign investment in several sectors (e. g., food and dairy products, transport,
telecommunication, banking, mining, housing, infrastructure. etc.) (Reserve Bank of
India, 2005; Dutta, 2006; Venkat and Larkin, 2006). Also, India is considered to be

a cradle of lucrative and diverse opportunities for foreign exporters. In the

foreseeable future, India’s infrastructure, transportation, energy, environment, health
care, high-tech, and defense sector requirements for equipment and services will
exceed tens of billions of dollars, whereas most of these sectors in developed
countries are already saturated (U .S. & Foreign Commercial Service and US.

Department of State, 2003).

MARKET POTENTIAL

India’s market potential is much greater than that of many Western European
countries because of its enormous and well-educated population, which has the sixth
highest purchasing power in the world. After China, India is the second most
populous nation in the world having a population of over one billion, and the seventh
largest nation by geographical area. Its total population exceeds 1 billion, with the
urban population at approximately 300 million, and the rural population exceeding
741 million. India’s residents are dispersed across 4,000 urban towns and 625,000
rural towns (Krishnan 2001, p. 83). In addition, the population of India continues to
grow. Forecasts have emphasized that 9% of the Indian population will be elderly
(over 60 years of age) by 2010, whereas 19% of the US and 30% of the Japanese
population will be in this age category (Gingrich, 1999, p. 34). Therefore, India has
a considerably higher percentage of young people than the U.S or Japan. More
young people means more people in the labor force with money to spend and need for
conveniences. Two percent or 20 million Indian consumers have a per capita annual
income of more than US $13,000, while 8%, or 80 million, make US $3,500, and

10%, or 100 million, have an annual income of US $2,800 (U .S. & Foreign

Commercial Service and US. Department of State, 2003, p. 5).

MARKET STRUCTURE CHANGES

Traditionally, India has been a sellers’ market, which is a characteristic of a
developing country (Atac, 1985; Kale, 1986). Powerful manufacturers controlled
other channel partners (wholesalers, distributors, retailers etc.) and often used
coercive and high-pressure strategies to manipulate them (Kale, 1986). However,
the resulting growth of the Indian economy and the lowering of market entry barriers
caused by economic liberalization changed channel relationships between Indian
manufacturers and retailers, as well as intermediaries. As a result of economic
liberalization, Indian domestic companies face competition from foreign companies
and thus seek strategies to transform themselves to be able to survive in evolving
distribution channel environments. Pysarchik and Bhargava (1999) suggested that due
to structural market changes, channel power has moved away from manufacturers and
towards middlemen. Recently, Bandyopadhyay (2004) stressed that market
conditions in India are now organized differently, which has created greater
competition among suppliers. This has changed the channel structure from that of a
sellers’ market to a buyers’ market. He also stated that this change has strongly

inﬂuenced traditional Indian supplier-buyer relationships.

PROCESSED FOOD INDUSTRIES IN INDIA

The food retail sector is considered to be the “sunrise” in Indian industry.

Next to China, India is the second largest producer of food, and has the potential to

lead the world food and agricultural market. India’s processed food industry
contributed US $29 billion out of a total estimated India food market of US $92
billion in 2005 (India in Business, 2006). Food processing is the ﬁfth largest
industry in India, contributing over 6% to the GDP, and accounting for 13% of the
country’s exports (Reserve Bank of India, 2005, p.15). The semi-processed and
ready to eat packaged food industry is over US $1 billion and is expected to increase
by over 20% annually through 2010 (US. & Foreign Commercial Service and US.
Department of State, 2003, p. 66).

Historically, Indian consumers have preferred fresh food, and they are not
likely to put a priority on convenience and speed especially when purchasing and
preparing meals (Pysarchik and Bhargava, 1999). Nevertheless, as the number of
working women increases, there have been lifestyle changes that have boosted
demand for processed food products that are easily prepared after a day outside the
home (Bullis, 1997; International Trade Administration, 2000). Recent reports
indicate that packaged meat and frozen vegetables, are slowly becoming accepted by

the Indian consumers (International Trade Administration, 2000).

INDIAN SUPPLY CHAIN

Supply chain management in India is complex due to its state-based taxation,
geographic distance, and dispersion of consumers. Indian manufacturers deal with a
selling and distribution structure made up of three components: distributors,

wholesalers and retailers. Generally, large companies operating throughout India

have between 400 — 2,300 distributors. In addition, 250,000 — 750,000 retailers are

directly controlled by distributors (U .S. & Foreign Commercial Service and US.
Department of State, 2003). Distributors, frequently referred to as distribution
“stockists”, operate in speciﬁc geographic locations with selected retailers who are
serviced on a pre-established periodic basis by sales representatives. Most
distributors service multiple non-competitive companies. Stockists assist in the
sales and distribution of products through their own sales representatives, thus
providing companies with a level of protection from the ﬁnancial risks involved with
collecting money from millions of retailers. Sales training assistance is also
provided by the stockists, as well as promotions directed at retailers and consumers
(Krishnan, 2001).

The major responsibility of wholesalers is to deliver the merchandise to
several retailers under their jurisdiction. Wholesalers have their own staff that
survey stock levels and merchandise, and manage the delivery system. They are
able to deliver small quantities of goods to a large number of retailers in a timely and
economical way (Sachan, Sahay, and Sharma, 2005).

Due to India’s geographic dispersion, many companies operate warehouses
that spread across the country. The operation of these warehouses is often
outsourced to third parties for the sake of cost savings and efﬁciency. The third
party charges a service fee for managing the inventory and billing operations within
the warehouse, however, they do not participate in sales and collection activities
(Krishnan, 2001 ).

Most channel intermediaries (e.g., distributors and wholesalers) and retailers

are very small and unsophisticated, unlike the large companies seen in the US

(Bandyopadhyay, 2004; US. & Foreign Commercial Service and US. Department of
State, 2003).

In general, retailing in India is not organized, and there are very few
advanced supply chain management systems. Although India has 5 million retail
outlets of various kinds, nearly 96 percent of these are smaller than 500 square feet,
which equates to about 2 square feet per capita (compared to 16 square feet in the
US). Thus, India’s per capita retailing space is the lowest in the world (The Indus
Foundation, 2005). In addition, because of multiple ethnicities, cultures, habits, trade
rules, and regulations, India’s retailing industry must service many diverse markets
rather than one large homogenous market (The Emerging Retail Landscape, 2005).

There are two major components to the Indian retailing industry: the
traditional retailers such as “kirana,” small-sized mom and pop stores, and organized
contemporary retailers such as hypermarkets, supermarkets, convenience stores,
department stores, and specialty stores. The traditional retail sector includes small
to medium size shops, and are usually characterized by low-cost structures and
generations of family ownership with little or no taxation (International Business
Strategies, 2003). Although the traditional retailers’ distribution system is rather
complex and inefﬁcient, it services rural and urban areas, where consumers can rely
on getting products within easy reach. Also, because of the limited number of
supermarkets in urban areas and the non-existence of advanced distribution systems
in the rural areas, a limited number of suppliers continue to provide goods to a large

number of small and medium retail stores (Krishnan, 2001).

10

The strongest competition for traditional retailers comes from the organized
retail sector in terms of product assortments, quality, and customer services. However,
organized retailers struggle with high costs due to higher wages and the need to
provide social security beneﬁts, services, and comfort facilities (International
Business Strategies, 2003). Despite these difﬁculties, organized retailers continue to
grow in India. After economic liberalization, Indian consumers became familiar
with many international brands for sale on Indian market shelves. Because of the
higher quality products and the better shopping conditions found in organized
retailers’ shops, Indian consumers are becoming attracted to these new stores
(International Business Strategies, 2003). Although organized retailing currently
contributes only 2% of India’s total retail sales, it is expected to grow annually by 6%
to reach $17 billion by 2010 (International Business Strategies, 2003, p. 5). Also,
the number of organized retail stores is expected to rise from 2,500 currently to 5,500
by 2010 (The Emerging Retail Landscape, 2005, p. 102)

In 2006, the G01 approved FDI in the retailing sector for stores that handle
single brand products such as Polo Ralph Lauren Corporation or Louis Vuitton.
These foreign companies will be allowed to own up to 51% of their operations in
India. International single-brand stores don’t exist in the traditional retailer sectors,
thus, single-brand stores will not directly compete with traditional retailers (V enkat

and Larkin, 2006; Bellman, 2006).

STATEMENT OF THE PROBLEM AND SIGNIFICANCE OF STUDY

Previous studies in channel relationships have signiﬁcantly contributed to the

11

empirical understanding of supplier-buyer relationships. Speciﬁcally, the issues of
multi-dimensional measurements of satisfaction and conﬂict have been raised in
channel relationship studies. After Geyskens et a1. (1999) divided satisfaction into
economic and non-economic satisfaction to differentiate from a single satisfaction
measure, Yu and Pysarchik (2002) conceptualized economic and non—economic
conﬂict. They empirically determined the differential impacts of satisfaction and
conﬂict on suppliers’ power, inﬂuence strategies, trust, and long-term orientation
among Korean ﬁrms. The current conceptual model will focus on the relationships
between economic and non-economic factors (economic satisfaction, economic
conﬂict, non-economic satisfaction, and non-economic conﬂict), and the other
constructs. Speciﬁcally, the relationships between economic and non-economic
factors, and some determinants such as switching costs, cooperation and commitment
have not yet been examined. Therefore, this study will be the ﬁrst to research these
relationships.

Second, most of channel relationship studies have conducted in Westem
countries. Thus, the current study will make an important contribution to the
literature in the ﬁeld by being one of the few to research channel relationships in a
developing country. Also, it is anticipated that this study will reveal important
implications for understanding market development theory in other emerging markets.

Third, very few studies of Indian supplier-buyer relationships have been
published since economic liberalization in the 1990s. Speciﬁcally, previous channel
relationship studies related to India (Kale, 1986; Frazier, Gill, and Kale, 1989) may

no longer be applicable to the more current Indian market environment. A new study

12

is needed to examine the changed environment. For example, due to economic
liberalization, suppliers’ attitudes toward buyers may have changed because the
Indian market structure is evolving from a sellers’ market to a buyers’ market. Thus,
the use of suppliers’ coercive attitudes and actions toward retailers would likely be
reduced compared to the pre-liberalization period when retailers had fewer supplier
alternatives.

Forth, despite the importance of India’s huge market potential, the primary
problem is that there is little information regarding Indian processed food market
environments and distribution channel relationships compared to Western countries.
In order to be successful in the Indian processed food markets, global companies need
to learn more about the Indian food market structure, distribution channels, business
practices, and, especially, cultural differences. Without this information, foreign
processed food companies will not be able to compete effectively in Indian markets,
and will be disadvantaged in their business relationships with local companies.

Thus, this study offers practical and useful information for global companies
regarding the Indian supplier-buyer relationship. Speciﬁcally, marketing strategies
will be suggested for how to develop successful long-term business relationships with

Indian manufacturers, intermediaries, or retailers.

RESEARCH OBJECTIVES
The objectives of this study are to investigate changing Indian supplier-buyer
relationships and to propose an effective conceptual model using theoretically

developed constructs: “coercive power sources,” “non-coercive power sources,”

99 66 ,9 6‘

“performance,” “economic satisfaction, economic conﬂict, non-economic

l3

99 66 9’ 66 ’9 66 ,9 6‘

satisfaction, non-economic conﬂict, trust, cooperation, switching costs,” and
“commitment.”

This study aims to accomplish the following: 1) to analyze the inﬂuence of
Indian suppliers’ power sources and performance on buyers’ economic and non-
economic satisfaction, and economic and non-economic conﬂict; 2) to investigate the
differential effects of economic and non-economic satisfaction, and economic and
non-economic conﬂict on cooperation, trust, switching costs, and commitment; 3) to
provide practical information about business strategies speciﬁcally for global food

companies who wish to enter India.

14

CHAPTER II

LITERATURE REVIEW

In this chapter, a review is presented of the literature associated with the key
constructs to be included in the conceptual model, and the resulting hypotheses are
presented. Speciﬁcally, the study focuses on the supplier-buyer relationships between
economic and non-economic factors (satisfaction and conﬂict), and other constructs
such as power sources, performance, cooperation, trust, switching costs, and
commitment. Because there are very few published articles related to Indian supplier-
buyer relationships, most of the hypotheses are based on studies conducted primarily

in the US. and other Western countries.

POWER AND INLFUENCE STRATEGIES

With regard to suppliers’ (manufacturers’) attitudes toward buyers (retailers),
two main research streams lead marketing channel relationship studies: 1) power and
2) inﬂuence strategies. Although power and “inﬂuence strategies” represent similar
conceptual meanings and have shown similar relationships with the constructs of
satisfaction, conﬂict and trust, they have been separately studied and developed.
Thus, in this section, the power and inﬂuence strategies literature is separately

discussed.

15

Power

For several decades, power has been considered a critical component to
understand supplier — buyer relationships. Generally, power is the ability of one
individual or group to control or inﬂuence the behavior of another (Morgan and Hunt,
1994; Dahl, 1957; Emerson, 1962). In channel relationship studies, power is deﬁned
as the “the ability to evoke a change in another’s behavior, that is, the capability to get
someone to do something he or she would not have done otherwise” (Gaski and

Nevin, 1985, p. 130).

Power Sources
According to Simon (1953), power can be determined from the power sources.

Although there are many possible power sources, French and Raven (1959) deﬁned

ﬁve power sources in their framework, and Gaski and Nevin (1985) summarized

these power sources as:

1) Coercive Power Sources: B’s perception that A has the ability to impose
punishments on him.

2) Reward Power Sources: B’s perception that A has the ability to provide
rewards for him.

3) Legitimate Power Sources: B’s perception that A has the rightful authority to
prescribe behavior for him.

4) Referent Power Sources: B’s identiﬁcation with A.

16

5) Expert power sources: B’s perception that A has some special knowledge or

expertise (Gaski and Nevin, 1985, p.130).

El-Ansary and Stern (1972) were the ﬁrst to introduce these power sources to
the study of channel relationships, but they failed to ﬁnd signiﬁcant relationships
between channel members’ power and antecedent constructs such as power sources
and dependence. Later, Hunt and Nevin (1974) divided power sources into coercive
and non-coercive (expert, referent, reward, and legitimate), and found that
franchisers’ non-coercive power sources increase franchisees’ satisfaction, while
coercive power sources decrease franchisees’ satisfaction. The results of Hunt and
Nevin’s (1974) study were conﬁrmed by Lusch (1977) and Michie (1978) in studies
of the automobile industry and by Wilkinson (1981) in the beer industry.

Using this typology, Gaski (1986) found that: 1) suppliers’ use of rewards has
a positive effect on expert, referent, and legitimate power sources, and the use of
coercive power sources has a negative effect on them (expert, referent and legitimate),
and 2) reward and coercive power sources inﬂuence suppliers’ power and dealer
satisfaction, respectively. Rawwas, Vitell, and Barnes (1997) reported similar
results; the use of reward power sources by a dominant channel member has a
positive impact on expert power sources, referent power sources, and legitimate
power sources, whereas the use of coercive power sources has a negative impact on

expert and referent power sources.

17

Inﬂuence Strategies

Apart from power, inﬂuence strategies also have been widely studied in order to

examine suppliers’ attitudes toward buyers. Inﬂuence strategies are deﬁned as “the

means of communication used by a ﬁrm’s personnel in applying the ﬁrm’s power”

(Kim, 2000, p. 389).

Although power sources have mainly focused on the magnitude of power as

perceived by the buyer, Frazier (1984) deﬁned an inﬂuence strategy as “a means or

method of communication utilized by a ﬁrm’s boundary personnel in applying its

power” (p. 72). Thus, previous studies have focused on what inﬂuence strategy is

used by a partner. Frazier and Summers (1984) conceptualized a typology of six

inﬂuence strategies:

1)

2)

3)

4)

5)

Promise strategy: A channel member pledges to offer a speciﬁc reward
contingent on the channel partner’s compliance.

Threat strategy: A channel member notiﬁes the channel partner that
failure to achieve the desired action will result in a negative sanction.
Legalistic Plea strategy: A channel member stresses that the channel
partner’s compliance is required by legal contract.

Request strategy: A channel member asks the channel partner to act
without any sanction or reward.

Information Exchange strategy: A channel member discusses business

issues and operating philosophies with the channel partner.

18

6) Recommendation strategy: A channel member stresses that the channel
partner will be more successful if he/she follows the channel member’s

suggestions.

Frazier and Summers (1986) and Kale (1986) further categorized these six
inﬂuence strategies into coercive strategies and non-coercive strategies. In coercive
inﬂuence strategies (promise, threat, legalistic plea), a channel member directly
pressures the channel partner to perform speciﬁc behaviors by stressing the negative
results of noncompliance (Frazier and Rody, 1991). Non-coercive inﬂuence
strategies (request, business strategy discussion, information exchange,
recommendation) focus on the channel partner’s beliefs and attitudes about general
business issues, and do not involve direct pressure strategies.

Frazier and Summers (1986) found that manufacturers’ coercive inﬂuence
strategies (promise, threat, legalistic plea) are often negatively correlated with
dealers’ satisfaction while non-coercive inﬂuence strategies (request, information
exchange) are often positively correlated with satisfaction. However,
recommendation does not show any signiﬁcant relationship with satisfaction. Boyle
and Dwyer (1995) reported that non-coercive inﬂuence strategies, especially
information exchange, has a positive eﬁ‘ect on the partners’ performance, while
coercive inﬂuence strategies (threats and legalistic pleas) have a deleterious effect on
performance. Simpson and Mayo (1997) reported that a supplier’s use of non-
coercive inﬂuence strategies is associated with an increase in a distributor’s

commitment, trust, and satisfaction, while the use of coercive inﬂuence strategies is

19

associated with reduced levels of commitment and trust.

Furthermore, Geyskens et a1. (1999) found that a greater use of non-coercive
inﬂuence strategies by channel members fosters economic and non-economic
satisfaction, whereas a greater use of threat inﬂuence strategies reduces economic and
non-economic satisfaction. As is similar with power source studies, most of the
inﬂuence strategy literature indicates that coercive inﬂuence strategies are negatively
related to satisfaction and positively related to conﬂict, while non-coercive inﬂuence
strategies are positively related to satisfaction and negatively related to conﬂict.

Although most power sources and inﬂuence strategies studies have been
conducted separately, some researchers have studied them together. For example,
Mayo, Richardson, and Simpson (1998) examined the effects of suppliers’ use of
power sources and inﬂuence strategies on buyers’ satisfaction. They found that
although the use of both signiﬁcantly impact satisfaction, the use of suppliers’ power

sources is a better predictor of satisfaction than the use of inﬂuence strategies.

