Relationship-specific factors influencing supplier involvement in customer new product development

Journal of Business Research 56 (2003) 721 – 733

Relationship-specific factors influencing supplier involvement in customer new product development Achim Walter* University of Karlsruhe, IBU, PO Box 6980, D-76128 Karlsruhe, Germany

Abstract Many manufacturing firms are becoming involved in closer relationships with suppliers in order to utilize their skills, capabilities, and resources to develop new products faster and at a lower cost. However, effective supplier relationships do not just exist or emerge. This study advances and tests a relationship model that examines antecedents and central characteristics of close relationships and their impact on supplier involvement in customer new product development (NPD). The findings suggest that supplier involvement in NPD depends on trust and commitment of the supplier. Moreover, the study reveals that managers functioning as relationship promoters (RPs) in the customer’s firm and supplier-specific adaptations of the customer have a positive influence on supplier involvement in NPD. The RPs and customer adaptations were found to have a strong effect on the supplier’s trust and commitment. Some theoretical and managerial implications are discussed. D 2003 Elsevier Science Inc. All rights reserved. Keywords: New product development; Relationship promoter; Trust; Commitment; Adaptations

1. Introduction Due to shrinking product life cycles and increasing global competition in recent years, as well as specialized skills and ‘sticky’ knowledge, suppliers have become more and more important to new product development (NPD). Previous research in NPD has associated an early (Handfield et al., 1999; LaBahn and Krapfel, 2000; Mabert et al., 1992) and extensive (Clark and Fujimoto, 1991; Langerak et al., 1999; Wasti and Liker 1997) supplier involvement with quicker product development processes, reduced development costs, greater technological improvements, and/or enhanced product quality. Suppliers often possess the potential to generate new product ideas and to provide means for their realization (Araujo et al., 1999; Ha˚kansson, 1987; Spekman, 1988). An effective supplier involvement in NPD can decrease the complexity of the development processes (Liker et al., 1996) and enables the avoidance of problems that arise due to ignoring supplier’s technological and manufacturing constraints (Hartley et al., 1997).

* Tel.: +49-721-608-3433; fax: +49-721-608-6046. E-mail address: [email protected] (A. Walter).

The literature in both the business relationship (e.g., Gemu¨nden et al., 1996; Ha˚kansson, 1987) and NPD (e.g., Dyer and Ouchi, 1993; Maidique and Zirger, 1985) fields emphasize the importance of relationship development as a precursor to effective supplier involvement in NPD. Strategies like total quality management, simultaneous engineering, and black-box sourcing often necessitate close and lasting supplier relationships rather than employing a transactional approach in dealing with suppliers (LaBahn and Krapfel, 2000; Liker et al., 1994, 1996). Long-term supplier relationships allow customers to receive better services and provide them with access to know-how and capabilities that they lack in-house (Kalwani and Narayandas, 1995; Sheth and Sharma, 1997). Close relationships with suppliers enable manufacturing customers to learn about rapid technological changes and enhance their ability to deal with novelty (Gemu¨nden et al., 1996; Rothwell and Dodgson, 1991). However, the development of effective business relationships faces serious exchange barriers. Exchange barriers are circumstances that impede or even prevent a timely, purposeful, and/or continued interchange between parties. Diverse languages, group thinking, and/or mismatches in coding schemes between suppliers and customers might act as communication impediments (Gemu¨nden and Walter, 1997; Rubenstein and Ettlie, 1979). Suppliers are

0148-2963/03/$ – see front matter D 2003 Elsevier Science Inc. All rights reserved. doi:10.1016/S0148-2963(01)00257-0