Dependence and Role Performance in Buyers’ and Sellers’ Markets

In channel relationships, dependence is deﬁned as one ﬁrm’s need to
maintain a relationship with another ﬁrm in order to achieve a desired goal (Frazier
1983). Channel members’ dependence, therefore, has been regarded as a reverse
power relationship. That is, if a channel member is highly dependent on its channel
partner, the channel partner has power over the member (Emerson, 1962; Frazier,

1983).

20

Based on previous dependence literature, there are three main approaches to
such channel relationships: 1) sales and proﬁt (Anderson, Lodish, and Weitz, 1987;
Brown, Lusch, and Muehling, 1983; El-Ansary and Stern, 1972; Etgar, 1976; Kale,
1986), 2) role performance (Anderson and Narus, 1984; Fraizer, 1983; Frazier and
Summers, 1986; Skinner and Guiltinan, 1985), and 3) transaction-speciﬁc investment
(Heide and John, 1988).

According to Emerson’s (1962) work on power-dependence relations, a
channel member’s dependence is determined by the ﬁrst two approaches: sales and
proﬁt, and role performance. The sales and proﬁt approach, as developed by El-
Ansary and Stern (1972), assumes that a channel member’s dependence on a channel
partner will increase if the percentage of sales and proﬁt with this channel partner
increases. In this context, the importance of dependence is regarded to be a ftmction

of the following:

1) The percentage of the channel member’s business contracted with the
partner.

2) The size of the contribution that the partner makes to the member’s proﬁt.

3) The commitment of a channel member to a partner in terms of the
contribution of the latter’s marketing policies.

4) The difﬁculty in effort and cost faced to switch to another supply source

or another customer (Frazier 1983, p. 160).

21

A role performance approach was developed by Frazier (1983) in which he
describes how well a channel partner performs its role with a channel member.
This approach assumes that when a channel member’s perception of its channel
partner’s performance increases, the channel member’s dependence on the partner
increases. Therefore, it is very difficult for a channel member to replace a channel
partner if the channel member perceives the partner’s role performance as critical.
Therefore, if a channel partner’s role performance increases, the channel member
will be more motivated to maintain the relationship with this partner.

The third dependence approach, transaction speciﬁc investments3, was
developed by Heide and John (1988). The basic principle of this theoretical
approach is that a channel member (agency) will become dependent on its channel
partner (principal) if the channel member invests in speciﬁc assets with the channel
partner. If this were to occur, a channel member will try to bond more closely with
the channel partner in order to protect its (channel member’s) assets. Heide and
John’s (1988) study identiﬁed several cases in which a channel member’s dependence

on the channel partner was increased:

1) When the outcomes from the channel member — partner relationship are
critical, highly valued, and the magnitude of the exchange itself is

greater.

 

3 Heide and John (1988) deﬁned transaction-speciﬁc investments as “those human and physical assets
(tangible and intangible) required to support an exchange and which are specialized to the exchange
relationship. If the relationship were to be temrinated, the value of these assets would be largely lost
because their salvage value outside the relationship is very low. Such nonredeployable assets can be
thought of as creating switching costs” (p. 21).

22

2) When the outcomes from the channel member-partner relationship are
comparatively better than the outcomes available from alternative
relationships.

3) When few potential alternative sources of exchange are available (p. 23).

In a sellers’ market, manufacturers’ role performance and retailers’ economic
dependence are unrelated because the number of manufacturers is smaller than the
number of retailers (Frazier, Gill, and Kale, 1989). In this type of market situation,
retailers have few options to replace their suppliers when manufacturers do not
perform very well. Therefore, manufacturers’ role performance does not inﬂuence
the dependence level of retailers.

On the other hand, in a buyers’ market, role performance and retailers’
dependence are strongly related. In a buyers’ market, manufacturers know that their
performance and contribution to retailers’ goals increase a retailers’ dependence.
Therefore, role performance in a buyers’ market is more important than in a sellers’
market, and produces greater economic dependence (Frazier, Gill, and Kale, 1989).
In this market, retailers are not likely to succumb to a manufacturer’s coercive action
because retailers have alternative manufacturers from which to buy.

In Frazier, Gill, and Kale’s (1989) study, the two approaches of sales and
proﬁt and role performance were empirically tested to examine the level of
dependence. The researchers concluded that the sales and proﬁt approach was more
easily explained in a sellers’ market, while role performance was more applicable in a

buyers’ market.

23

Interestingly, a few studies of Japanese retailers (Stemquist, Cooper, and
Ogawa, 1995; Stemquist, Ogawa, and Cooper, 2002) argued that the dependence of
Japanese retailers was not driven by the supplier’s role performance because of
different cultural and unique environmental factors such as absence of price
competition, loyalty, trust, and manufacturers provision of sales employees to
retailers (consignment system). Chung, Stemquist, and Chen (in press) also reported
a non-signiﬁcant relationship between role performance and dependence in Japan,
though role performance has been found to be a critical component to inﬂuence
retailers’ dependence in Western studies (Frazier 1983; Frazier, Gill, and Kale, 1989;

Kale 1986).

CONFLICT

Conflict in Channel Relationship Studies

In channel relationship studies, conﬂict is generally deﬁned as a tension
between two or more social entities (individual, group, or organization) that rises
from the incongruity between actual and desired responses (Raven and Kruglanski,
1970). Conﬂict occurs when a channel member perceives that a channel partner is
impeding his/her achievement, and stress or tension results (El-Ansary and Stern,

1972; Gaski, 1984).

24

Functional Conflict and Dysfunctional Conﬂict
Although conﬂict is usually considered dysfunctional and destructive, some

researchers (Anderson and Narus, 1990; Dwyer, Schurr, and Oh, 1987; Rosenbloom,
1991; Stem, El-Ansary, and Coughlam, 1996) have suggested that if conﬂict is
controlled and managed properly, results from it could be ﬁrnctional and constructive.
For example, Pondy (1967) and Thomas (1976) indicated that conﬂict is not
necessarily good or bad, but should be evaluated in terms of its individual and
organizational functions and dysfunctions. A low level of tension generates pressure
to decrease conﬂict; however, if conﬂict continuously persists, its outcome is usually
destructive.

Constructive conﬂict is deﬁned as “an evaluative appraisal of the results of
recent efforts to manage disagreements” (Rawwas, Vitell, and Barnes, 1997, p. 52).
Constructive conﬂict implies a low degree of intensity and impersonal characteristics
(Pondy, 1967; Thomas, 1976). On the other hand, destructive conﬂict can cause the
channel partners to have hostile attitudes toward one another (Thomas, 1976). The
characteristics of destructive conﬂict show a strong intensity (Pondy, 1967; Thomas,
1976). Actually, Rawwas, Vitell, and Barnes (1997) found that suppliers’ coercive
power sources positively inﬂuence retailers’ destructive conﬂict. Also, retailers’
constructive conﬂict has a positive effect on satisfaction while retailers’ destructive

conﬂict has a negative effect on satisfaction.

Economic Conflict and N on-economic Conflict

Although several dimensions of conﬂict have been developed in various

25

academic ﬁelds, uni-dimensional conﬂict (dysfunctional conﬂict concept) measures
have been widely used in channel relationship studies (Brown and Frazier, 1978;
Gaski and Nevin, 1985; Geyskens et al., 1999; Lusch, 1977; Lusch and Brown, 1982;
Rawwas, Vitell, and Barnes, 1997; Wilkinson, 1981).

Although Geyskens et a1. (1999) dichotomized the constructs of economic and
non-economic satisfaction, they considered conﬂict to be uni-dimensional. Later, Yu
and Pysarchik (2002) conceptualized economic and non-economic conﬂict. They
deﬁned economic conﬂict as a channel member’s negative reaction to economic
decline, such as decreasing proﬁts or ﬁnancial loss, and non-economic conﬂict as a
channel member’s negative reaction to a non-economic encounter, such as an impolite
or disrespectful attitude, or discordant communication with a channel partner. By
isolating the two types of conﬂict, they were able to demonstrate the different effects

of economic and non-economic conﬂicts.

SATISFACTION

Satisfaction in Channel Relationship Studies

Geyskens et al. (1999) deﬁned satisfaction as “a positive affective state
resulting from the appraisal of all aspects of a ﬁrm’s working relationship with
another ﬁrm” (p. 224). Regarding the relationships among conﬂict, satisfaction, and

other constructs, previous studies have shown the following results:

26

1)

2)

3)

4)

Channel member conﬂict is negatively related to satisfaction (Brown,
Lusch, and Smith, 1991; Wilkinson, 1981).

Coercive power sources are positively related to conﬂict and negatively
related to satisfaction (Hunt and Nevin, 1974; Lusch, 1977; Brown and
Frazier, 1978; Gaski and Nevin, 1985).

Non-coercive power sources are positively related to satisfaction and
negatively related to conﬂict (Hunt and Nevin, 1974; Lusch, 1977; Michie
and Sibley, 1985; Wilkinson, 1981; Gaski and Nevin, 1985).

Conﬂict negatively affects trust (Andaleeb, 1996), dependence (Yu and
Pysarchik, 2002), and long-term orientation (Ganesan, 1994), while

satisfaction positively affects these constructs.

Although most studies have focused on the relationships between satisfaction

and other channel constructs (e.g., power sources, conﬂict), some researchers have

raised concerns about the measurement of these constructs. For instance, Ruekert

and Churchill (1984) questioned the efﬁcacy of a uni-dimensional measurement of

satisfaction and thus developed two types of multi-dimensional satisfaction measures

(direct scale, SATDIR, and indirect scale, SATIND).

INTERNATIONAL CHANNEL RELATIONSHIP STUDIES

Several studies have suggested that cultural diversity impacts supplier-buyer

relationships, and have shown that a variety of cultural factors signiﬁcantly inﬂuence

channel relationships in various countries (Frazier, Gill, and Kale, 1989; Hall, 1976;

27

Kale, 1986; Kale and McIntyre, 1991; Stemquist, Ogawa, and Cooper, 2002; Yu and
Pysarchik, 2002). For example, Hall (1976) indicated that low context cultures,
such as Western countries, value competitive and arm’s length relationships, whereas
high context cultures, such as Asian countries, focus on trust and social relationships
in business. Kale and McIntyre (1991) explained supplier-buyer relationships using
Hofstede’s (1983) four dimensions3 . They suggested that companies in
individualistic societies are more likely to increase conﬂict and less likely to resolve
conﬂict with a partner than ﬁrms in collectivistic societies. Frazier and Kale (1989)
and Kale (1986) also suggested that market structur -- buyers’ markets in developed
countries versus sellers’ markets in developing countries -- has a signiﬁcant impact on
supplier-buyer relationships.

Speciﬁcally, there are inconsistencies in the relationships among power,
satisfaction and conﬂict in supplier-buyer studies conducted in non-Westem countries
compared to those of Western cultures. For instance, Liu and Wang (1999)
examined suppliers - local distributors relationships in China. They discovered that
non-coercive power sources are not related to conﬂict and cooperation in Chinese
channel relationships. They stated that non-coercive power sources were merely
used as adjustment methods in Chinese companies. This study showed the

limitations of power sources in international channel relationships. Furthermore,

 

3 “Power distance” -- This dimension focuses on how a society deals with the perception that people
are unequal in physical and intellectual capabilities.

“Individualism” versus “collectivism” -- This dimension focuses on the relationship between the
individual and group. Individualistic cultures emphasize the “I” identity while collectivistic cultures
emphasize the “we” identity.

“Uncertainty avoidance” -- This dimension focuses on the extent to which different cultures socialize
their members into accepting ambiguous situations and tolerating uncertainty.

“Masculinity” versus “Fernininity” - This dimension focuses on the relationship between gender and
work roles.

28

Yavas’s study (1998) examined the power source measurements that are grounded in
US research in Saudi Arabia. The results showed that more than half of the power
source measurements are not crystallized, that is, they demonstrate low reliability, and
many of the inter—item correlations fell outside the required limits. Further, they
found that neither coercive nor non-coercive power sources are signiﬁcantly related
to conﬂict.

Interestingly, Paswan (2003) reported that Indian marketing managers do not
regard distribution channel support activities such as trade allowance and incentives,
free samples, and ﬁnancing and credit supports (non-coercive power sources), as
critical to business relationships. The study reported that the distribution channel
support activities are not related to any of the market oriented goals (e.g., proﬁt,
market share, grth rate, sales volume), because Indian managers may consider
these support activities as bonus, gratitude, and relation building tools, not as

important support activities.

Economic Satisfaction and Non-economic Satisfaction
Geyskens et a1. (1999) divided satisfaction into economic and non-economic
satisfaction to isolate the two dimensions of the construct. They deﬁned economic
satisfaction as “a channel member’s positive affective response to the economic
rewards that ﬂow ﬁ'om the relationship with its partner, such as sales volume and
margins” (Geyskens et al., 1999, p. 224). This suggested that a channel member
who is economically satisﬁed considers the relationship to be one that is effective and

productive, and results in successful ﬁnancial outcomes.

29

Geyskens et a1. (1999) also deﬁned non-economic satisfaction as “a channel
member’s positive, affective response to the non-economic, psychosocial aspects of
its relationship, in that interactions with the exchange partner are fulﬁlling, gratifying,
and easy” (p. 224). Thus, a channel member who is non-economically satisﬁed
believes a relationship is successful if it embodies working together with a partner
who is respectful and willing to exchange ideas.

Geyskens et a1. (1999) empirically found the following relationships among
partners: 1) the use of a threat inﬂuence strategy decreases both economic satisfaction
and non-economic satisfaction, 2) the use of a non-coercive inﬂuence strategy
increases economic satisfaction and non-economic satisfaction, and 3) the use of a
promise inﬂuence strategy increases economic satisfaction and decreases non-
economic satisfaction because economic rewards depend on a member’s compliance
with a partner’s request. Under these conditions, retailers’ intrinsic motivation and
sense of autonomy tend to be undermined because retailers must comply or meet

manufacturers’ directions and/or requirements to obtain an economic beneﬁt.

Relationship Between Satisfaction (Economic and Non-economic) and Conﬂict
(Economic and Non-economic)
Regarding economic and non-economic satisfaction and economic and non-

economic conﬂict, Yu and Pysarchik (2002) reported the following results:

30

1)

2)

3)

4)

5)

6)

Korean suppliers’ (manufacturers’) coercive power sources decrease
retailers’ economic and non-economic satisfaction, while manufacturers’
non-coercive power increases economic and non-economic satisfaction.
Korean suppliers’ coercive power sources increase both economic and non-
economic conﬂict; and non-coercive power decreases non-economic
conﬂict.

Korean buyers’ (retailers’) economic and non-economic satisfaction is
negatively related to economic and non-economic conﬂict.

Korean buyers’ economic satisfaction is positively related to dependence
and trust, while non-economic conﬂict is negatively related to these
constructs.

Trust is a mediating factor between satisfaction (economic and non-
economic) and a long-term relationship.

Neither conﬂict nor satisfaction is uni-dimensional; each has an economic

and non-economic dimension.

Consequently, Yu and Pysarchik (2002) revealed the multi-dimensionality of

conﬂict and satisfaction. Based on this background, the following relationships are

hypothesized and depicted in Figure 1:

Hla:

Indian suppliers’ coercive power sources will negatively inﬂuence buyers’

economic satisfaction.

31

Figure 1. Power Sources, Conﬂict, and Satisfaction

Economic
Satisfaction

\\

H1 a (-)
Coercive
Power ‘
Sources l Hlb G
= Non-economic
H16 (+) Satisfaction
Hld (+)
H2a (+)

    
   
 
    
   
   
 

Economic
Conﬂict

Non-coercive

Power
Sources

Non-economic
Conﬂict

32

Hlb:

ch:

Hld:

H2a:

H2b:

H2c:

H2d:

Indian suppliers’ coercive power sources will negatively inﬂuence buyers’
non-economic satisfaction.

Indian suppliers’ coercive power sources will positively inﬂuence buyers’
economic conﬂict.

Indian suppliers’ coercive power sources will positively inﬂuence buyers’
non-economic conﬂict.

Indian suppliers’ non-coercive power sources will positively inﬂuence buyers’
economic satisfaction.

Indian suppliers’ non-coercive power sources will positively inﬂuence buyers’
non-economic satisfaction.

Indian suppliers’ non-coercive power sources will negatively inﬂuence
buyers’ economic conﬂict.

Indian suppliers’ non-coercive power sources will negatively inﬂuence

buyers’ non-economic conﬂict.

Disconf'irmation of Expectations Model of Satisfaction

Regarding satisfaction in supplier-buyer relationship studies, there are two

major academic research streams. The ﬁrst is channel member’s satisfaction in

channel relationship studies, which was discussed earlier. The second is from

customer satisfaction theory. In most studies of the second research stream,

researchers applied customer satisfaction theory to business-to-business relationships,

thus most conceptual models are derived from customer satisfaction theories, such as

the disconﬁrmation of expectations model and customer perceived value.

33

Customer satisfaction research is mainly explained by the disconﬁrmation of
expectations theory, where customer satisfaction is the result of a comparative process
between perceived performance and expectation (Oliver, 1980). If the product’s
performance exceeds expectation, the customer will be satisﬁed, but if performance is
below expectations, the customer will be dissatisﬁed.

Although the disconﬁrmation of expectations theory has been well
researched with consumer goods and services (Bolton and Drew, 1991; Brown and
Swartz, 1989; Churchill and Surprenant, 1982; Oliver, 1980; Spreng, Mackenzie, and
Olshavsky, 1996; Tse and Wilton, 1988), Patterson, Johnson, and Spreng (1997)
empirically examined this theory for the ﬁrst time in a business-to-business
relationship. Data were collected from a longitudinal survey of consultancy ﬁrms
and clients. Speciﬁcally, Patterson et a1. (1997) included purchase situation variables

99 ‘6'

(“novelty, 1mportance, ” “decision complexity” ), individual variables
(“stakeholding” and “uncertainty”)4 and “fairness” in their disconﬁrmation of
expectations model (See Figure 2).

They found that the disconﬁrmation of expectations theory could be applied to

a business-to-business relationship and found that situation (novelty, importance, and

decision complexity) and individual variables (stakeholding and uncertainty)

 

Patterson et al. (1997) deﬁne novelty as “The lack of experience of individuals in the organization
with similar purchase situations” (p. 7).
Importance of the purchase decision -- “The perceived effect of the purchase on organizational
productivity and proﬁtability” (p. 8).
Complexity -- “Technical or product complexity and complexity of the purchase situation” (p. 8).
Stakeholding -- “Those with the most at stake (or risk) because the buying decision will affect them far
more than other members” (p. 8).
Uncertainty -- “A lack of adequate information or knowledge concerning the outcome of a purchase
situation” (p. 9).
Fairness -- “Expect to be fairly treated” (p. 9).

34

Figure 2. The Conceptual Model of Patterson, Johnson, and Spreng (1997)

 

Purchase ;
Situation
__Variahlcs__l

A

 
     

 

 

 

   

Importance I + ,
Expectations
4.
(I -
Decision . V \I
Complexrty
. . +
+6 Disconﬁrmation Satleactlon ‘v‘

 

l

' Individual ; -
L Variables / ;
' l

 

Stakeholdin' - Performance 1+1 Fairness

1

 

 

 

35

inﬂuence expectation and performance in a business-to-business relationship.
Although one path was not supported (e. g., stakeholding -) expectations), the other
paths showed signiﬁcant relationships.

Later, Patterson (2000) also used disconﬁrmation of expectations theory in a
business-to-business relationship (Figure 3). The study examined the moderating
effects of two individual variables (stakeholding and product norm experience) and
one purchase situation variable (perceived product complexity) on the relationships
among perceived performance, disconﬁrmation of expectations, and satisfaction.
Patterson (2000) empirically found that the impact of performance and
disconﬁrmation on satisfaction are controlled by different contingency conditions
such as experience, complexity, and stakeholding. In other words, Patterson et a1.
(1997) and Patterson (2000) indicated that satisfaction is signiﬁcantly inﬂuenced by
performance, one of the critical constructs in the current conceptual model

(performance also will be discussed in the Attitudes and Performance section).

Customer Perceived Value

Along with the disconﬁrmation of expectations model, customer perceived
value also has been used to measure satisfaction in business-to-business relationships.
Patterson and Spreng (1997) investigated the nature of relationships between value,
satisfaction and repurchase intentions (Figure 4). They describe (1) value as “a ratio
or trade-off of total beneﬁts received to total sacriﬁes” (p. 416) and (2) satisfaction as

“a consumer’s post-purchase evaluation and affective response to the overall product

36

Figure 3. The Conceptual Model of Patterson (2000)

 

 

Individual Level Variables

   

     
 

Product

Stakeholding Experience

 

l j
Disconﬁrmation
of Expectations

1 \

 

 

 

 

1-39M“

 

 

Satisfaction

 

 

Performance
Perception

 

Product
Complexity

 

 

Purchase Situation Variable

 

37

 

Figure 4. The Conceptual Model of Patterson and Spreng (1997)

 

Outcome
of the Project

 

 

Methodology
Used

 

 

 

 

, Level of Service

   

Repurchase
Intention

 
 

 

 

 

 

 

 

+
‘ \
‘ Relationship with /
1 Consultancy Firm | '1'
Global ' '
Competence
Problem
Identiﬁcation

 

 

 

 

38

or service experience” (p. 418). In their conceptual model, Patterson and Spreng
(1997) hypothesize that several performance dimensions positively inﬂuence value
and satisfaction, and value and satisfaction are important antecedents of repurchase
intention.

The results of their study indicated that all performances (outcomes of the
project, methodology used, level of service provided, relationship with the
consultancy ﬁrm, global competency, and problem identiﬁcation) signiﬁcantly
inﬂuence value and satisfaction. Value positively inﬂuences satisfaction, in turn,
satisfaction positively impacts repurchase intention. Actually, they found that the
effect of value on intention is completely mediated by satisfaction in business-to-
business relationships. Although a number of studies have examined the dimensions
of satisfaction and service quality in a consumer setting (SERVQUAL), this is one of
the few attempts to delineate the dimensions in a business-service context.

Eggert and Ulaga (2002) also examined the business-to-business relationship
of value and satisfaction. In their conceptual model, they hypothesized that cognitive
variables (customer perceived value) inﬂuence affective variables (customer
satisfaction), which consequently inﬂuence conative variables (repurchase intention,
search for alternative, and world of mouth). To estimate the mediating effect of
customer satisfaction between the value and conative variables, two different models
were compared (Model 1: value 9 conative variables, Model 2: value -) satisfaction
-) conative variables) (See Figure 5).

They found that Model 2 had a signiﬁcantly better ﬁt than Model 1. Thus,

this study also demonstrated that customer satisfaction mediates a customer’s

39

Figure 5. The Conceptual Model of Eggert and Ulaga (2002)

 

 

Repurchase
Intention
.1.
Customer . + Search for
Satisfaction Alternative
Model 1 +
Chi-S uare = 3.83
df=32)
GFI = 0.92 “
AGFI = 0.87 , Word of
RMSEA = 0.098 Mouth
AIC = 168.4

 

 

 

 
    

Repurchase
Intent1on

  
    
  

 
   

  
  

  
   

 
 

Customer
Satisfaction

Search for

Customer
Alternative

Perceived
Value

 

    
 

 

Model 2 - ;
Chi-S uare = 1.69 ;
df=50) .
GFI = 0.96
AGFI = 0.93
RMSEA = 0.048
AIC = 141.7 5

 

 

40

perceived value and the purchasing manager’s conative intentions (repurchase
intention, search for alternatives, and word of mouth) in a business-to-business

relationship.

POWER THEORY ISSUE

Although the relationships among power sources and other constructs, such as
satisfaction, conﬂict, trust, dependence, have been widely studied in channel
relationship studies, few studies have investigated the weak points of power theory.
Thus, in this section, I would like to highlight some issues of power theory that have

not received much attention.

Correlation Between Coercive and Non-coercive Power Sources

To begin with, the relationship between coercive power sources and non-
coercive power sources is ambiguous. As discussed in the power and power sources
section earlier in this chapter, coercive power sources increase conﬂict (decrease
satisfaction), while non-coercive power sources increase satisfaction (decrease
conﬂict). Given these results, it may be surmised that these two power sources are
negatively correlated to each other.

Surprisingly, however, previous studies have shown conﬂicting results.
Some have yielded positive, negative, or non-signiﬁcant relationships between
coercive and non-coercive (reward) power sources. Table 1 shows correlation

coefﬁcients of several studies.

41

Table 1. Correlation Coefﬁcients between Coercive and Non-coercive Power Sources

 

 

Studies Correlation Coefﬁcient Sig. level
Gaski and Nevin (1985) -.166 P < 0.05
John (1984) .394 P < 0.01
Raven, Tansuhai and McCullough -.15 P > 0.50
(1993)

Rawwas, Vitell, and Barnes (1997) .432 N/A
Wilkinson (1981) -.01 P > 0.05
Yu and Pysarchik (2002) .09 P > 0.05

 

It can be stated that the use of one power source may not inﬂuence the use of
another power source. This means that the supplier can exert both coercive and non-
coercive power sources at the same time instead of using just a single power source.
For example, this might happen in a real business situation when a manufacturer uses
both coercive and reward business strategies simultaneously to obtain a retailer’s
compliance or cooperation.

Accordingly, the assumption that coercive power sources and non-coercive
power sources are negatively correlated with each other due to their inﬂuences on
satisfaction and conﬂict may not be accurate. Based on this discussion, it is

hypothesized that:

H3: There is no relationship between coercive power sources and non-coercive

power sources.

42

Attitudes and Performance

Second, several important factors that may impact buyer’s satisfaction are
missing in the measurement scales of power sources. For example, in Gaski and
Nevin’s (1985) study, the original coercive power sources and the non-coercive

(reward) power sources items were:

Table 2. Original Items of Coercive and Non-coercive Power Sources

 

 

Coercive Power Sources Non-coercive Power Sources
0 Delay delivery 0 Provide advertising support
0 Delay warranty claims 0 Give trade allowances/incentives
0 Take legal action against you 0 Train personnel
0 Refuse to sell 0 Provide sales promotion materials
0 Charge high prices 0 Grant favors (golf, lunches)
0 Deliver unwanted products 0 Give inventory rebates
O Furnish supplies
0 Give business advice
0 Give pricing assistance
0 Give free sample
0 Provide ordering assistance
0 Provide inventory mgt. assistance

0 Demonstration products

 

Source: Gaski and Nevin (1985). Most studies that have focused on coercive and
non-coercive power sources used Gaski and Nevin’s (1985) original scale
measurement or modiﬁed the original scale.

As shown in Table 2, Gaski and Nevin’s (1985) scales focused on
manufacturers’ attitudes (punishment or reward) toward retailers, rather than on

manufacturers’ competitive advantages and/or performance. As discussed in the

disconﬁrmation of expectations model of satisfaction section, however, many studies

43

have shown that suppliers’ performances strongly inﬂuence buyers’ satisfaction.

Patterson and Spreng (1997) found that consulting ﬁrms’ performance dimensions

(outcome, methodology, service, relationship, global competency, and problem

identiﬁcation) have a positive effect on clients’ satisfaction. Also, Schellhase et a1.

(1999) identiﬁed ten dimensions of a food suppliers’ performance and found that ﬁve

out of ten dimensions have the potential to inﬂuence how satisﬁed retailers are with a

supplier:
1)
2)
3)
4)
5)
6)
7)
8)
8)

10)

contact person*

packing/logistics

sales promotion

intensity of co-operation*

self servicing

product management“

management of prices and conditions*

delivery competence and attractiveness of the trading margin
quality and ﬂexibility“

wide spread of conditions in the retailing industry

*Signiﬁcant at the 0.05 level

The results of these studies found that retailers’ satisfaction is inﬂuenced by a

supplier’s performance dimensions. These are not analyzed in power theory, which

mainly focuses on a supplier’s attitudes. Consequently, the complex dimensions of

satisfaction can be better explained by combining these two theoretical approaches

44

(suppliers’ attitudes from power theory and suppliers’ performances from customer
satisfaction theories). Although, Schellhase et al. (1999) did not divide satisfaction
into economic and non-economic satisfactions, the logical linkages between
suppliers’ performance and satisfaction can be established because retailers’
satisfaction is inﬂuenced not only by economic performances such as product
management, and management of prices and conditions, but also by non-economic
performance such as the attitude of the contact person. Thus, it is hypothesized

(Figure 6) that:

H4a: Indian suppliers’ performance positively inﬂuences buyers’ economic
satisfaction.

H4b: Indian suppliers’ performance positively inﬂuences buyers’ non- economic
satisfaction.

H4c: Indian suppliers’ performance negatively inﬂuences buyers’ economic
conﬂict.

H4d: Indian suppliers’ performance negatively inﬂuences buyers’ non-economic

conﬂict.

Power Sources in India

In general, suppliers’ power sources (or inﬂuence strategies) in channel
relationship studies have been regarded as independent variables (or exogenous
variables) which inﬂuence satisfaction, conﬂict, and other variables. However,

power sources are actually strongly controlled by factors such as market situation and

45

Figure 6. Performance, Satisfaction, and Conﬂict

  
     
     
 
    
 

  

Economic
Satisfaction

Non-economic
Satisfaction

H4b (+)

  
 

Supplier's

Performance H4O H

Economic

Conﬂict

H4d (-)

 

‘\

./ Non-economic
Conﬂict

46

contextual variables. These characteristics are neglected in most channel
relationship studies. For example, in a sellers’ market, manufacturers do not need to
invest money or effort to create strong or cooperative relationships with retailers
because maintaining such relationships is expensive, and it is difficult to estimate the
economic beneﬁts. Also, strong manufacturers are more likely to use coercive
inﬂuence strategies (or coercive power sources) because manufacturers can then
acquire retailers’ quick response and compliance (Kale, 1986). Retailers must
follow the manufacturers’ directions or requirements because of the lack of alternative
manufacturers.

On the other hand, in a buyers’ market, cooperation between manufacturers
and retailers is very important for achieving mutual goals (Frazier, Gill, and Kale,
1989). In this market, stronger manufacturers tend to use more non-coercive
strategies because retailers have many alternative manufacturers (Kale, 1986). Thus,
if manufacturers use coercive inﬂuence strategies (or coercive power sources), the
conﬂict level of retailers will be greater than that of retailers in a sellers’ market.
Bandyopadhyay (2004) reported that the use of Indian suppliers’ non-coercive
inﬂuence strategies (information exchange and recommendation) was greater than
their use of coercive inﬂuence strategies (promises, requests, legal pleas, and threats)
since economic liberalization. This is an indication that general market conditions

are shifting ﬁ'om a sellers’ market to a buyers’ market. Thus, it is hypothesized that:

H4c: When dealing with Indian buyers, Indian suppliers use non-coercive power

sources more frequently than coercive power sources.

47

TRUST

Trust has been deﬁned in several ways. Moonnan, Deshpande, and Zaltman
(1993) deﬁned trust as “a willingness to rely on an exchange partner in whom one has
conﬁdence” (p. 82). Morgan and Hunt (1994) theorized trust as “existing when one
party has conﬁdence in an exchange partner’s reliability and integrity” (p. 23). Also,
Anderson and Narus (1990) deﬁned trust as “the ﬁrm’s belief that another company
will perform actions that will result in positive outcomes for the ﬁrm as well as not
take unexpected actions that result in negative outcomes” (p. 45). According to
Yarnagishi and Yarnagishi (1994), trust exists when the trustor has a belief that
another party will not cheat because of its good will, even though the other party has
an incentive to cheat. Ganesan (1994) pointed out two components of trust:
“credibility” and “benevolence.” Credibility occurs when the channel member
believes that the channel partner has special knowledge for achieving its tasks, and
benevolence occurs when a channel member has faith that its channel partner has the

willingness and motivation to support the channel member (Ganesan, 1994).

'D'ust, Satisfaction, and Conﬂict

Some marketing literature posits a positive relationship between trust and
satisfaction (Andaleeb, 1996; Anderson and Narus, 1990; Dwyer, Schurr, and Oh,
1987; Park and Oh, 1999), while assuming a negative relationship between trust and
conﬂict (Geyskens et al., 1999). Andaleeb (1996) reported that a supplier’s high
level of trust increases a buyer’s satisfaction in a channel relationship, which

conﬁrmed the results of some former studies (Anderson and Narus, 1990; Dwyer,

48

Schurr and Oh, 1987). In a Korean study, Park and Oh (1999) found that a
supplier’s and a retailer’s satisfaction with their past business experience strongly
affects trust and commitment. Ganesan (1994) reported that retailers’ satisfaction
positively inﬂuences two components of trust: credibility (welfare) and benevolence
(task performance). Also, Geyskens et a1. (1999) reported that conﬂict with the
channel partner negatively impacts trust, because disagreement will induce frustration,
which then causes distrust and conﬂict.

Regarding economic and non-economic factors (satisfaction and conﬂict),
Ganesan (1994) mentioned that vendors with notorious reputations for terminating
relationships (non-economic conﬂict) and seeking high proﬁts (economic
satisfaction) have difﬁculty in developing trust with channel members. Geyskens et
a1. (1999) found that non-economic satisfaction increases trust, and similarly, Yu and
Pysarchik (2002) reported that increased levels of economic and non-economic
satisfaction positively inﬂuence trust, while increased levels of economic and non-

economic conﬂict negatively inﬂuence it. Thus, it is hypothesized (Figure 7) that:

H5a: Indian buyers’ economic satisfaction positively inﬂuences their trust of
suppliers.

H5b: Indian buyers’ non-economic satisfaction positively inﬂuences their trust of
suppliers.

H5c: Indian buyers’ economic conﬂict negatively inﬂuences their trust of suppliers.

H5d: Indian buyers’ non-economic conﬂict negatively inﬂuences their trust of

suppliers.

49

Figure 7. Satisfaction, Conﬂict, and Trust

Economic
Satisfaction

    
  

 
  

Non-economic
Satisfaction

   
  
    
     
 

HSb (+)

Economic
Conﬂict

Non-economic
Conﬂict

50

COMMITMENT

Commitment has been recognized as a critical factor for successful long-term
channel relationships. Moorman, Zaltman, and Deshpande (1992) deﬁned
commitment as “the desire to maintain a valued relationship” (p. 136). Anderson
and Weitz (1992) construed commitment as “a desire to develop a stable relationship,
a willingness to make short-term sacriﬁces to maintain the relationship, and a
conﬁdence in the stability of the relationship” (p. 19). Further, Morgan and Hunt
(1994) stated that:

We deﬁned the relationship commitment as an exchange partner

believing that an ongoing relationship with another is so important as

to warrant maximum efforts at maintaining it; that is, the committed

party believes the relationship is worth working on to ensure that is

endures indeﬁnitely. (p.23)

The concept of commitment assumes that the relationship between a channel
member and a channel partner is stable and will continue long enough for both to
realize long-term beneﬁts (Anderson and Weitz, 1992). Based on previous studies,
the idea of commitment has produced such important outputs as decreased turnover

(Porter et al., 1974), higher motivation (Farrell and Rusbult, 1981), and increased

organizational citizenship behaviors (Williams and Anderson, 1991).
Trust and Commitment

According to Morgan and Hunt’s (1994) study, commitment and trust are

described as key mediating factors in a successful relational exchange, and trust,

51

especially, is considered a determinant of commitment. Trust implies value that
provides enhanced beneﬁts to both channel members and channel partners, and
allows them to take risks/uncertainty because opportunistic behaviors are not
expected of either party (Morgan and Hunt, 1994). Therefore, a trusting member or
partner does not need to get involved in such actions as monitoring its channel partner
and/or establishing protection through legalistic contracts, which are costly. These
beneﬁts appear to increase a desire to build a strong and continuous relationship,
which is the deﬁnition of commitment. Thus, if commitment and trust are present,
the channel member and partner increase their efﬁcient, productive, and effective
relationship.

Morgan and Hunt (1994) suggested that commitment and trust encourage a
channel member: 1) to work with its channel partner to preserve a cooperative
relationship, and 2) to maintain a long-term relationship with its channel partner and
avoid attractive short-term channel alternatives. Several researchers also have found
positive relationships between trust and commitment (Andaleeb, 1996; Garbarino and
Johnson, 1999; Geyskens etal., 1999; Morgan and Hunt, 1994). Thus, it is

hypothesized (Figure 8) that:

H6: Indian buyers’ trust positively inﬂuences their commitment to suppliers.

52

Figure 8. Trust and Commitment

Trust \ H6 (+) Commitment

 

Long-term Orientation

Similar to commitment, long-term orientation has been widely studied in the
marketing literature. Ganesan (1994) conceptualized the distinction between long-
term orientation and short-term orientation in two different ways. First, while short-
term orientation focuses on the options and outcomes of the present period, long-term
orientation focuses on accomplishing both present and future outcomes. Second, a
channel member with a short-term orientation is concerned with the efficiency of
market exchange in order to maximize beneﬁts in a transaction, while a channel
member with a long-term orientation is concerned about relational exchange in order
to maximize beneﬁts through continuous transactions (Ganesan, 1994). Regarding
the relationship between trust and long-term orientation, Ganesan (1994) said that :

A retailer’s trust in a vendor affects the long-term orientation of a

retailer in three ways: (1) it reduces the perception of a risk associated
with opportunistic behaviors by the vendor, (2) it increases the

53

conﬁdence of the retailer that short-term inequities will be resolved

over a long-term period, and (3) it reduces the transaction costs in an

exchange relationship. (p. 3)

In general, then, long-term orientation is considered a dependent variable that
is inﬂuenced by satisfaction, dependence, and trust (Ganesan, 1994; Yu and Pysarchik,
2002). Ganesan (1994) reported that a retailer’s dependence and trust (credibility
and benevolence) inﬂuences long-term orientation. Also, Yu and Pysarchik (2002)
found that a retailer’s dependence and trust positively inﬂuence their long-term
orientation, and at the same time non-economic conﬂict negatively inﬂuences it.