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often afraid of losing core competencies through collaborative product development (Doz, 1988; Kamath and Liker, 1990). They might be suspicious of becoming overly dependent on customers and of being burdened with their development costs (LaBahn and Krapfel, 2000). At the same time, it might not be easy for business customers to demonstrate trust and commitment as they have traditionally been quite willing to change their suppliers (Sheth and Sharma, 1997). Thus, the development of trust and commitment by suppliers is hampered (cf. Ford, 1980; Wilson and Mummalaneni, 1986; Young and Wilkinson, 1989). However, trust and commitment are key characteristics of effective business relationships (Dwyer et al., 1987; Morgan and Hunt, 1994) and are considered to be vital prerequisites for substantial contributions of suppliers to their customers’ NPD (Dyer and Ouchi, 1993; Ellram, 1990; Littler et al., 1995; Spekman, 1988). Researchers and practitioners consider the management of effective supplier relationships as one important way for business customers to gain a next-generational competitive advantage (cf. Anderson and Narus, 1999; Sheth and Sharma, 1997). Despite the importance of supplier involvement in NPD, only a few articles have so far attempted to empirically document factors that foster supplier integration in product development processes of manufacturing customers (Hartley et al., 1997; Kamath and Liker, 1990; LaBahn and Krapfel, 2000). Therefore, further empirical research into strategies and approaches for successful supplier integration in NPD is needed. Researchers increasingly acknowledge the positive impact of boundary spanning individuals on supplier involvement in customer NPD (Anderson and Narus, 1999; Handfield et al., 1999; Littler et al., 1995). It is argued that the role of supply and purchasing managers is

in transition. They should function as effective relationship managers or ‘‘relationship promoters (RPs)’’ (Walter and Gemu¨nden, 2000), building support for supplier-specific adaptations and developing structural and social bonds with suppliers. Therefore, the purpose of this study is to look at supplier-specific adaptations by the customer, supplier trust, and supplier commitment as mediating variables between the influence of a RP in the customer firm and supplier integration in NPD. The article is organized as follows: After describing the conceptualization of the relevant constructs, formal hypotheses will be presented. Then, the data source, the operationalization of variables, and the methodology used to address the research questions will be described. Finally, the results of the investigation are presented and their implications are discussed.

2. Conceptual model and hypotheses The present study draws on theories and frameworks that have guided empirical research on business relationships (e.g., Anderson and Weitz, 1992; Morgan and Hunt, 1994) to examine a set of relationship-specific factors that seem to affect suppliers’ contributions to their customers’ NPD. The framework presented here is in essential agreement with various assumptions of the Interaction Model of the Industrial Marketing and Purchasing (IMP) Group (Ha˚kansson, 1982), the Relationship Development Model (Dwyer et al., 1987), the Commitment – Trust Model (Morgan and Hunt, 1994), and the Buyer – Seller Relationship Model (Wilson, 1995). The conceptual model specifying the antecedents of supplier involvement in customer NPD is presented in Fig. 1.

Fig. 1. Relationship model of supplier involvement in customer NPD.

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2.1. Supplier involvement in customer NPD Supplier involvement in customer NPD can operate at various levels, depending on the amount of design entrusted to the suppliers and the establishment of information flows with them (Clark and Fujimoto, 1991). In the case of new-to-the-firm NPD projects, the supplier’s knowhow, competence, and capability may be important, especially as new components and/or materials are involved (Langerak et al., 1999). At a high level of supplier involvement, the supplier’s staff can participate directly in the customer’s product development team and might be entrusted with developing and screening product ideas (Handfield et al., 1999). Furthermore, the supplier’s engineers and experts can be involved in specific subprojects for designing, developing, realizing, testing, and/or modifying the product, its components or subsystems (Muffatto and Panizzolo, 1996; Wasti and Liker, 1997). The empirical study conducted by Handfield et al. (1999) suggests that the active involvement of suppliers may be sought at any point in the generic NPD process. In this study, supplier involvement in customer NPD refers to the extent a supplier contributes to NPD of a focal customer from the idea stage to the prototype testing stage. 2.2. Supplier commitment Scholars have recognized commitment as an essential ingredient for successful long-term relationships (e.g., Dwyer et al., 1987; Gundlach et al., 1995; Morgan and Hunt, 1994). Most studies conceptualize commitment as an attitudinal component signifying a durable intention by the parties to develop and sustain a long-term relationship (e.g., Anderson and Weitz, 1992). Moorman et al. (1992, p. 316) view commitment ‘‘as an enduring desire to maintain a valued relationship’’. In the present study, four characteristics of relationship commitment are used to describe supplier commitment: loyalty (cf. Geyskens et al., 1996), willingness to make short-term sacrifices (cf. Anderson and Weitz, 1992), long-term orientation (cf. Ganesan, 1994), and willingness to invest in the relationship (cf. Gundlach et al., 1995). Collaborative product development requires considerable nonretrievable investments from the partners, e.g., knowhow, equipment, and training (Araujo et al. 1999; Kamath and Liker, 1990; Rubenstein and Ettlie, 1979; Parkinson, 1985). Supplier involvement in customer NPD especially in the case of a co-design partnership requires a close cooperation between the partners over a period of several months (e.g., Muffatto and Panizzolo, 1996). Often, customers expect suppliers to be loyal and not to use the technology developed specifically for their relationship in dealing with competitors (Kalwani and Narayandas, 1995). Commitment encourage partners to resist attractive short-term alternatives in favor of the expected long-term benefits of staying in a relationship (Ganesan, 1994). Committed partners will