In a conceptual model assessed through structural equation modeling (SEM),
Chung, Stemquist and Chen (2007) posited long-term orientation as an exogenous
variable, which inﬂuences retailers’ trust and economic dependence rather than an
endogenous variable, as in the case of Western culture studies. To test this
difference, they developed and compared two models: 1) a traditional model
where long-term orientation has an impact on trust and dependence, and 2) a
performance model where role performance inﬂuences long-term orientation, trust
and dependence. The results of the study showed that the traditional model had a
greater explanatory power than the performance model. In other words, long-term
orientation is considered an antecedent of trust and dependence in Japanese supplier-
buyer relationships. Thus, once Japanese retailers have a relationship with their
supplier, they are more likely to maintain and keep this long-term relationship.
Chung, Stemquist and Chen (in press) also stressed that Western companies need to

have a long-term orientation when they ﬁrst establish new business relationships with

Japanese companies. Although this kind of relationship is not typical of most

54

Western companies, it would increase Japanese retailers’ trust of and economic
dependence on Western companies. This study indicated how cultural differences

impact channel relationships.

COOPERATION

Cooperation is deﬁned as “similar or complementary coordinated actions
taken by ﬁrms in interdependent relationships to achieve mutual outcomes or singular
outcomes with expected reciprocation over time” (Anderson and Narus, 1990, p.45).
Also, Lucas et a1. (1996) deﬁned cooperation as the outcome of a learning process
and mutual understanding between suppliers and buyers. Most studies in channel
relationships have recognized cooperation as a desirable construct in that it cultivates
positive and long-term relationships between suppliers and buyers (Brown and Day,

1981; Frazier and Rody, 1991; Frazier, 1983; Robicheaux and El-Ansary, 1975).

Cooperation, Satisfaction, and Conﬂict

Generally, cooperation has been known as the opposite construct to conﬂict
(destructive conﬂict). Balabanis (1998) found that the lower the occurrence of
conﬂict, the greater the level of cooperation between supplier and buyer. In Skinner
et al.’s (1992) study, the results showed that the higher the level of conﬂict
(destructive conﬂict) the lower the level of cooperation since a channel member’s
unﬁiendly behavior will deﬁnitely undermine its channel partner’s cooperativeness,

thus destroying an effective relationship and performance.

55

Previous channel relationship studies have suggested a positive relationship
between satisfaction and cooperation (Anderson and Narus, 1990; Dwyer, 1980;
Mallen, 1963; Sibely and Michie, 1982). However, there is some disagreement in
regard to the sequence of cooperation and satisfaction. Some researchers have used
cooperation as a determinant of satisfaction (Olsen and Granzin, 1993), while others
have viewed cooperation as an antecedent of satisfaction (Skinner et al., 1992;
Anderson and Narus, 1990). For example, Skinner et a1. (1992) reported that a
higher level of cooperation leads to a higher level of satisfaction because cooperative
efforts produce greater channel efﬁciency and lead to the desired goal, thereby
increasing satisfaction. However, Olsen and Granzin (1993) reported that satisﬁed
dealers in channel relationships are more willing to help manufacturers, and thus
manufacturers who seek cooperation with retailers should provide satisfaction to the
retailers (satisfaction -) cooperation).

Morgan and Hunt (1994) stated that cooperation is different from
acquiescence. Cooperation implies a proactive response whereas acquiescence is
reactive. For example, if a retailer passively agrees to promote a manufacturer’s
advertisement, this would be acquiescence, whereas if a retailer proactively suggests
a better advertisement, this would be cooperation. Thus, in this study, satisfaction is
posited as an antecedent of cooperation because a satisﬁed channel member will
cooperate proactively with a channel partner, and will be more likely to help a
channel partner improve mutual performance (Olsen and Granzin, 1993).

In regard to the relationship between economic satisfaction and cooperation,

Geyskens and Steenkarnp (2000) said that:

56

Economic satisfaction directly impacts channel survival and growth as
it deals with economic outcomes. Hence, when economic
satisfaction is high, channel members will be inclined to engage in
constructive responses and disinclined to engage in destructive
responses [cooperative-like behaviors] in reacting to a given
problematic situation (p 17).

Also, Geyskens and Steenkamp (2000) said that:

H7a:

H7b:

H7c:

H7d:

Increases in social satisfaction [non-economic satisfaction] also
encourage constructive responses and discourage destructive responses
when problematic incidents occur [cooperative-like behavior].
Channel members who are happy in their current relationship [non-
economic satisfaction] are more likely to stay [commitment] and be
supportive or work to improve things [cooperative-like behaviors] than
would channel members who do not have this basis for hope (p. 16).

Thus, it is hypothesized (Figure 9) that:

Indian buyers’ economic satisfaction positively inﬂuences their cooperation
with suppliers.

Indian buyers’ non-economic satisfaction positively inﬂuences their
cooperation with suppliers.

Indian buyers’ economic conﬂict negatively inﬂuences their cooperation with
suppliers.

Indian buyers’ non-economic conﬂict negatively inﬂuences their cooperation

with suppliers.

57

Figure 9. Satisfaction, Conﬂict, Trust, Cooperation, and Commitment

Economic
Satisfaction /

 
  

H7a (+)
Non-economic
Satisfaction
H7b (+)
\1
\\
H70 (-) / H7f(+)

 

   

Economic
Conﬂict

   

'V\\ Cooperation

    
 

H7d (-)

    

Non-economic
Conﬂict

 
   
 

58

Cooperation, Trust and Commitment

Regarding the concept of trust, Anderson and Narus (1990) noted that,
“Once trust is established, ﬁrms learn that coordinated, joint efforts will lead to
outcomes that exceed what the ﬁrm would achieve” (p. 45). Similarly, Hagen and
Choe (1998) said that trust encourages cooperation because it reduces transaction
costs caused by the channel partner’s opportunistic behavior. Several scholars also
reported that a high level of trust is related to cooperative relationships between
individuals and organizations (Casson, 1991; Ouchi, 1981). Morgan and Hunt
(1994) also empirically found positive causal relationship between trust and
cooperation.

Previous studies have shown that cooperation is positively and signiﬁcantly
correlated to relationship beneﬁts, relationship commitment, trust, and
communication (Morgan and Hunt, 1994). Balabanis (1998) stated that one of the
goals for a channel member (international trade intermediary) should be to sustain
stable, long-term relationships with their channel partners because stable relationships
reduce the effort of selecting a new supplier, along with the risk of uncertainty.
They empirically found that a greater level of cooperation lead to longer duration
(commitment) in business relationships. Also, Anderson and Narus (1990) found
that cooperation leads to trust, which increases willingness to collaborate
(commitment) in the future (Morgan and Hunt, 1994). Based on these results, it is

hypothesized (Figure 9) that:

H7c: Indian buyers’ trust positively inﬂuences their cooperation with suppliers.

59

H7f: Indian buyers’ cooperation positively inﬂuences their commitment to suppliers.

SWITCHING COSTS

Switching costs are deﬁned as the time, monetary, and psychological costs of
changing a supplier (Jackson, 1985). Generally, switching costs are described as the
buyer’s perceived costs of changing ﬁ‘om a current supplier to a new supplier (Heide
and Weiss, 1995). The construct of switching costs has been widely integrated with
several theoretical approaches in supplier—buyer relationships (Anderson, 1985;
Dwyer et al., 1987; Frazier et al., 1988).

When trying to switch its existing supplier, the buyer faces two types of
switching costs: setup costs and takedown costs. Setup costs refer to the costs the
buyer needs to ﬁnd a new supplier who will provide the same or better performance
(Dwyer et al., 1987). Take down costs refer to the costs incurred when a speciﬁc or
idiosyncratic investment with an existing supplier becomes valueless after
terminating the relationship.

Morgan and Hunt (1994) stated that switching costs are increased by
idiosyncratic investment that makes it more difﬁcult or costly to change an existing
partner. In other words, transaction speciﬁc investments required by suppliers raise
buyers’ switching costs, thus increasing buyers’ dependence and inhibiting their
motivation to change existing suppliers. Therefore, the net result of switching costs
is that suppliers create reason for buyers to remain in the relationship even though

they would prefer to change.

60

Switching Costs, Satisfaction and Conﬂict

Regarding the relationship between economic factors and switching costs,
Sengupta, Krapfel and Pusateri (1997) indicated that the greater the economic
incentives (economic satisfaction) offered by a supplier, the greater the switching
costs faced by a buyer, while the lower the price (economic conﬂict) offered by a
potential supplier, the higher the likelihood of customers switching.

According to the deﬁnition of switching cost (Jackson, 1985), it encompasses
not only monetary cost but also psychological and emotional costs (non-economic
factors). When personal relationships, social ties, and trust have been built up over a
period of time, the relationship between supplier and buyer is likely to present a
psychological exit barrier (non-economic satisfaction), even though the performance
of the core service is less than satisfactory.

A buyer is more likely to avoid the psychological and emotional stress and the
risk/uncertainty that the termination of the current relationship might bring (non-
economic factor) by staying in the relationship, even when it may be less than ideal
(Sharma and Patterson, 2000). Consequently, retailers’ economic and non—economic
factors will strongly inﬂuence switching costs. Thus, it is hypothesized (Figure 10)

that:

H8a: Indian buyers’ economic satisfaction positively inﬂuences their switching
costs for suppliers.
H8b: Indian buyers’ non-economic satisfaction positively inﬂuences their switching

costs for suppliers.

61

H8c: Indian buyers’ economic conﬂict negatively inﬂuences their switching costs
for suppliers.
H8d: Indian buyers’ non-economic conﬂict negatively inﬂuences their switching

costs for suppliers.

Switching Costs, Trust, Cooperation, and Commitment

Dwyer, Schurr, and Oh (1987) suggested that a buyer’s expectation of high

switching costs increases his/her intention to remain in the present business

relationship. Morgan and Hunt (1994) stated that:
Termination costs [switching costs] are, therefore, all expected losses
from termination and results from the perceived lack of comparable
potential alternative partners, relationship dissolution expenses, and/or
substantial switching costs. These expected termination costs lead to
an ongoing relationship being viewed as important, thus generating
commitment to the relationship. Indeed, facing termination costs
[switching costs] that are actually very high, a partner may be
blissfully unaware of this fact and not be committed to the trading
partner. Conversely, facing total costs that are actually very low, a
partner unfoundedly may fear being terminated and be committed.

Thus, it is the expectation of total costs [switching costs] that produces
commitment. (p. 24)

Actually, Morgan and Hunt (1994) found a positive empirical relationship
between switching costs and commitment, and a negative relationship between
switching costs and a propensity to leave.

Regarding the relationships between switching costs, trust, and cooperation, a

high degree of trust and cooperation will increase the switching costs. For example,

a channel partner cannot easily exchange a highly cooperative and trustworthy

62

Figure 10. Satisfaction, Conﬂict, Trust, Switching Costs, and Commitment

Economic
Satisfaction

 

 

H8a (+)
Non-economic l
Satisfaction
H8b (+)
Economic H8e H 94' Switching H8f(+. Commitment
Conﬂict \ Costs
H8d (-)
H8e (+)

Non-economic
Conﬂict

U

63

channel member because such a channel member will tend to heighten idiosyncratic
investment (nonredeployable), thus increasing the switching costs. Empirically,
Nielson (1996) found that trust positively inﬂuences switching costs. Also,
Finnegan (working paper) reported that suppliers’ trust (credibility, one of the
components of trust) negatively inﬂuences propensity to switch. Thus, it is

hypothesized (Figure 10) that:

H8e: Indian buyers’ trust positively inﬂuences their switching costs for suppliers.
H8f: Indian buyers’ switching costs positively inﬂuence their commitment to

suppliers.

Based on the previous discussion and hypotheses, a holistic conceptual model

is shown in Figure 11.

Figure 11. The Holistic Conceptual Model

Economic
Satisfaction

   
  

L.

 
   
     
 

Coercive
Power
Sources

/
Non-
coercive
Power ) 3

Supplier’s
Performance

  
   
 
     
 
    
   
   

Non-
economic

Economic
Conﬂict

 

Switching
Costs

Non-
economic
Conﬂict

 

65

CHAPTER III

RESEARCH METHODS

In this chapter, sample selection, data collection procedures, and the survey
instrument are discussed. Also, measurement items for all constructs are presented.
Then, data analysis plans including analysis methods and statistical techniques to test

hypotheses are provided.

SAMPLE SELECTION AND DATA COLLECTION

This study is focused on supplier-buyer relationship among Indian companies
in the processed/packaged (not fresh) food business. Generally, most Indian
manufacturers deal with several types of intermediaries and retailers. Thus, to
measure complex Indian supplier-buyer relationships accurately, companies that are
supply chain members in the processed/packaged food industries (e.g., wholesaler,
stockist, broker, importers, trading company or retailer) were selected as the
population to be sampled. Because the purpose of the study was to investigate a
channel member’s relationship with his/her major supplier, manufacturers/producers
were not included in the sample of buyers. The nature of transactions between
farmers and manufacturers can be quite different than among other channel partners.

To achieve a representative sample, data were collected from 6 cities (Mumbai,
Ludhiana, Kolkata, Hyderabad, Bangalore, and Delhi) between late 2004 and early

2005 in India. Table 3 presents the characteristics of the cities and Figure 12 shows

66

the data collection sites in India.

Urban cities were selected for this study because in

India processed/packaged foods are purchased by middle to upper income consumers,

who typically live in urban areas (See Table 4).

from data collection in this study.

Thus, rural cities were excluded

Table 3. Characteristics of Data Collection Sites

 

Data
Collection
Sites

Basic Characteristics

 

Mumbai
(Bombay)

State: Maharashtra
Area: 468km2
Population:
19,400,000

Density: 41 ,453/km2
Altitude: 10 meters

Mumbai, formerly known by the British as
“Bombay” , is the capital of the Indian state of
Maharashtra and is the most populous Indian
city. The city, which has a deep natural harbour,
is also the largest port in westem India,
handling over half of India's passenger trafﬁc.
Mumbai is the commercial capital of India, and
houses important ﬁnancial institutions.

 

Delhi

National capital
territory

Area: 1483km2
Population:
19,000,000

Density: 12,812/krn2
Altitude: 300 meters

Delhi is a metropolis in India. This city is one
of the three towns that make up the National
Capital Territory (N CT), the other two being
New Delhi and Delhi Cantonment. Delhi is one
of the most afﬂuent urban centres in India and
is at the heart of India's largest consumer belt.

 

Kolkata
(Calcutta)

State: West Bengal
Area: 1,036 km2
Population:
15,350,000

Density: 14,817 km2
Altitude: 6 meters

Kolkata was the capital of British India until
1912. The city's name was ofﬁcially changed
from Calcutta back to the original Kolkata in
January 2001. The urban agglomeration of
Kolkata covers several municipal corporations,
municipalities, city boards and villages and is
the third largest urban agglomeration in India
after Mumbai and Delhi.

 

Bangalore

 

 

State: Karnataka
Area: 366 km2
Population:
6,900,000

Density: 18,852 km2
Altitude: 920 meters

 

Bangalore is the largest city of the Indian state
of Karnataka. After India gained independence
in 1947, Bangalore evolved into a
manufacturing hub for heavy industries.
Bangalore is called the "Silicon Valley of
India" due to the large number of information
technology companies located there.

 

67

 

 

 

 

 

Area: 3,744 km2
Population:
1,650,000
Density: 440 km2
Altitude: N/A

Hyderabad State: Andhra Hyderabad is the 5th largest metropolis of
Pradesh India. It is known for its rich history and culture
Area: 260 km2 with monuments, mosques, temples, and a rich
Population: and varied heritage in arts, crafts and dance.
6,550,000 Hyderabad is also known as the second Silicon
Density: 25,192 km2 Valley in India after Bangalore.
Altitude: 536 meters

Ludhiana State: Punjab Ludhiana is the largest city of Punjab. It is a

major industrial center of northern India.

F arnous for its hosiery, textiles and bicycle
industry, Ludhiana also is sometimes called the
"Manchester of India."

 

 

Sources: http://www.citypopulation.de/World.htrnl(October 5, 2005)
http://en.wikipedia.org (October 5, 2005)

Figure 12. Data Collection Sites in India

'1’, i, 0 {tr-F a ‘1: m.
C :‘r '1; .crx': -n
CC!) f.“ 'Sundqﬂ r" _ I” A
‘1 ., 5 11‘1”
rim ,1' :33 ° Ludhiana V
. l Amritsar -
l. 2: /EW (”ti-‘1‘
F, 0‘ A'KE“\.: _1::.’. / jj\
J. ”K .
é;— LHI* m . .- J? 1:" . . (/
9' a upu M‘ﬁ- C, 1n rrhal .4
I _g ”L? .3 1
chlllﬁlta .Bhopal L‘ 1 1
l .. Ahmadtibad Kolkata - ;_~--. ‘1.) may;
, z; .Nagpur , _“y ‘r " "
1’ . I .‘
i Mumbai t" It
' " "‘ ‘- ﬂyderabad _. '
- ' l ‘ ' Vishzikhapainam
:Panaji " .‘ -. In.
Marmagao Cn m l .
I“ C. .‘II "n. ." 0.
Ban anre {.Hdtlld‘fﬁ “Tim“;
P n r r u . ’3
‘gCalicut 9 0 CC C V Port Blair'
Cochin. .Madurai
, .. . . , :._ ' .or-ttam.
TJtICC'rIr‘I‘ . ‘k L i." . lslA'a'lj '

 

 

 

Source: http://education.yahoo.com/refemce/factbook/in/map.html (October 5, 2005)

68

 

Table 4. Rural — Urban Household Income Distribution Comparison (1999 data)

 

 

 

 

 

 

 

Income Groups Rural (%) Urban (%)
Low income (below Rs. 20,000) 65.4 36.7
Lower middle (Rs. 20,001 — 40,000) 23.2 33.1
Middle (Rs. 40,001 — 62,000) 7.5 17.1
Upper middle (Rs. 62,001 — 86,000) 2.5 7.8

High income (over Rs. 86,000) 1.4 5.3

 

 

 

 

Source: http ://www.ﬂonnet.com/ﬂ21 14/stories/20040716002009000.htm (December
10,2005)

To complete this study, the managers or owners (age 18 and above) of the
businesses were contacted by research assistants. Two contact methods were used:
1) telephone contact and 2) direct personal contact.

Regarding the telephone contact method, the telephone directory was used for
the sampling frame. Every third processed/packaged food business such as
wholesaler, stockist, broker, importers, trading company or retailer was selected from
the telephone directory. From this information, research assistants made a call list
and proceeded to contact the company. In areas where telephones were not
prevalent or in places where telephone contact would reduce participation, research
assistants randomly selected streets within the area, and then approached owners or
managers of every third food business to seek their participation in the study.

Regardless of the contact method, when a research assistant made contact with
the business, the research assistant introduced him/herself and asked to speak to the
owner or manager. If this person was not available, the research assistant asked for
a more convenient time to return or call to speak to the owner/manager. If the initial
contact with the owner or manager was successful, the research assistant explained

the purpose of this study and either presented or verbally paraphrased the contents of

69

an explanatory letter, which described the objectives of the study, sponsorship, and
directions for completion. If an owner/manager agreed to participate in the survey,
the research assistant dropped off the questionnaire and made an appointment for a
mutually convenient time to pick up the completed survey. At the agreed upon date
and time, completed questionnaires were picked up from the respondents. Before
the research assistant left the business, he/she reviewed the survey for incomplete or
illegible information and, if found, requested that the respondent complete or clarify a

response.

INSTRUMENT

The questionnaire used in this study included eleven constructs and 64 items:
coercive power sources, non-coercive power sources, economic satisfaction, non-
economic satisfaction, economic conﬂict, non-economic conﬂict, cooperation, trust,
switching costs, performance and commitment. All of the measures for the
constructs were developed for and empirically tested in previous studies.

The questionnaire was originally developed in English, however, for
respondents who could not read or understand English, the instrument was double-
blind back translated into the local languages by a bi-lingual scholar. To achieve
comparability, great attention was given to the issue of equivalence of meaning
during translation. Moreover, two pretests of the questionnaire were conducted to
increase the comprehension and cross-cultural appropriateness of the speciﬁc items in
the questionnaire. The pretest results indicated that slight modiﬁcations in the

wording of some items were needed to better reﬂect the Indian culture and market

70

environment. We also found that suppliers’ payment systems and suppliers’ products
and services are important economic factors to Indian buyers. However, in the
original scales (Wilkinson, 1981), these factors are excluded. Thus, to effectively
measure the economic satisfaction construct, two additional items (“The discount
allowances your supplier gives you for regular and early payment”, “The supplier’s
products and services help me achieve my revenue/business objectives”) were
developed and added (Table 5). Also, we realized that one of the original items
(“The service provided by the manufacturer’s salesmen”) (Wilkinson, 1981) was not
related to economic satisfaction in the India processed food industries. Thus, this
item was modiﬁed to “The services your supplier provides that save you money.”
Similarly, to measure non-coercive power sources accurately in the India situation,
two items (“The supplier sets monthly/quarterly sales volume targets,” and “The
supplier sets incentives and promotions based on sales target achievement”) were
developed based on pretest results (Table 5).

Table 5. Modiﬁed items

 

 

 

Construct Original items Added/Modiﬁed item

Economic The discount allowances your
satisfaction supplier gives you for regular and
(Wilkinson, early payment.

1981) The supplier’s products and

services help me achieve my
revenue/business objectives.

 

The service provided by the The services your supplier

 

 

 

 

 

manufacturer’s salesmen. provides that save you money.
(This item is not used in the
current study)
Non-coercive The manufacturer provides The supplier sets
power sources service. (This item is not monthly/quarterly sales volume
(Gaski and used in the current study) targets.
Nevin, 1985) The supplier sets incentives and
promotions based on sales target
achievement.

 

 

71

In the questionnaire, respondents were asked to select their primary (major)
supplier of processed (packaged) food, and then respond to the question items with
this supplier in mind (See Appendix A). All measurement items for each construct
are presented in Table 6.

Exercised Coercive Power Sources and Non-exercised Coercive Power
Sources. Exercised coercive power sources and exercised non-coercive power sources
were measured by scales previously developed by Gaski and Nevin (1985). A four-
item, seven-point scale (1=Never to 7=Always) was used to measure exercised
coercive power and a six-item, seven-point Likert-type scale was used to measure
exercised non-coercive power sources.

Economic Satisfaction and Non-economic Satisfaction. Wilkinson’s (1981)
six-item, seven-point Likert-type scale (1=Extremely Dissatisﬁed to 7=Extremely
Satisﬁed) was used for economic satisfaction. Gaski’s (1986) one-item and
Andaleeb’s (1996) two-item scales (a total of three items) were used to measure non-
economic satisfaction with a seven-point Likert-type scale (1=Extremely Disagree to
7=Extremely Agree).

Economic Conﬂict and Non-economic Conﬂict. Economic conﬂict was
assessed by the scale previously developed by Gaski and Nevin (1985), which
contains a ﬁve-item, seven-point Likert-like scale (1=Extremely Disagree to
7=Extremely Agree). No scale exists for measuring non-economic conﬂict in

marketing channels. Therefore, Eggeman, Moxley and Schumm’s (1985) four-item,

72

seven-point Likert-type marital conﬂict scale was adjusted for the study
(1=Extremely Disagree to 7= Extremely Agree).

Trust. Raven, Tansuhaj and McCullough’s (1993) four item, seven-point
Likert-type scale (1=Extremely Disagree to 7=Extremely Agree) was used to measure
Trust.

Switching Costs. Switching costs were measured through the scale previously
developed by Colgate and Lang (2001), which contained three items that were
measured by a seven-point Likert-type scale (1=Extremely Disagree to 7=Extremely
Agree).

Cooperation. Skinner, Gassenheimer, and Kelly’s (1992) three item, seven-

. point Likert-type scale (1=Extremely Disagree to 7=Extremely Agree) was used to
measure cooperation.

Commitment. Kumar, Scheer, and Steenkamp’s (1995) four item, seven-point
Likert-type scale (1=Extreme1y Disagree to 7=Extremely Agree) was used to measure
commitment.

Performance. Schellhase, Hardock and Ohlwein’s (1999) twenty-two item,
seven-point Likert-like scale (1=Extremely Disagree to 7=Extremely Agree) was used

to measure supplier’s performance.

73

Table 6. Measurement of Constructs

 

 

 

 

 

 

 

My supplier has not been very fair with me.

Items Scale Published Study
Qonbach’s a)
Exercised coercive power (1=Never to Gaski and
1. The supplier delays delivery of products 7=Always) Nevin (1985)
(generally). (a. = .62)
2. The supplier refuses to sell.
3. The supplier charges high prices.
4. The supplier delivers unwanted products.
Exercised non -coercive power (1=Never to Gaski and
1. The supplier sets monthly/quarterly sales volume 7=Always) Nevin (1985)
targets.* (a = .83)
2. The supplier sets incentives and promotions based
on sales target achievement.*
3. The supplier gives trade allowances/incentives.
4. The supplier provides sales promotion materials.
5. The supplier provides ﬁnancing/credit.
6. The supplier demonstrates products.
Economic Satisfaction (1=Extremely Wilkinson
1. The price at which the supplier sells products to Dissatisﬁed to (1981)
you. 7=Extremely (a = .82)
2. The credit facilities the supplier makes available to Satisﬁed)
you.
3. The discount allowances your supplier gives you
for large orders, etc.
4. The discount allowances your supplier gives you
for regular and early payment.*
5. The supplier’s products and services help me
achieve my revenue/business obj ectives.*
6. The services your supplier provides that save you
money.*
Non-Economic Satisfaction: (1=Extremely Gaski (1986),
1. I am satisﬁed with the products and services I get Disagree to (a = .76)
from my supplier (Gaski, 1986). 7=Extremely Andaleeb
2. The relationship between the supplier and me Agree) (1996)
seems to reﬂect a happy situation (Andaleeb, (a = .95)
1996)
3. The relationship between the supplier and me is
very positive (Andaleeb, 1996).
Economic Conﬂict (1=Extremely Gaski and
l. I do not like many of the things my supplier does. Disagree to Nevin (1985)
2. My supplier’s policies reduce my proﬁts. 7=Extremely (01 = .89)
3. My supplier makes it difﬁcult for me to do my job. Agree)
4.
5.

Dealing with my supplier does not beneﬁt my
company.

 

 

 

74

 

 

 

 

 

 

 

Non-economic Conﬂict (1=Never to Eggeman,

1. Do you both begin to understand each other’s 7=Always) Moxley and
feelings reasonably quickly? R Schumm

2. Do you both get your points across to each other (1985), in Yu
without too much trouble? R and

3. Do you both begin to appreciate each other’s Pysarachik
points of view on a matter fairly soon? R (2002)

4. Does your supplier seem to be supportive of your (01 = .73)
feelings about your disagreement? R

R = Scale reversed

Trust (1=Extremely Schurr and

1. I have many good things to say about my Disagree to Ozanne (1985)
supplier’s trustworthiness. 7=Extremely (01 = N/A)

2. I can trust my supplier to be very “up front” with Agree)
me.

3. I can trust my supplier to keep a trade secret.

4. I am convinced that I can trust my supplier in
negotiations.

Switching Costs (1=Extremely Colgate and

1. Switching to another supplier is too much bother Disagree to Lang (2001)
in terms of time and effort. 7=Extremely (or = N/A)

2. I was concerned about the negative ﬁnancial Agree)
outcomes of switching to another supplier.

3. I feel locked into this supplier because of the
products I have with the supplier.

Cooperation (1=Extremely Skinner,

1. My future goals are best reached by working with Disagree to Gassenheimer,
my supplier rather than against my supplier. 7=Extremely and Kelly

2. My future proﬁts are dependent on maintaining a Agree) (1992)
good working relationship with the supplier. (01 = .83)

3. I do not feel I can count on my supplier to give me
the kind of support (such as local advertising) that
companies working with other suppliers receive.R

Commitment (1=Extremely Kumar,

1. Even if we could, we would not drop the supplier Disagree to Scheer, and
because we like being associated with him/her. 7=Extremely Steenkamp

2. We want to remain a member of the supplier’s Agree) (1995)
network because we genuinely enjoy our ((1 = .86)

relationship with him/her.

. Our positive feelings toward the supplier are a

major reason we continue working with him/her.
We expect our relationship with the supplier to
continue for a long time.

 

 

 

75

 

 

 

Performance

1. Reliable ﬁeld personnel.

2. Well-prepared contact personnel.

3. Given me access to senior management in its
company.

4. Contact personnel are adequately empowered to
make market decisions.

5. Fast reaction in the event of delivery problems.

6. Good ideas for sales promotion campaigns.

7. Logistics discounts commensurate with

performance.

8. Good planning of sales promotion activities.

9. Promotion for the trade geared to customers.

10. Promotion to meet the needs of its customers.

11. Problem-free processing of orders.

12. Contact person if there are problems.

13. Good information about new products.

14. Successful product innovation.

15. Products with fast tumaround in stores.

16. Unique or prestigious products.

17. Effective consumer advertising.

18. Transparent system of prices and conditions.

19. Punctual, reliable and complete deliveries.

20. Attractive margins of the products.

21. Quality products.

22. Field personnel that meet the needs of its

customers.

 

( 1 =Extremely
Disagree to
7=Extremely
Agree)

 

Schellhase,
Hardock and
Ohlwein
(1999)

(01 = N/A)

 

*Questions were modiﬁed in this study based on pre-test results.

76

 

CHAPTER 1v

RESULTS AND DISCUSSION

In this chapter, the statistical analysis of collected data, interpretation of
results, and discussion of ﬁndings are presented. First, the demographic
characteristics of the sample are described, and then reliability and validity of
measurements are reported. Data were analyzed through Structural Equation
Modeling (SEM) using Amos 4.0 (Arbuckle, 1999). After Conﬁrmatory Factor
Analysis (CFA) was conducted on the measurements, path analysis was conducted to

test all hypotheses.

DEMOGRAPHIC CHARACTERISTICS OF THE SAMPLE
Three hundred and one useable questionnaires were collected from six cities

in India (Bangalore, Delhi, Hyderabad, Kolkata, Ludhiana, and Mumbai).
Descriptive statistics were analyzed to depict the demographic characteristics of the
sample (gender, age, and position title) and ﬁrm information (average sales per month,
number of full-time employees, years in business, form of business, and form of
ownership) (Table 7).

The sample consists of 93% males and 7% females ranging in age from 20 to
61, with an average age of 38. The majority (72%) of the respondents were small

sole proprietorship companies with fewer than 10 employees (89%). A majority of

77

the respondents indicated they are retailers (64.6%), have been in a business
relationship with their major supplier for 5 years or more (75%), and depend upon
their major supplier for 60% or more of their processed/packaged food sales (63%).

Table 7. Characteristics of the

     

Frequency Percent

Male
Female

29 and below
30 ~ 39

40 ~ 49

50 and over

F arm
Sole

Business
Retailer
Wholesaler

Broker

Other more than one

78

 

Number F ulltime Employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than 4 105 38.9
4 ~ 10 135 50.0
10 and over 30 11.1
Missing 3 1

Years in Business
Less than 5 yrs 40 13.5
5 ~ 10 yrs 131 44.3
11 ~ 15 61 20.6
16 ~ 20 35 11.8
21 and over 29 9.8
Missing 5

Years in Business with Major Supplier
Less than 5 yrs 74 25.0
5 ~ 10 yrs 167 56.4
11 ~ 15 32 10.8
16 ~ 20 17 5.7
21 and over 6 2.0
Missing 5

Percentage of Sales by Major Supplier ‘
0 — 20 % 21 8.3
21 — 40 % 26 10.3
41 — 60 % 47 18.6
60 — 80 % 80 31.6
80 — 100% 79 31.2
Average percentage (67.7 %)
Missing 48

Average Sales per Month (Rupees) *
50,000 and below 43 24.1
50,001 ~ 200,000 52 29.2
20,0001 ~ 1,000,000 64 36.0
1,000,001 and over 19 10.7
Missing 123

Types of Products Purchased from Supplier
Processed meat 7 2.3
All products 9 3.0
Soft drinks 20 6.6
Cereals & snacks 38 12.6
General packaged food 46 15.3
Baked products 52 17.3
Dairy 59 20.0
Other (chocolate, pickles, noodles, etcL 33 11.0
Missing 31

 

79

 

Position Title
Owner

44
Other 39
Missin 64
$1 = 45 Rupee (April 20, 2006)
" Dependence measurement question: What percentage of the volume of
processed/packaged food you sell is supplied by this primary (major) supplier?
%

 

RELIABILITY
The constructs used in this study have been tested in Western countries;

however, this study applied these constructs in India supplier-buyer relationships.
Thus, current study is exploratory study that researches different cultural context.
Although most of the constructs had a Cronbach alpha higher than 0.6, and exceed the
recommended requirements of 0.5 — 0.6 for an exploratory study, (Nunnally, 1978;
Peterson, 1994), cooperation and trust had somewhat lower reliabilities, .50 and .60,
respectively. Thus, using the “if item deleted” technique in SPSS, two items (one
item from cooperation and one item from trust) were deleted. After deleting these
two items, the reliabilities of the cooperation and trust scales were increased to .68
and .64, respectively. The deleted item from cooperation is “I do not feel I can
count on my supplier to give me the kind of support (such as local advertising) that
companies working with other suppliers receive”, and the deleted trust measure is “I
have many good things to say about my supplier’s trustworthiness.” Thus, a total of
62 items were used in the next step.

The ﬁnal reliabilities of all eleven constructs (coercive power sources, non-
coercive power sources, economic satisfaction, non-economic satisfaction, economic

conﬂict, non-economic conﬂict, trust, switching costs, cooperation, commitment, and

80

performance) are reported in Table 8.

Table 8. Reliability and Conﬁrmatory Factor Analysis Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSTRUCTS FIRST CFA SECOND CFA 3mg;
(CRONBACH ALPHA, R2) Factor t-value Factor t-value Extracted
loading loading (AVE)
0») (7»)
Coercive power (.69)
The supplier delays delivery of products .68 7.52 .66 7.52
(generally).
The supplier refuses to sell. .59 7.08 .59 7.12 .57
The supplier charges high prices. .56 6.82 .56 6.84
The supplier delivers unwanted products. .55 F* .55 F
Non-coercive coercive power (.77)
The supplier sets monthly/quarterly sales .60 5.37 .70 8.81
volume targets.
The supplier sets incentives and promotions .75 5.68 .83 9.41
based on sales target achievement.
The supplier gives trade allowances/incentives. .73 5.66 .70 8.83
The supplier provides salegpromotion materials. .68 5.57 .58 F -55
The supplier provides ﬁnancing/credit. .48 4.95 Deleted (Low 1.)
The supplier demonstrates products. .36 F Deleted (Low 1.)
Economic Satisfaction (.74, R2=.40)
The price at which the supplier sells products to .59 8.42 .63 8.75
you.
The credit facilities the supplier makes available .46 6.78 Deleted (Low 1.)
to you.
The discount allowances your supplier gives .62 8.78 .57 8.11
you for large orders, etc. -53
The discount allowances your supplier gives .61 8.73 .57 8.11
you for regular and early payment.
The supplier’s products and services help me .48 7.04 Deleted (Low I.)
achieve my revenue/business objectives.
The service your supplier provides that save you .65 F .65 F
money.
Non-economic Satisfaction (.83, R2=.40)
I am satisﬁed with the products and services I .74 13.02 .74 13.02
_get from my supplier.
The relationship between the supplier and me .82 14.35 .82 14.34 .79
seems to reﬂect a happy situation.
The relationship between the supplier and me is .80 F .80 F
very positive.
Economic Conﬂict (.80, R2=.39)
I do not like many of the things my supplier .50 7.68 .50 7.64
does.
My supplier’s policies reduce my profits. .82 11.33 .82 11.31
My supplier makes it difﬁcult for me to do my .80 11.18 .80 11.20 -66
job.
My sirpplier has not been very fair with me. .70 10.14 .70 10.15
Dealing with my supplier does not beneﬁt my .64 F .64 F
cornmny.

 

 

 

 

 

 

 

 

81

 

Non-economic Conﬂict (.79, R2=.16)

(71)

t-value

(l)

t-value

AVE

 

Do you both begin to understand each other’s
feelings reasonably quickly?

.76

10.17

.76

10.19

 

without too much trouble?

Do you both get your points across to each other

.69

9.56

.69

9.58

 

Do you both begin to appreciate each other’s
points of view on a matter fairly soon?

.70

9.60

.69

9.60

 

Does your supplier seem to be supportive of
your feelings about your disagreement?

.65

 

F

.65

 

F

.71

 

Trust (.64, R2=.16)

 

 

I have many good things to say about my
supplier’s trustworthiness.