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cooperate because of a desire to make the relationship work (Morgan and Hunt, 1994). Hence, it is hypothesized that: Hypothesis 1: Higher supplier commitment leads to greater supplier involvement in customer NPD.

2.3. Supplier trust Trust is included in most relationship models (cf. Wilson, 1995). Empirical findings suggest that trust is an integral feature of successful relationships (e.g., Mohr and Spekman, 1994; Moorman et al., 1992; Morgan and Hunt, 1994). Although scholars have used a variety of definitions for trust, nearly all researchers have implicitly accepted the definition of trust as a positive belief, attitude, or expectation of one party concerning the likelihood that the action or outcomes of another will be satisfactory (Andaleeb, 1992). In this study, supplier trust exists to the extent that the supplier believes his customer to be honest (cf. Doney and Cannon, 1997), benevolent (cf. Geyskens et al., 1996), and competent (cf. Moorman et al., 1992). NPD tasks are intrinsically uncertain about the relationship between inputs and outputs and usually involve a high risk of failure (Cooper, 1997). NPD processes are plagued by many unforeseen disruptions and delays. Moreover, there are additional risks that attend collaborative product development (Doz, 1988; Kamath and Liker, 1990). For example, a customer might transfer a supplier’s technological knowhow to other suppliers in order to strengthen these partnerships or even invest in new ones. If partners trust each other, constructive dialogue and cooperative problem solving allow difficulties to be worked out. Trust reduces fears of exploitation and minimizes feelings of vulnerability (Boon and Holmes, 1991). A higher level of trust advances a greater information exchange and better goal clarification (Zand, 1972). Consequently, trusting partners feel less risks concerning (investment) decisions and activities connected with a technological partnership because they assume negative consequences to be less likely (Dodgson, 1993; Littler et al., 1995). Therefore, the second hypothesis is: Hypothesis 2: Higher supplier trust leads to greater supplier involvement in customer NPD.

2.4. Supplier-specific adaptations Another central characteristic of a long-term relationship is adaptation of the partners towards each other (e.g., Ha˚kansson, 1982; Wilson 1995). Partner-specific adaptations are a representation of past events, activities, and decisions that symbolize common experiences and a means to conducting further business (Ford, 1980). They can be considered as a method of getting access to resources controlled by another firm (Halle´n et al., 1991). Adaptations tie partners closer to each other, thereby facilitating subsequent interaction and creating entrance barriers for competing firms (Brennan and