Deleted, Low Reliability

 

I can trust my supplier to be very “up front”
with me.

.46

6.78

.46

6.76

 

I can trust my supplier to keep a trade secret.

.52

7.36

.51

7.35

 

I am convinced that I can trust my supplier in
negotiations.

.89

F

.89

.52

 

Switching Costs (.64, R2=.27)

 

Switching to another supplier is too much
bother in terms of time and effort.

.62

6.80

.62

6.83

 

I was concerned about the negative financial
outcomes of switchirgto another supplier.

.77

7.24

.76

7.28

 

I feel locked into this supplier because of the
products I have with the supplier.

.50

 

.50

.55

 

Cooperation (.68, R2=.46)

 

My future goals are best reached by working
with my supplier rather than against my
supplier.

.76

11.16

.76

11.15

 

a good working relationship with the supplier.

My future proﬁts are dependent on maintaining

.67

 

 

.670

 

 

I do not feel I can count on my supplier to give
me the kind of support (such as local

suppliers receive. R

advertising) that companies working with other

Deleted, Low Reliability

.57

 

Commitment (.85, R2=.31)

 

Even if we could, we would not drop the
supplier because we like being associated with
him/her.

.79

13.92

.79

13.94

 

We want to remain a member of the supplier’s
network because we genuinely enjoy our
relationship with him/her.

.71

12.45

.71

12.46

 

Our positive feelings toward the supplier are a
major reason we continue working with
him/her.

.74

12.98

.74

13.94

 

We expect our relationship with the supplier to
continue for a long time.

.80

.80

.77

 

Performance (.91, R2=.40)

 

Summed Scale (22 items summed)

 

 

 

 

 

 

 

*F: Fixed item

82

 

VALIDITY

Conﬂrmatory Factor Analysis

To assess convergent and discriminant validity, a Conﬁrmatory Factor
Analysis (CFA) was conducted for the eleven constructs using Amos 4.0. Among
the 62 items, 22 items measured performance. These were summed and used as a
single measure of performance in the CFA (Spreng, 2006). In Sanchez-Rodriguez
and Martinez-Lorente’s (2004) study, several measurements of performance were
summed to be a single item because performance measurements were considered to
be formative, as opposed to reﬂective, where items are considered as observed

variables. Thus, a total of 41 items were actually used as observed variables.

Convergent Validity

Convergent validity was assessed by examining the signiﬁcance of individual
item loadings (factor loading, it.) through t —value (Table 8). In the initial CFA, all of
the item factor loadings were signiﬁcant (p < .001). The results of the ﬁrst CFA model
ﬁt statistics are x2: 2104.5, df= 725, p<0.00, GFI = 0.74, CFI = .74, RMR = 0.17,
RMSEA = .08. However, ﬁve items had a lambda value (A) less than .50, which
suggested that these should be deleted (Bagozzi and Yr, 1988). The ﬁve items
included: two from the non-coercive power sources (“The supplier provides
ﬁnancing/credit” and “The supplier demonstrates products”), two ﬁ'om economic
satisfaction (“The credit facilities the supplier makes available to you” and “The

supplier’s products and services help me achieve my revenue/business objectives”),

83

and one from trust (“I can trust my supplier to be very ‘up front’ with me”). Thus,
four of the ﬁve items (two from the non-coercive power sources and two from the
economic satisfaction) were deleted, however, the trust item was not deleted.
Originally, four items were used to measure trust. As already discussed, one item
was already deleted in the reliability test (See Reliability section). Thus, if one more
item were deleted in the CFA due to the low lambda value, only two items would be
used to measure trust. Because of this, the item with a factor loading less than .50
(A= .47) was not deleted in the second CFA(Ca1antone, 2006). Consequently, only
the two items from non-coercive power sources and the two items from economic
satisfaction were deleted in this step.

In the second CFA, all measurement items significantly loaded on their
respective latent factors (t-values between 6.82 and 14.34), which indicate factor
loadings more than .50 (Bagozzi and Yi, 1988). In addition, the average variance
extracted (AVE) was calculated for each measurement scale (Fornell and Larcker,
1981). All AVEs are higher than .50 (Bagozzi and Yi, 1988) (Table 8). Also, the
largest standardized residuals ranged from .42 to 1.91. These ﬁndings support the
convergent validity of the items. The results of the second CFA model ﬁt statistics
are x2: 1492.3, df = 575, p<0.00, GFI = 0.790, CFI = .804, RMR = 0.137, RMSEA
= .073. Even though the chi-square test result was signiﬁcant, the CPI and RMSEA
were considered acceptable considering the large number of items and factors.
Therefore the decision was made to continue with the analysis. Table 8 shows the

results of the ﬁrst and second CFA.

84

Discriminant Validity

For the discriminant validity check, chi-square difference tests were
conducted for each pair of constructs (Anderson, 1987; Bagozzi and Phillips, 1982;
Steenkamp and Van Trijp, 1991). Signiﬁcant chi-square differences mean that the
pair of constructs is not collinear (Anderson and Gerbing, 1988). The results show
that all chi-square differences were signiﬁcant at the .05 level (a = 0.05, A38 > 3.84).
For example, the test of discrimination between economic satisfaction and non-
economic satisfaction, a presumably highly interrelated pair, showed sz (l) = 20.0
(p< .001). This indicates that all of the constructs reﬂect high discriminant validity.
In addition, AVE values for each pair of constructs were compared with the squared
correlation between them. The results show that no squared correlation was larger
than the individual AVE values (F omell and Larcker, 1981). These results establish
that the measurement model achieved adequate construct reliability, convergent

validity, and discriminant validity.

HYPOTHESIS TESTING

The R2 for each of the endogenous constructs was calculated to assess for the
amount of variance explained, and reported in Table 8. The correlation matrix of

constructs was used as an input matrix for path analysis, which is presented in Table 9.

85

Table 9. Correlations amog Variables

 

Copw Ncopw Ecosa Necosa Ecocon Necocon Trust Switch Cooper Commit Perform

 

C opw 1

 

Ncopw -,04 1

 

 

 

 

 

Ecosa -.46** .22" I

Necosa -.47” .08 .46" l

Ecocon .50" —.02 -.53" -.51‘”‘I l

Necocon .25" -.04 -. l 7" -.45"”" .23“ l

Trust -.18"”“ -.O6 .25" .32” -.33** -.28“‘ l

 

Switch -.30” -.02 .31" .49“ -.28’” -.26"“" .30“ l

 

C00p€r -.42"‘* .04 .45” .56" -.60” -.35** .39" .41" l

 

Commit -.39** .14“ .34" .43" -.39** -.42" .40” .29“ .52" l

 

Perform -.43*"‘ .24" .58" .60” -.55"”" -.38** .22" .55” .42" .40” l

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*p < 0.05, “p < 0.01

COPW - Coercive power sources, NCOPW - Non-coercive power sources, E COSA - Economic
satisfaction, NECOSA - Non-economic satisfaction, E COCON - Economic conﬂict, NE COCON - Non-
econorrric conﬂict, TR US T - Trust, SWITCH - Switching costs, COOPER - Cooperation, COMMIT-
Commitrnent, PERFORM - Performance

Maximum likelihood estimation was employed to test the path model. The
structural parameters and t-values for this model are shown in Table 10. The overall
ﬁt of the conceptual model was adequate: the model ﬁt (x2 = 121.73, df = 20, p=.000)
and other statistics (GFI = .933, AGFI= .779, CFI = 0.910, RMR = .0073) show that

the model also is a good ﬁt to the data.

86

Table 10. Structural Parameters

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Relationship Unstandardized Standardized t-value

COPW 9 ECOSA -0.32 -0.29 -5.80
COPW 9 NECOSA -0.30 -0.28 -5.60
COPW 9 ECOCON 0.43 0.33 6.73
COPW 9 NECOCON 0.12 0.11 1.82
NCOPW 9 ECOSA 0.06 0.09 1.82
NCOPW 9 NECOSA -0.05 -0.07 -1.46
NCOPW 9 ECOCON 0.09 0.11 2.40
NCOPW 9 NECOCON 0.04 0.06 1.09
PERFORM 9 ECOSA 0.52 0.43 8.50
PERFORM 9 NECOSA 0.56 0.48 9.43
PERFORM 9 ECOCON -0.60 -0.44 -8.55
PERFORM 9 NECOCON -0.41 -0.36 -5.86
ECOSA9 TRUST 0.07 0.07 1.15
NECOSA 9 TRUST 0.12 0.11 1.75
ECOCON 9 TRUST -0.18 -0.20 -3.26
NECOCON 9 TRUST -0.19 -0.18 -3.24
TRUST 9 COMMIT 0.23 0.22 4.30
ECOSA9 COOPER 0.10 0.10 1.95
NECOSA 9 COOPER 0.26 0.24 4.79
ECOCON 9 COOPER -0.34 -0.38 -7.71
NECOCON 9 COOPER -0.11 -0.11 -2.35
TRUST 9 COOPER 0.14 0.14 2.99
COOPER 9 COMMIT 0.41 0.41 7.49
ECOSA 9 SWITCH 0.11 0.10 1.66
NECOSA 9 SWITCH 0.46 0.40 6.86
ECOCON 9 SWITCH 0.03 0.03 0.56
NECOCON 9 SWITCH -0.04 -0.03 -0.64
TRUST 9 SWITCH 0.16 0.15 2.71
SWITCH 9 COMMIT 0.05 0.05 1.03

 

 

 

 

 

COPW - Coercive power sources, NCOPW - Non-coercive power sources, PERFORM - Performance,
ECOSA - Economic satisfaction, NECOSA - Non-economic satisfaction, E COCON - Economic
conﬂict, NECOCON - Non-economic conﬂict, TRUST - Trust, COOPER - Cooperation, SWITCH —
Switching costs, COMMIT- Commitment

Coercive Power Sources, Satisfaction and Conﬂict

Hla: Indian suppliers’ coercive power sources will negatively inﬂuence buyers’
economic satisfaction.

Hlb: Indian suppliers’ coercive power sources will negatively inﬂuence buyers’
non-economic satisfaction.

ch: Indian suppliers’ coercive power sources will positively inﬂuence buyers’
economic conﬂict.

87

Hld: Indian suppliers’ coercive power sources will positively inﬂuence buyers’
non-economic conﬂict.

H1 proposed the relationships among Indian suppliers’ coercive power
sources, and buyers’ satisfaction and conﬂict. The results indicate that H1 a, Hlb,
and ch (Hla: y = -.29, Hlb: y = -.28, ch: y = .33, respectively) are supported
Q) < .05). Also, Hld is acceptable under the one-tail test (Hld: y = .1 l, t = 1.82 >
1.645, p < .05) (Hays, 1988; Motulsky, 1999). Coercive power sources negatively
inﬂuence economic and non-economic satisfaction, and positively inﬂuence

economic and non-economic conﬂict.

Non-Coercive Power Sources, Satisfaction and Conﬂict

H2a: Indian suppliers’ non-coercive power sources will positively inﬂuence buyers’
economic satisfaction.

H2b: Indian suppliers’ non-coercive power sources will positively inﬂuence buyers’
non-economic satisfaction.

H2c: Indian suppliers’ non-coercive power sources will negatively inﬂuence
buyers’ economic conﬂict.

H2d: Indian suppliers’ non-coercive power sources will negatively inﬂuence
buyers’ non-economic conﬂict.

H2 proposed the relationships among Indian suppliers’ non-coercive power
sources and buyers’ satisfaction and conﬂict. The results indicate that H2a is
supported under the one-tail test (H2a: y = .09, t= 1.82 > 1.645, p < .05). However,
H2b and H2d (H2b: y = -.07, H2d: y = .06, p > .05, respectively) are not supported.
Although H2c shows a signiﬁcant t-value (y = .11, p< .05), the relationship is positive,

which is not in the hypothesized direction. Thus, H2c is not supported as well.

Non-coercive power sources positively inﬂuence economic satisfaction and economic

88

conﬂict.

Coercive Power Sources and Non-coercive Power Sources

H3: There is no relationship between coercive power sources and non-coercive power
sources.

H3 proposed no relationship between coercive power sources and non-
coercive power sources. The results indicate that H3 is supported (r = -.040. p
= .484); the correlation coefﬁcient indicates there is no signiﬁcant relationship

between coercive and non-coercive power sources.

Suppliers ’Performance, Satisfaction and C onﬂict

H4a: Indian suppliers’ performance positively inﬂuences buyers’ economic
satisfaction.

H4b: Indian suppliers’ performance positively inﬂuences buyers’ non-economic
satisfaction.

H4c: Indian supplier’s performance negatively inﬂuences buyers’ economic
conﬂict.

H4d: Indian suppliers’ performance negatively inﬂuences buyers’ non-economic
conﬂict.

H4a, H4b, H4c, and H4d proposed the relationships among suppliers’
performance and buyers’ satisfaction and conﬂict. The results indicate that H4a,
H4b, H4c and H4d are supported (H4a: y = .43, H4b: y = .48, H4c: y = -.44, H4d: y =
-.36, respectively, p < .05) are supported. Suppliers’ performance positively

inﬂuences economic satisfaction and non-economic satisfaction, and negatively

inﬂuences economic conﬂict and non-economic conﬂict.

89

Power Sources in India

H4c: When dealing with Indian buyers, Indian suppliers use non-coercive power
sources more frequently than coercive power sources.

H4e proposed a comparison between the frequency of suppliers’ coercive and
non-coercive power sources. To test this hypothesis, a t-test was performed to
compare the frequencies of coercive power sources and non-coercive power sources.
The t-test result indicates that the mean value for the use of non-coercive power
sources use (mean = 3.98, SD = 1.39) was signiﬁcantly higher (t= 18.633, p < .001)
than the mean value for the use of coercive power sources (mean = 2.20, SD = .90).
Therefore, H4c is supported. Indian suppliers use non-coercive power sources more

frequently than coercive power sources.

Satigfaction, Conﬂict and Trust

H5a: Indian buyers’ economic satisfaction positively inﬂuences their trust of
suppliers.

H5b: Indian buyers’ non-economic satisfaction positively inﬂuences their trust of
suppliers.

H5c: Indian buyers’ economic conﬂict negatively inﬂuences their trust of suppliers.

H5d: Indian buyers’ non-economic conﬂict negatively inﬂuences their trust of
suppliers.

H5 proposed the relationships among satisfaction, conﬂict and trust. The
results indicate that H50 and H5d are supported (H5c: [3 = -.20, H5d: [3 = -.18,
respectively, p < .05). Also, HSb is supported under the one-tail test (HSb: B = .11, t

= 1.75 > 1.645). However, H5a is not supported ([3 = .07, p > .05). Indian buyers’

9O

non—economic satisfaction positively inﬂuences their trust of suppliers, and economic

conﬂict and non-economic conﬂict negatively inﬂuence their trust of suppliers.

Commitment and Trust

H6: Indian buyers’ trust positively inﬂuences their commitment to suppliers.

H6 proposed the relationship between trust and commitment. The results
indicate that H6 ([3 = .22, p < .05) is supported, which means that trust positively

inﬂuences commitment.

Satig'action, Conﬂict and Cooperation

H7a: Indian buyers’ economic satisfaction positively inﬂuences their cooperation
with suppliers.

H7b: Indian buyers’ non-economic satisfaction positively inﬂuences their
cooperation with suppliers.

H7c: Indian buyers’ economic conﬂict negatively inﬂuences their cooperation with
suppliers.

H7d: Indian buyers’ non-economic conﬂict negatively inﬂuences their cooperation
with suppliers.

H7a, H7b, H7c, and H7d proposed the relationships among satisfaction
(economic and non-economic), conﬂict (economic and non-economic), and
cooperation. The results indicate that H7b, H70 and H7d are supported (H7b: [3: .24,
H70: [3 = -.38, H7d: B = -.11, respectively, p < .05). Also, H7a is supported under the
one-tail test (H7a: B = .10, t = 1.95 > 1.645, p < .05). Economic satisfaction and

non-economic satisfaction positively inﬂuence cooperation, and economic conﬂict

and non-economic conﬂict negatively inﬂuence cooperation.

91

Trust, Cooperation and Commitment

 

H7e: Indian buyers’ trust positively inﬂuences their cooperation with suppliers.
H7f: Indian buyers’ c00peration positively inﬂuences their commitment to suppliers.

H7e and H7f pr0posed the relationships among trust, cooperation, and
commitment. The results indicate that H7e and H7f are supported (H7e: [3= .14,
H7f: B = .41, respectively, p < .05). Trust positively inﬂuences cooperation, and

cooperation positively inﬂuences commitment.

Satisfaction, Conﬂict and Switching Costs

H8a: Indian buyers’ economic satisfaction positively inﬂuences their switching
costs for suppliers.

H8b: Indian buyers’ non-economic satisfaction positively inﬂuences their switching
costs for suppliers.

H8c: Indian buyers’ economic conﬂict negatively inﬂuences their switching costs
for suppliers.

H8d: Indian buyers’ non-economic conﬂict negatively inﬂuences their switching
costs for suppliers.
H8a, H8b, H8e and H8d proposed the relationships among satisfaction,

conﬂict and switching costs. The results indicate that H8b is supported (H8b: [3

= .40. p < .05) and H8a is also supported under the one-tail test (H8a: B: .10, t =1 .66

> 1.645, p < .05). However, H8c and H8d are not supported (H8c: B: .03, H8d: B =

-.03, respectively, p > .05). Economic satisfaction and non-economic satisfaction

positively inﬂuence switching costs.

92

T rusthwitching Costs and Commitment

H8e: Indian buyers’ trust positively inﬂuences their switching costs for suppliers.
H8f: Indian buyers’ switching costs positively inﬂuence their commitment to
suppliers.

H8e and H8f proposed the relationships among trust, switching costs and
commitment. The results indicate that H8e (B = .15, p < .05) is supported, but H8f
is not supported (B = .05, p > .05). Trust positively inﬂuences switching costs while
switching costs do not inﬂuence commitment.

To assess the mediating effects of trust and cooperation, the individual
relationship between satisfaction (economic and non-economic) and conﬂict
(economic and non-economic) with commitment were tested. The results show that
only non-economic conﬂict negatively inﬂuences commitment (economic
satisfaction: B= .08, p > .05, non-economic satisfaction: B: .06, p > .05, economic
conﬂict: B: -.03, p > .05, non-economic conﬂict: B: -.22, p < .05). Thus, it can be
concluded that trust and cooperation act as mediating factors in the conceptual model.

The summary of hypotheses testing is shown in Table 11. Also, Figure 13

shows the path results.

93

Table 11. Summary of Hypotheses Testing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

inﬂuences their cooperation with suppliers.

 

Hypotheses Results

Hla: Indian suppliers’ coercive power sources will negatively Supported
inﬂuence buyers’ economic satisfaction.

Hlb: Indian suppliers’ coercive power sources will negatively Supported
inﬂuence buyers’ non-economic satisfaction.

ch: Indian suppliers’ coercive power sources will positively Supported
inﬂuence buyers’ economic conﬂict.

Hld: Indian suppliers’ coercive power sources will positively Supported
inﬂuence buyers’ non-economic conﬂict.

H2a: Indian suppliers’ non-coercive power sources will Supported
positively inﬂuence buyers’ economic satisfaction.

H2b: Indian suppliers’ non-coercive power sources will Not supported
positively inﬂuence buyers’ non-economic satisfaction.

H2c: Indian suppliers’ non-coercive power sources will Not supported
negatively inﬂuence buyers’ economic conﬂict.

H2d: Indian suppliers’ non-coercive power sources will Not supported
negatively inﬂuence buyers’ non-economic conﬂict.

H3: There is no relationship between coercive power sources Supported
and non-coercive power sources.

H4a: Indian supplier’s performance positively inﬂuences Supported
buyers’ economic satisfaction.

H4b: Indian supplier’s performance positively inﬂuences Supported
buyers’ non-economic satisfaction.

H4c: Indian supplier’s performance negatively inﬂuences Supported
buyers’ economic conﬂict.

H4d: Indian supplier’s performance negatively inﬂuences Supported
buyers’ non-economic conﬂict.

H4c: When dealing with Indian buyers, Indian suppliers use Supported
non-coercive power sources more frequently than
coercive power sources.

H5a: Indian buyers’ economic satisfaction positively inﬂuences Not supported
their trust of suppliers.

H5b: Indian buyers’ non-economic satisfaction positively Supported
inﬂuences their trust of suppliers.

H5c: Indian buyers’ economic conﬂict negatively inﬂuences Supported
their trust of suppliers.

H5d: Indian buyers’ non-economic conﬂict negatively Supported
inﬂuences their trust of suppliers.

H6: Indian buyers’ trust positively inﬂuences their Supported
commitment to suppliers.

H7a: Indian buyers’ economic satisfaction positively inﬂuences Supported
their cooperation with suppliers.

H7b: Indian buyers’ non-economic satisfaction positively Supported

 

94

 

 

 

 

 

 

 

 

 

 

 

 

H7c: Indian buyers’ economic conﬂict negatively inﬂuences Supported
their cooperation with suppliers.

H7d: Indian buyers’ non-economic conﬂict negatively Supported
inﬂuences their cooperation with suppliers.

H7e: Indian buyers’ trust positively inﬂuences their Supported
cooperation with suppliers.

H7f: Indian buyers’ cooperation positively inﬂuences their Supported
commitment to suppliers.

H8a: Indian buyers’ economic satisfaction positively inﬂuences Supported
their switching costs for suppliers.

H8b: Indian buyers’ non-economic satisfaction positively Supported
inﬂuences their switching costs for suppliers.

H8c: Indian buyers’ economic conﬂict negatively inﬂuences Not supported
their switching costs for suppliers.

H8d: Indian buyers’ non-economic conﬂict negatively Not supported
inﬂuences their switching costs for suppliers.

H8e: Indian buyers’ trust positively inﬂuences their switching Supported
costs for suppliers.

H8f: Indian buyers’ switching costs positively inﬂuence their Not supported

commitment to suppliers.

 

 

95

 

Figure 13. Signiﬁcant Relationships among Variables

. / \

_\\

‘ Economic
Satisfaction ,,

   
 
 
    
    
  
    
 
  
 
   
    
   
    

Coercive
‘ Power
\ Sources
‘ /

’\

  

economic
Satisfaction ,‘

 
 

    

Non- + ‘ .
_gCommument /
\ /

coercive \ Trust . I
Power ‘ \\ ‘

n / ;

~~.\Sources /¢ \ / / .

\\,,,// x —
\

I I ”I
'3‘“;
1

 
 

Economic ‘

  
 
  

. + .
Conﬂ1ct +
[ Supplier’s ‘ \g/ \\<\
kPerformance ‘ . . '
. Sw1tch1ng .
\/ Costs
\\ _ V//‘CZ?’ /.
Non- // \\-_/

‘ economic
Conﬂict v
\

/
\,

\g 7////

—> Signiﬁcant
—-—> Non-signiﬁcant

. . . . - .p Signiﬁcant but not in the hypothesized direction

96

DISCUSSION

Despite the huge market potential of India, very few studies of Indian
supplier-buyer relationships have been published since economic liberalization in
India. Moreover, there have been few studies of processed food in India. In this
study, therefore, Indian processed food industries were selected to investigate new
Indian supplier-buyer relationships. One of the unique aspects of the study is to
analyze the diﬁ‘erential effects of satisfaction and conﬂict. Using dichotorrrized
(economic and non-economic) measures, the ways in which Indian buyers’ economic
satisfaction, non-economic satisfaction, economic conﬂict and non-economic conﬂict
are related to other constructs such as power sources, performance, cooperation, trust,
switching costs and commitment, are researched. The results of the hypothesis

testing are discussed and interpreted in the next section.

Processed Food Market Environment

The results of this study show that certain characteristics of a sellers’ market
remain strong in the Indian processed food markets. According to the demographic
characteristics, Indian processed food buyers are dependent on their major supplier
for 67% of their sales, on average. This indicates that a buyer in an Indian processed
food industry is highly dependent on one supplier, which is a characteristic of a
sellers’ market. Moreover, thirty percent of the buyers were dependent on their
major supplier for more than 80% of their sales. Also, more than 75% of the buyers
have been in a business relationship for 5 or more years with their major supplier.

This implies that Indian buyers may not have many attractive alternative suppliers.

97

Thus, the Indian processed food markets are sellers’ markets. Also, switching costs
do not impact long-term relationships due to the unavailability of alternative suppliers
in India.

However, recently, several studies have suggested that market conditions in
India are moving from a sellers’ market to a buyers’ market, and Indian suppliers use
non-coercive power sources more frequently than coercive power sources
(Bandyopadhyay, 2004). The results of the current study indicate that Indian
suppliers use non-coercive power sources more frequently than coercive power
sources, (an indication of a buyers’ market), yet buyers also report high dependence
on their major supplier, which is an indicator of a sellers’ market. Thus, we
conclude that Indian processed food markets are in transition from a sellers’ market to

a buyers’ market.

Impact of Suppliers’ Coercive Power Sources, Non-coercive Power Sources, and
Performance

As expected, coercive power sources are negatively related to economic
satisfaction and non-economic satisfaction, and positively related to economic
conﬂict and non-economic conﬂict. Other studies (Geyskens et al., 1999; Yu and
Pysarchik, 2002) have demonstrated the effects of coercive attitudes on economic and
non-economic satisfaction, and the current study conﬁrms their results. However,
the results show that non-coercive power sources positively inﬂuence economic
satisfaction and economic conﬂict, while they do not signiﬁcantly affect non-

economic satisfaction and non-economic conﬂict.

98

Non-coercive power source scale items developed by Gaski and Nevin
(1985) are mostly associated with economic issues, such as providing trade
allowances/incentives, sales promotion materials and ﬁnancing/credit. These scale
items would be regarded as non-coercive power sources that increase economic and
non-economic satisfaction in Western countries’ studies, but may not in the Indian
environment. Although suppliers’ non-coercive attitudes/actions signiﬁcantly
inﬂuence Indian buyers’ economic satisfaction, they do not have an impact on non-
economic factors (satisfaction and conﬂict) in the Indian study. Moreover, non-
coercive power sources signiﬁcantly and positively inﬂuence economic conﬂict. As
discussed earlier, Pawan (2003) suggested that Indian managers regard non-coercive
attitudes or actions as insigniﬁcant in Indian supplier-buyer relationship. Also this
study also shows consistent results with Pawan’s (2003) study. Thus, it can be
concluded that Indian buyers’ concept of non-coercive power sources is different
from that of Western buyers.

Regarding suppliers’ performance, the results show that Indian suppliers’
performance is a key factor in inﬂuencing buyers’ satisfaction and conﬂict. The
current study conﬁrms the results of previous studies in customer satisfaction theory
(Patterson et al., 1997; Patterson, 2000). This ﬁnding suggests that an assumption of
power theory that buyers’ satisfaction and/or conﬂict are based on suppliers’
attitudes/actions (power sources) needs to be supplemented. The current study
demonstrated that buyers’ satisfaction and conﬂict are inﬂuenced not only by

suppliers’ attitudes/actions (power sources) but their performance as well.

99

Impact of Economic Satisfaction, Non-economic Satisfaction, Economic Conﬂict
and Non-economic Conﬂict

Regarding satisfaction, the results indicated that both economic and non-
economic satisfaction inﬂuence cooperation and switching costs. In other words,
channel members who are satisﬁed economically and non-economically are more
likely to maintain relationships with their present suppliers, and cooperate to improve
work efﬁciency than would channel members who are not satisﬁed.

It is interesting to note, however, that economic satisfaction does not inﬂuence
trust, while non-economic satisfaction does. Based upon the original construct, non-
economic satisfaction reﬂects a more holistic assessment of satisfaction as compared
to economic satisfaction, which is more focused on speciﬁc aspects of economic
satisfaction such as price, credit facilities, discount allowance and revenue/business
objectives. Also, according to Yamagishi and Yamagishi’s (1994) ﬁndings, trust is
related to non-economic factors with a partner because it is established through a
partner’s conﬁdence rather than through speciﬁc economic beneﬁts or rewards. This
could be an explanation for the relationships between satisfaction (economic and non-
economic) and trust in the current study.

From a conﬂict point of View, both economic and non-economic conﬂict
negatively impact trust and cooperation. This means that buyers’ trust and
cooperation are reduced by economic and non-economic conﬂict with their suppliers.
Especially, in markets where buyers are highly dependent on their major suppliers--
sellers’ market environment-- conﬂict (economic and non-economic) would be

critical because bad—business relationships with their suppliers are directly related to

100

their survival (Frazier, Gill, and Kale, 1989).

In addition, according to Hofstede’s four cultural dimensions (Hofstede, 1983),
India is a collectivist society. In collectivist cultures, social relationships are more
important in terms of controlling channel relations than in individualist cultures
because members seek to avoid conﬂict with others to maintain group harmony.
These cultural underpinnings contribute to our understanding of why conﬂict
(economic and non-economic) impacts trust and cooperation in Indian supplier-buyer
relationships. Yu and Pysarchik (2002) also found that non-economic conﬂict is
negatively related to a long-term orientation among Korean retailers. Korea also is
considered to be a collectivist country.

The results also show that satisfaction and conﬂict (economic and non-
economic) play a mediating role between the antecedent constructs of power sources
and performance and those of cooperation, trust, commitment and, to a lesser extent,
switching costs. Therefore, it is important for suppliers to understand the

signiﬁcance of satisfaction and conﬂict in sustaining long-term relationships.

Impact of Cooperation, Trust, Switching Costs, and Commitment

Regarding the antecedents to a long-term relationship, the results indicate that
1) trust signiﬁcantly inﬂuences cooperation, commitment and switching costs, 2)
cooperation also signiﬁcantly inﬂuences commitment, but 3) switching costs do not
signiﬁcantly inﬂuence commitment. This implies that a high level of trust and
cooperation between channel partners will lead to a commitment to the relationship.

This study also found that buyers’ trust and cooperation play a mediating role

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between the two factors of satisfaction and conﬂict, and commitment. As previously
discussed, economic and non-economic factors (satisfaction and conﬂict) directly
inﬂuence trust and cooperation with the exception of economic satisfaction 9 trust.
Trust and cooperation also sequentially inﬂuence commitment. This means that
economic and non-economic factors indirectly impact commitment through trust and
cooperation. Yu and Pysarchik (2002) had a similar ﬁnding in a study of Korean
manufacturer-retailer relationships; trust was found to be a mediating factor between
satisfaction (economic and non-economic satisfaction) and long-term orientation.
One of the notable ﬁndings of the study involves switching costs. The
results show that only satisfaction factors (economic and non-economic) inﬂuence
switching costs, whereas conﬂict factors (economic and non-economic) do not.
Despite signiﬁcant market changes in India, the processed food markets still have
some characteristics of a sellers’ market (dependence on and long-term relationship
with major supplier). Thus, this is not a surprising result. Under these
circumstances, even though conﬂict may occur, buyers do not disengage from their
business relationships with present suppliers regardless of switching costs, because
there are few, if any, alternatives. These factors provide insight into why switching

costs are not related to conﬂict and commitment in India.

102

CHAPTER V

SUMMARY AND CONCLUSIONS

In this chapter, a summary of key points that were discussed in Chapter I —
Chapter IV are presented: introduction, signiﬁcance of study, research objectives,
literature review, research design, methods, and empirical study ﬁndings are
summarized. Also, managerial implications of the research ﬁndings, limitations and

recommendations for ﬁrture studies are reported.

SUMMARY OF INTRODUCTION AND RESEARCH’OBJECTIVES

In the early 19908, India lifted its decades-old inwardly-focused economic
system, and adopted a “free market economy” model. This dramatic and
economically liberal change opened up new opportunities for foreign trade and
business, and set in motion profound changes in the Indian market system. Recently,
India has become an attractive market for many multinational ﬁrms. Now, India is
the world’s third most desirable country for Foreign Direct Investment (F DI), after
China and the United States. Speciﬁcally, the food retail sector is considered to be
the “sunrise” in Indian industry. Next to China, India is the second largest producer of
food, and has the potential to lead the world food and agricultural markets.

Although most studies of channel relationships have been conducted in
developed countries, where the market environment is signiﬁcantly different from

that of developing countries, few empirical studies have been focused on the latter.

103

Thus, this study will make an important contribution to the literature by being one of
the few to research channel relationships in a developing country and in the value-
added food industries of India. Moreover, very few studies of Indian supplier-buyer
relationships have been published since economic liberalization in the 19903.
Speciﬁcally, previous channel relationship studies related to India may no longer be
applicable to the current dynamic Indian market environment. New studies are
needed to examine the evolving environment.

Despite the importance of India’s huge market potential, the primary problem
is that there is little information regarding Indian processed food market
environments and distribution channel relationships compared to the information
available about Western markets. In order to be successful in India, global companies
need to learn more about the Indian food market structure, distribution channels,
business practices, and cultural differences.

This study aims to accomplish the following: 1) to analyze the inﬂuence of
Indian suppliers’ power sources and performance on buyers’ economic and non-
economic satisfaction, and economic and non-economic conﬂict; 2) to investigate the
differential effects of economic and non-economic satisfaction, and economic and
non-economic conﬂict on cooperation, trust, switching costs, and commitment; 3) to
provide practical information about business strategies speciﬁcally for global food

companies who wish to enter India.

104

SUMMARY OF LITERATURE REVIEW

In Chapter II, a review is presented of the literature associated with the key
constructs included in the conceptual model, and the resulting hypotheses are
presented. Speciﬁcally, the study focuses on the supplier-buyer relationships
between economic and non-economic factors (satisfaction and conﬂict), and other
constructs such as power sources, performance, cooperation, trust, switching costs,
and commitment.

H1 proposed the relationships among Indian suppliers’ coercive power
sources and buyers’ satisfaction and conﬂict. H2 proposed the relationships among
Indian suppliers’ non-coercive power sources and buyers’ satisfaction and conﬂict.
H3 proposed the correlation between coercive power sources and non-coercive power
sources. H4 proposed the relationships among suppliers’ performance and buyers’
satisfaction and conﬂict. H5 proposed the relationships among buyers’ satisfaction,
conﬂict and trust. H6 proposed the relationship between trust and commitment.

H7 proposed the relationships among satisfaction, conﬂict, cooperation, trust and
commitment. H8 proposed the relationships among satisfaction, conﬂict, switching

costs, trust, and commitment.

SUMMARY OF RESEARCH METHODS

To measure complex Indian supplier-buyer relationships accurately,
companies that are supply chain members in the processed/packaged food industries
(e.g., wholesaler, stockist, broker, importers, trading company or retailer) were

selected as the population to be sampled. Data were collected from six urban cities

105

(Bangalore, Delhi, Hyderabad, Kolkatta, Ludhiana, and Mumbai) between late 2004
and early 2005 in India. Urban cities were selected for this study because in India
processed/packaged foods are purchased by middle to upper income consumers, who
typically live in urban areas. Two contact methods were used: 1) telephone contact
and 2) direct personal contact. Six parallel self-report survey instruments were used to
collect data; each focused on one of the six product categories: meat, ﬁ'uits and
vegetables, diary products, soft drink, snacks and cereal, and baked products.

The questionnaire used in this study included eleven constructs and 64 items:
coercive power sources, non-coercive power sources, performance, economic
satisfaction, non-economic satisfaction, economic conﬂict, non-economic conﬂict,
cooperation, trust, switching costs, and commitment.

The questionnaire was originally developed in English, and then double-blind
back translated into the local languages by a bi-lingual scholar for respondents who
could not read or understand English. To achieve comparability, great attention was
given to the issue of equivalence of meaning during translation. Moreover, two
pretests of the questionnaire were conducted to increase the comprehension and

cross-cultural appropriateness of the speciﬁc items in the questionnaire.

SUMMARY OF RESULTS

Three hundred and one useable questionnaires were collected from the six
Indian cities. After the reliability of the eleven constructs was tested, Conﬁrmatory
Factor Analysis (CFA) was conducted to assess convergent and discriminant validities.

Through reliability and CFA tests, six items were deleted from the original

106

measurement items. The correlation matrix of constructs was used as an input
matrix for path analysis, and tested through maximum likelihood estimation. A

summary of the results follows.

Coercive Power Sources, Satisfaction and Copﬂict

Coercive power sources negatively inﬂuence economic and non-economic
satisfaction, and positively inﬂuence economic and non-economic conﬂict (Hla, Hlb,
H16, and Hld are supported).
Non-Coercive Power Sources, Satisfaction and Conﬂict

Non-coercive power sources positively inﬂuence economic satisfaction (H2a
is supported, but H2b, H2c, and H2d are not supported).
Coercive Power Sources and Non-coercive Power Sources

The correlation coefficient between coercive and non-coercive power sources
shows no signiﬁcant relationship (H3 is supported).
Suppliers ’Performance, Satisfaction and Conﬂict

Suppliers’ performance positively inﬂuences economic and non-economic
satisfaction, and negatively inﬂuences economic conﬂict and non-economic conﬂict
(H4a, H4b, H40, and H4d are supported).
Power Sources in India

Indian suppliers use non-coercive power sources more frequently than
coercive power sources (H4c is supported).
Satisfaction, Conﬂict and Trust

Indian buyers’ non-economic satisfaction positively inﬂuences their trust of

107

suppliers, and economic and non-economic conﬂict negatively inﬂuence their trust of
suppliers (H5a is not supported, but H5b, H5c, and H5d are supported).
Mt and Commitment
Trust positively inﬂuences commitment (H6 is supported).
Satigfaction, Conflict and Cooperation,

Economic and non-economic satisfaction positively inﬂuence cooperation,
and economic and non-economic conﬂict negatively inﬂuence cooperation. (H7a,
H7b, H7e, and H7d are supported).