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Turnbull, 1999). Adaptations towards a partner may take place in the technical, commercial, financial, and/or social spheres (Ha˚kansson, 1982). In the present study, supplierspecific adaptations are defined as investments of a customer in the supplier’s knowledge, structures, and processes to make use of its resources. For example, a customer may buy specific machinery, change the design of its own product, use new technologies, and reorganize the production or planning systems in order to match the capabilities of a certain supplier. The adoption of a strategy of fast innovation implies adaptations in processes and procedures towards selected suppliers (Langerak et al., 1999; Ritter, 1999), e.g., the use of electronic data interchange (EDI) and total quality management (TQM). Supplier-specific adaptations in information exchange, e.g., delivering partial information about specifications prior to being given the complete specification for a prototype or subsystem, help to improve coordination and integration of suppliers’ activities in NPD processes (cf. Dyer and Ouchi, 1993; Liker et al., 1994). Thus, a supplier would be able to provide purposeful and timely product ideas, technical services, technological know-how, and equipment (cf. Araujo et al., 1999). Therefore, it is hypothesized that: Hypothesis 3: Higher supplier-specific adaptations by the customer lead to greater supplier involvement in customer NPD.

2.5. Relationship advancement by a RP of the customer Business relationships are maintained and developed by the individuals involved. The influence of one or more ‘‘RPs’’ (Walter, 1999), who is wholeheartedly committed to making the relationship work and the determination to surmount any collaboration barriers (cf. Gemu¨nden and Walter, 1997) is of pivotal importance to relationship effectiveness. RP are persons who intensively shape and advance interorganizational exchange processes; they do so on the basis of their network of good personal relationships with significant actors of the partner organizations and relevant third parties, as well as their ability to develop and use new network relationships. Theoretical considerations and empirical results suggest that establishing purposeful and timely communication, lobbying for support and resources, building coalitions between key persons, defining mutual and clear goals, solving conflicts, synchronizing cooperational activities, and advancing a congruent understanding of each others competences and needs, facilitate effective supplier involvement in customer NPD (Anderson and Narus, 1999; Handfield et al., 1999; Hartley et al., 1997; Liker et al., 1996; Littler et al., 1995). These performance contributions are typical for a RP fostering an innovation-oriented supplier – customer relationship (Walter and Gemu¨nden, 2000). Therefore, the following hypothesis: Hypothesis 4: Higher relationship advancement by a RP of the customer leads to greater supplier involvement in customer NPD.

2.6. Interrelationships among commitment, trust, adaptations, and RPs Several empirical studies have already shown that trust in a partner has a positive impact on relationship commitment (e.g., Ganesan, 1994; Geyskens et al., 1996; Moorman et al., 1992). Morgan and Hunt (1994) argue that the relationship is unlikely to be committed unless trust is already established, because commitment entails potential vulnerability and sacrifice. Trust is so highly valued by relationship partners that, once it is established, the parties will strongly intend to develop and maintain the relationship (Granovetter, 1985; Hinde, 1979). Trust reduces complexity and provides reasonable assurance that desired outcomes will be obtained and thereby reduces transaction costs (Andaleeb, 1992). Therefore, it is expected that: Hypothesis 5: Higher supplier trust leads to greater supplier commitment.

A customer may adapt products, processes, and procedures to the capabilities of a specific supplier (Halle´n et al., 1991). The customer’s adaptations towards the supplier increase the switching costs for the supplier. An adaptive fit between the supplier and customer firm ensures the optimal use of material and organizational capacities of the partners. Thus, it is likely that the willingness of the supplier to maintain and develop the relationship with the customer grows (cf. Wilson and Mummalaneni, 1986; Dwyer et al., 1987). Furthermore, it is likely that the supplier judges the customer’s supplier-specific adaptations as idiosyncratic investment in the partnership (Anderson and Weitz, 1992; Ford, 1980). Empirical findings by Anderson and Weitz (1992) suggest that each party’s relationship commitment is based on its perceptions of the other party’s commitment and investments specific to the relationship. Thus, it is expected that: Hypothesis 6: Higher supplier-specific adaptations of the customer leads to greater supplier commitment.