Trust, Cooperation and Commitment

Trust positively inﬂuences cooperation, and cooperation positively inﬂuences
commitment. (H7e and H7f are supported).
Satisfaction, Conflict and Switching Costs

Economic and non-economic satisfaction positively inﬂuence switching costs.
(H8a and H8b are supported but H8e and H8d are not supported).

Trust, Switching Costs and Commitment
Trust positively inﬂuences switching costs. (H8e is supported, but H8f is not

supported).

SUMMARY OF DISCUSSION

The results of this study can be summarized by ﬁve main points. First, this
study demonstrated the differential effects of satisfaction and conﬂict in Indian
supplier-buyer relationships. Both conﬂict and satisfaction have an economic and

non-economic dimension. Second, Indian suppliers’ coercive power sources

108

negatively inﬂuence satisfaction (economic and non-economic), and positively
inﬂuence conﬂict (economic and non-economic). Also, suppliers’ performance
positively inﬂuences satisfaction (economic and non-economic), and negatively
inﬂuences conﬂict (economic and non-economic). Third, economic satisfaction and
non-economic satisfaction positively inﬂuence cooperation and switching costs, while
economic conﬂict and non-economic conﬂict negatively inﬂuence cooperation and
trust. Satisfaction and conﬂict mediate the relationship between power sources and
performance, and cooperation and trust. Fourth, cooperation and trust positively
inﬂuence commitment, whereas switching costs do not. Speciﬁcally, trust and
cooperation act as mediating factors between satisfaction and conﬂict, and
commitment. Fifth, the Indian processed food markets are in transition from a
sellers’ market to a buyers’ market. Although buyers reported high dependence on
their major supplier (an indicator of a sellers’ market), the results of this study show
that Indian suppliers use non-coercive power sources more frequently than coercive
power sources, which is an indication of a buyers’ market. Practical applications of

the ﬁndings are discussed.

MANAGERIAL IMPLICATIONS

For global companies, a key requirement for success will be how to develop
long-term relationships with local companies. Thus, this study suggests practical
and useﬁrl information for successful marketing strategies to establish long-term
supplier-buyer relationships in the processed or valued-added food markets of India.

First, global companies entering India must recognize that value added food

109

industries are in a transition period. This suggests that historical supplier-buyer
practices are unlikely to produce long-term relationships. Therefore, to increase
buyers’ satisfaction, global companies need to enhance their performance with buyers.
To effect positive performance, suppliers should stress the importance of positive
attitudes and practices to their ﬁeld personnel who work with the local buyers,
emphasize product quality and product delivery, while avoiding coercive attitudes or
actions such as refusal to sell products, charging high prices, or delivering unwanted
products. However, companies should keep in mind that suppliers’ non-coercive
attitudes or actions (e.g., giving incentives, trade allowances, sales promotion
materials) provide only one aspect of a buyer’s satisfaction, not overall (non-
economic) satisfaction. Consequently, when global companies enter Indian markets,
they must be mindful of these important dimensions of supplier-buyer relationships.

Second, economic and non-economic factors positively inﬂuence cooperation
and trust except in the instance of economic satisfaction 9 trust. Therefore, we
recommend that companies who wish to have trusting and cooperative relationships
with Indian buyers should focus on practices that establish both economic and non-
economic satisfaction. Suppliers must recognize that economically satisﬁed buyers
and non-economically satisﬁed buyers behave differently. That is, economic
satisfaction does not engender trust in a supplier, while non-economic satisfaction
does.

In addition, trust and cooperation positively inﬂuence long-term relationships
(commitment), and act as mediators between satisfaction and conﬂict, and

commitment. Therefore, global food suppliers are more likely to establish long-term

110

business relationships through trust and cooperation when suppliers focus on
economic factors (offering credit, discount allowances, cost saving services, and
economic incentives) and enhancing positive interactions and psychosocial

relationships, and frequent communications (non-economic factors).

LIMITATIONS AND FUTURE STUDIES

This study has a common limitation related to most survey research. The
focus of the study was on a targeted set of related industries, those of processed foods.
Thus, future studies should expand the research to other types of industries to increase
the generalizability of the results. If the market conditions or supply chain structures
are different from the processed food markets, the supplier-buyer relationships might
be different. For instance, in a buyers’ market, buyers’ perceived switching costs
may signiﬁcantly inﬂuence their commitment to a relationship with a supplier, which
was not the case in the current study.

The long-term versus short-term orientation of different cultures is another
potentially interesting dimension of supplier-buyer relationships. According to
Ganesan (1994), short-term oriented retailers are concerned with immediate or
current options and outcomes, whereas long-term oriented retailers are not only
concerned with current and future results, but focus on achieving long-term goals.
Short-term oriented retailers depend on the efﬁciencies of the market exchange in
order to maximize their proﬁts in a transaction (economic factor) whereas long-term
oriented retailers are equally focused on relational exchanges to increase proﬁts

through a series of transactions (economic and non-economic factors) (Ganesan,

111

1994)

The current study analyzed supplier-buyer relationships among Indian
suppliers and buyers. Previous research suggested that companies from collectivist
countries such as Korea, China, Japan or India are more long-term oriented, whereas
the US. and Western European countries are more short-term oriented. Thus, a
comparative study of economic and non-economic factors between long-term
oriented countries and short-term oriented countries would likely yield some
interesting and potentially different results. Such research would make an important
contribution to our understanding of the impact of process dynamics, culture and the
changing market structure on supplier-buyer exchanges. As we move more toward a
global market place, this information becomes increasingly more important for

successful seller-buyer interchanges.

112

APPENDIX A

SURVEY INSTRUMENT

113

MKQHICAR S I'AI'I’.

UNIVERSITY

 

This questionnaire will take approximately 20 minutes to complete. You indicate your voluntary agreement to
participate by completing and returning this questionnaire. You may discontinue participation at any time.

In this survey you will be asked a number of questions about your relationship with your primary (major) supplier
of processed (packaged) food products. If you have more than one primary (major) supplier. pick one to focus your
responses on in the survey. Please respond to each question by circling the number (1-7) that best reﬂects your views about
your relationship with this supplier.

 

Please check the box next to the supply chain member that is your primary (major) supplier of processed (packaged) food
products:

[:1 Manufacturer [:1 Broker

1:] Wholesaler [j Stockist

E] Importer C] Trading Company
D Other (please specify)

 

Please write the name of the city where this primary (major) supplier is located

 

For how many years have you conducted business with this primary (major) supplier? years

Please list the types of food products you purchase from this primary (major) supplier

 

 

What percentage of the volume of processed/packaged food you sell is supplied by this primary (major) supplier? %

What was your primary (major) supplier’s annual sales for the year 2002?

 

Section I
Please indicate the frequency with which your primary (major) supplier has engaged in each of the following actions with you
(1=Never, 2= Very Seldom, 3=Seldom, 4=Occasionally, 5=Frequently. 6=Very Frequently, 7=Always).

Never ‘— Occasionally —p Always

l. The supplier delays delivery of products (generally). 1 2 3 4 5 6 7
2. The supplier refuses to sell. 1 2 3 4 5 6 7
3. The supplier charges high prices. I 2 3 4 5 6 7
4. The supplier delivers unwanted products. 1 2 3 4 5 6 7
5. The supplier sets monthly/quarterly sales volume targets. 1 2 3 4 5 6 7
6. The supplier sets incentives and promotions based on 1 2 3 4 5 6 7
sales target achievement.
7. The supplier gives trade allowances/incentives. l 2 3 4 5 6 7
8. The supplier provides sales promotion materials. 1 2 3 4 5 6 7
9. The supplier provides ﬁnancing/credit. l 2 3 4 5 6 7
10. The supplier provides inventory management assistance. 1 2 3 4 5 6 7

Section 11

Please indicate your level of satisfaction with each of the following actions taken by your primary (major) supplier (1=Extremely
Dissatisﬁed, 2= Very Dissatisﬁed, 3=Somewhat Dissatisﬁed, 4=Neutral, 5=Somewhat Satisfied, 6: Very Satisﬁed, 7=
Extremely Satisﬁed).

Extremely ' Neutral Extremely
Dissatisﬁed Satisﬁed
l. The price at which the supplier sells food products to you. 1 2 3 4 5 6 7
2. The credit facilities the supplier makes available to you. 1 2 3 4 5 6 7
3. The discount allowances your supplier gives you for l 2 3 4 5 6 7
large orders, etc
4. The discount allowances your supplier gives you for l 2 3 4 5 6 7
regular and early payment.
5. The supplier’s products and services help me achieve my 1 2 3 4 5 6 7
revenue/business objectives.
6. The services your supplier provides that save you money. 1 2 3 4 5 6 7

114

Section III

Please indicate how strongly you agree or disagree with each of the following statements with regard to your general perceptions
about your primary (major) supplier (1=Extremely Disagree, 2= Strongly Disagree, 3=Somewhat Disagree, 4=Neutral,
5=Somewhat Agree, 6= Strongly Agree, 7= Extremely Agree).

Extremely ‘ Neutral ' Extremely

Disagree Agree

1. My primary (major) supplier’s products are very important for l 2 3 4 5 6 7
my anticipated future proﬁt as a percentage of my
company’s overall ﬁJture proﬁt (ﬁve years hence).

2. The proﬁts that I have generated from my primary (major) I 2 3 4 5 6 7
supplier have decreased over the years.

3. It would be very easy to discontinue doing business with my I 2 3 4 5 6 7
primary (major) supplier?

4. I am satisﬁed with the products and services I 2 3 4 5 6 7
I get from my supplier.

5. The relationship between the supplier and me seems to l 2 3 4 5 6 7

reﬂect a happy situation.

6. The relationship between the supplier and me is very positive. I 2 3 4 5 6 7

7. The supplier controls my business relationship with my customers. I 2 3 4 5 6 7

8. My supplier is crucial to my future performance. I 2 3 4 5 6 7

9. It would be difﬁcult for me to replace my supplier. l 2 3 4 5 6 7

10. I am dependent on my supplier. 1 2 3 4 5 6 7

I l. I do not have a good alternative to my supplier. l 2 3 4 5 6 7

12. My supplier is important to my business. I 2 3 4 5 6 7

I3. I have many good things to say about my I 2 3 4 5 6 7
supplier‘s trustworthiness.

14. I can trust my supplier to be very "up front" with me. 1 2 3 4 5 6 7

15. I can trust my supplier to keep a trade secret. I 2 3 4 S 6 7

16. I am convinced that I can trust my supplier in negotiations. I 2 3 4 5 6 7

17. My future goals are best reached by working with my I 2 3 4 S 6 7
supplier rather than against my supplier.

18. My future proﬁts are dependent on maintaining a good I 2 3 4 5 6 7
working relationship with the supplier.

19. I do not feel I can count on my supplier to give me 1 2 3 4 5 6 7
the kind of support (such as local advertising) that
companies working with other suppliers receive.

20. I do not like many of the things my supplier does. I 2 3 4 5 6 7

21. My supplier’s policies reduce my proﬁts. 1 2 3 4 5 6 7

22. My supplier makes it difﬁcult for me to do my job. I 2 3 4 5 6 7

23. My supplier has not been very fair with me. 1 2 3 4 5 6 7

24. Dealing with this supplier does not ﬁnancially beneﬁt my company. I 2 3 4 5 6 7

25. I have conﬁdence that my supplier provides the best deal. 1 2 3 4 5 6 7

26. The staff of my supplier lmow me. I 2 3 4 5 6 7

27. I receive preferential treatment from my supplier. l 2 3 4 5 6 7

28. I feel a sense of loyalty to my supplier. l 2 3 4 5 6 7

29. I feel obligated to conduct business with this supplier due to our 1 2 3 4 5 6 7
long business relationship with my family.

30. Switching to another supplier is too much bother in I 2 3 4 5 6 7
terms of time and effort.

31. I was concerned about the negative ﬁnancial outcomes of 1 2 3 4 5 6 7
switching to another supplier.

32. I feel locked into this supplier because of the products I l 2 3 4 5 7
have with the supplier.

33. A complaint that I had was resolved by the supplier. l 2 3 4 5 6 7

34. All suppliers are the same. I 2 3 4 5 6 7

35. I was uncertain of the outcome if I changed suppliers. I 2 3 4 5 6 7

36. To accomplish his own objectives, sometimes my I 2 3 4 5 6 7
supplier alters the facts slightly.

37. To accomplish his own objectives, sometimes my supplier 1 2 3 4 5 6 7
promises to do things without actually doing them later.

38. Sometimes, I have to alter the facts slightly in order to get 1 2 3 4 5 6 7
what I need.

39. I have sometimes promised to do things without actually I 2 3 4 5 6 7
doing them later.

40. My customers will ﬁnd it very difﬁcult to replace my company I 2 3 4 5 6 7
as a supplier.

41. My customers face low switching costs in terminating l 2 3 4 5 6 7
their business relationships with my company.

42. My suppliers compete intensely with each other for my business. I 2 3 4 5 6 7

115

Section IV
Please indicate how strongly you agree or disagree with each of the following statements with regard to your general perceptions
about your primary (major) supplier (1=Extremely Disagree, 2= Strongly Disagree, 3=Somewhat Disagree, 4=Neutral,
5=Somewhat Agree, 6: Strongly Agree, 7= Extremely Agree)

Extremely {-— Neutral —> Extremely
The supplier has: Disagree Agree

l. Reliable ﬁeld personnel. 1 2 3 4 5 6 7
2. Well-prepared contact personnel. 1 2 3 4 5 6 7
3. Given me access to senior management in its company. 1 2 3 4 5 6 7
4. Contact personnel are adequately empowered to make 1 2 3 4 5 6 7
market decisions.
5 Fast reaction in the event of delivery problems. 1 2 3 4 5 6 7
6 Good ideas for sales promotion campaigns. 1 2 3 4 5 6 7
7. Logistics discounts commensurate with perfomiance. 1 2 3 4 5 6 7
8 Good planning of sales promotion activities. 1 2 3 4 5 6 7
9 Promotion for the trade geared to customers. 1 2 3 4 5 6 7
10. Promotion to meet the needs of its customers. I 2 3 4 5 6 7
l l. Problem-free processing of orders. 1 2 3 4 5 6 7
12. Contact person if there are problems. I 2 3 4 5 6 7
13. Good information about new products. 1 2 3 4 5 6 7
14. Successful product innovation. 1 2 3 4 S 6 7
15. Products with fast turnaround in stores. I 2 3 4 5 6 7
16. Unique or prestigious products. I 2 3 4 5 6 7
17. Effective consumer advertising. 1 2 3 4 5 6 7
18. Transparent system of prices and conditions. 1 2 3 4 5 6 7
19. Punctual, reliable and complete deliveries. l 2 3 4 5 6 7
20. Attractive margins of the products. 1 2 3 4 5 6 7
21. Quality products. I 2 3 4 5 6 7
22. Field personnel that meet the needs of its customers. 1 2 3 4 5 6 7

Section V

Please indicate how often you and your primary (major) supplier engage in the activities mentioned in each question (1=Never,
2= Very seldom, 3=Seldom, 4=Occasionally, 5=Frequently, 6=Very Frequently, 7=Always). When you and your supplier
discuss a disagreement over an important issue how often:

Never 4— Occasionally —> Always

1. Do you both begin to understand each other’s 1 2 3 4 5 6 7
feelings reasonably quickly?

2. Do you both get your points across to each other 1 2 3 4 5 6 7
without too much trouble?

3. Do you both begin to appreciate each other’s points I 2 3 4 5 6 7
of view on a matter fairly soon?

4. Does your supplier seem to be supportive of 1 2 3 4 5 6 7

your feelings about your disagreement?

Section VI

Please indicate how strongly you agree or disagree with each of the following statements with regard to your general perceptions
about your primary (major) supplier (l=Extremely Disagree. 2= Strongly Disagree, 3=Somewhat Disagree, 4=Neutral,
5=Somewhat Agree, 6= Strongly Agree, 7= Extremely Agree).

Extremely ‘— Neutral ___, Extremely

Disagree Agree

1. I believe that over the long run my relationship 1 2 3 4 5 6 7
with the supplier will be proﬁtable.

2. Maintaining a long-term relationship with 1 2 3 4 5 6 7
the supplier is important to me.

3. I focus on long-term goals in this relationship. I 2 3 4 5 6 7

4. I expect my supplier to be working I 2 3 4 5 6 7
with me for a long time.

5. Even if we could, we would not drop the supplier l 2 3 4 5 6 7
because we like being associated with him/her.

6. We want to remain a member of the supplier‘s network I 2 3 4 5 6 7
because we genuinely enjoy our relationship with him/her.

7. Our positive feelings toward the supplier are a major reason 1 2 3 4 5 6 7
we continue working with him/her.

8. We expect our relationship with the supplier to continue 1 2 3 4 5 6 7

for a long time.

116

Section VII
Please indicate how strongly you agree or disagree with each of the following statements with regard to your general perceptions
about your primary (major) supplier (l=Extremely Poor, 2= Very Poor, 3= Poor, 4=Neutral, 5=Good, 6= Very Good, 7=
Excellent).

Extremely 4— Neutral —> Excellent

Poor
1. Supplier’s flexibility on special requests. 1 2 3 4 5 6 7
2. Supplier’s responsiveness to special orders. I 2 3 4 5 6 7
3. The supplier consistently accommodates customer requests. I 2 3 4 5 6 7

Section VIII. Please respond to the following questions about yourself (person completing the survey).

Please indicate your gender:
1) Male
2) Female

Please indicate your age:
I) 29 and below—
2) 30~39 _

3) 40—«49 _

4) 50 and over _

What is your position title?

 

Please check the box that most accurately describes your company‘s form of business:

D Retailer D Broker

[3 Wholesaler [Z] Stockist

D Importer D Trading Company
C] Other (please specify)

 

Please check the box that most accurately describes your company's form of ownership:

[:1 Sole Proprietorship [:1 Corporate Subsidiary

E] Publicly Held Corporation D Privately Held Corporation
D Partnership [3 Cooperative

C] Other (please specify)

 

Please write the name of the city/town where your company headquarters is located
How many years has your company been in business? years
How many full time employees are there in your company?

What is the average sales volume per month for your company?

 

Are there other branches of this company? If so, how many?

Where are the other branches located?

 

 

Thank you for participating in this study.

Please contact the researchers if you wish to receive a summary of the results of the study.

117

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