Partner-specific adaptations can be seen as risky advances that initiate a trusting relationship (Wilson and Mummalaneni, 1986; Wilson, 1995). Supplier-specific adaptations demonstrate the customer’s interest to support the supplier on a long-term basis (Halle´n et al., 1991). Adaptations can be viewed as investments that would have no or less value in other exchange relationships (Wilson and Mummalaneni, 1986). From a transaction cost economies perspective (Williamson, 1985), adaptations render the adapting firm vulnerable to opportunistic behavior by its counterparts. Behaving in a trustworthy way encourages partners to trust responses and actions (Young and Wilkinson, 1989). Partner-specific adaptations underpin a cooperative interaction orientation and the capability to solve the problems that may occur in the exchange relationship. Trust has its roots in positive experiences in the

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past of an exchange relationship (Blau, 1964). Therefore, the following hypothesis is: Hypothesis 7: Higher supplier-specific adaptations of the customer leads to greater supplier trust.

A RP on the side of the customer firm persuades (powerful) people in the supplier’s firm to support the relationship. The promoter establishes close interpersonal links with and between influential members of the partner organizations (Walter and Gemu¨nden, 2000). Close personal relationships are powerful bridging mechanisms that provide avenues for persuasion, negotiation, and even manipulation (Carroll and Teo, 1996). People in good relationships can be assumed to be supportive and agreeable in word and deed (Montgomery, 1988). Findings by Seabright et al. (1992) confirm the value of close personal relationships in building stable business relationships. The promoter helps to develop and maintain a high level of interfirm knowledge between exchange partners, e.g., the customer’s understanding of the supplier’s needs and wants, as well as the supplier’s understanding of how to make effective customer-specific adaptations. A RP sustains good personal relationships with potentially valuable network partners (e.g., further customers) for the supplier, that he or she can influence in the interest of the supplier. Moreover, a RP possesses valuable network knowledge (Walter, 1999). Thus, it is likely that these potential termination costs foster the supplier’s commitment to an ongoing customer relationship (cf. Anderson and Weitz, 1992; Dwyer et al., 1987; Ganesan, 1994; Morgan and Hunt, 1994). Hypothesis 8: A greater relationship advancement by a RP of the customer leads to higher supplier commitment.

RPs demonstrate a true concern and desire for meeting the partner’s needs and wants, and for considering their individual preferences and capabilities. Such responsiveness promotes a sense of mutual attachment and feelings of connectedness and belonging, vital inputs in the establishment of a willingness to trust (cf. Boon and Holmes, 1991). RPs contribute to the confidence of the partners that they can successfully address issues of disagreement within their relationship and that satisfactory solutions to problems can be worked out. (Walter and Gemu¨nden, 2000). A feeling of efficacy in terms of the ability to resolve conflicts is essential for the development of a trusting orientation (Boon and Holmes, 1991). With their relational performance contributions customer and supplier personnel, RPs help to articulate their mutual goals realistically, challenging, as consistently as possible, and comprehensibly (cf. Gemu¨nden and Walter, 1997). Trust in a party is very much a function of how clearly mutual expectations have been worked out with that party and how well that party is obviously capable to meet those expectations (Gabarro, 1978). A RP fosters the perception of similarities between the two partners, e.g., concerning

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goals, motives, habits, control systems, and structures. Similarities help partners to judge each other’s trustworthiness (Doney and Cannon, 1997). The promoter brings supplier and customer personnel together and advances their face-toface communication. Trust develops over time, and the nature of this trust becomes more concrete as parties come to know each other better (Gabarro, 1978). Therefore, I propose: Hypothesis 9: A greater relationship advancement by a RP of the customer leads to higher supplier trust.

Partner-specific adaptations are closely tied to the continued existence of the focal relationship. They lose substantial value unless the relationship continues (Brennan and Turnbull, 1999). Adaptations towards a partner face considerable risks because the expected returns on investment are highly governed by commitments of the focal partner (Wilson and Mummalaneni, 1986). The resources a firm provides for partner-specific adaptations are often not available for the development of alternative partnerships (Ford, 1980). Adaptations may reduce a firm’s freedom of choice in developing alternative relationships (Halle´n et al., 1991). Supplier-specific adaptations over time may be the result of the customers gradually learning about the supplier’s needs, wants, and capabilities (Mo¨ller and Wilson, 1995). RPs contribute to recognizing the specific importance for adaptations concerning the partner’s needs, wants, and capabilities and assist to provide required resources. Furthermore, they help to recognize, convince, or, sometimes, even remove opponents of partner-specific adaptation processes (Walter, 1999). Therefore: Hypothesis 10: A greater relationship advancement by a RP of the customer leads to stronger supplier-specific adaptations of the customer.

3. Method 3.1. Data collection and sample Data for the study were obtained from managers responsible for relationship and network management tasks. We gathered the addresses of their firms from a commercial address list, including industrial goods manufacturers. Potential key informants for this study, usually the CEOs or sales managers of the companies, were initially called by phone and were asked to participate in the study. The telephone contacts were also made to ensure that the persons were best able to report on the investigated constructs. The data were collected in standardized personal interviews in 267 German supplier companies. For the purpose of this study, 247 questionnaires were sufficiently completed, resulting in a response rate of 44% (of the 567 companies contacted). The sample can be described as follows: On average, the business relationship had been in existence for 13.3 years.

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The responding suppliers were all located in Germany and primarily operated in the fields of mechanical engineering (34%), the electronics industry (30%), the metal-processing industry (12%), and the chemical industry (11%). Their customers worked in sectors such as the electronics industry (26%), mechanical engineering (17%), the chemical industry (17%), and vehicle manufacturing (10%). For the most part, suppliers were medium-sized enterprises (SMEs), which is reflected in an average of 445 employees per firm. The customers employed 1076 persons on average. For the purpose of this study, respondents seemed to be appropriate as key informants who deal with relationship and network management and hold personal contacts to customers themselves. In 46% of our cases, the key informants were members of the firm’s top management; 40% of the respondents were from middle management, and only 14% of the interview partners were members of the lower management. The key informants had been actively involved in the respective customer relationships for approximately 7 years on average. They met employees from the customer firms approximately nine times per year on average. In addition to questions regarding the supplier –customer relationship, we also asked for person-related information. Questionnaires were completed for every actor in the relationship who, according to the assessment of the key informant, was primarily concerned with the management of the relationship in question. A total of 510 questionnaires were completed, representing the people who were involved in the 247 relationships on behalf of the customer firms. 3.2. Measures The present study was preceded by an extensive pilot study. A total of 30 semistructured interviews were conducted with employees of supplier companies in Germany who were responsible for the management of business relationships. In 19 cases, the corresponding customers were interviewed. The purpose of these interviews was to develop a set of items that tap each of the relevant constructs and to provide an initial test of some of the measures. Furthermore, we modified several items that were extracted from various previous studies and verified them for their relevance to the context of the present study by means of the interviews with relationship managers. The managers in the pretest answered the questionnaire and verbalized any thoughts that came to mind. The items were revised following each personal interview until no further changes were suggested. All constructs were measured using seven-point multiple-item scales. The final relationship model include 18 measures and five constructs. The proposed measures were purified by assessing their reliability and unidimensionality following guidelines of Anderson and Gerbing (1988). Itemto-total correlations were examined in each of the proposed scales and items with low correlations were deleted if they tapped into no additional domain of interest. Then, a factor

analysis was performed on items from subsets of theoretically related measures to assess the extent to which they reflected a single dimension. Supplier involvement in customer NPD was measured by four items that were developed for this study. The items capture an early and intensive involvement of the supplier in the NPD process (cf. Handfield et al., 1999): idea generating, product concept development, prototype building, and prototype testing. Supplier commitment was operationalized as a four-item scale adapted form the Anderson and Weitz (1992) study. The items represent the supplier’s loyalty, willingness to make short-term sacrifices, long-term orientation, and intention to invest in the customer relationship. The five-item scale supplier trust taps the three major facets of trust: honesty, benevolence, and competence. One item was used to assess the supplier’s overall trust in the customer. The five-item scale was developed through a review of literature (e.g., Andaleeb, 1992) and from interviews with relationship managers. Nine items were used to assess supplier-specific adaptations of the customer. The adaptation scale was based on two items that were developed by Halle´n et al. (1991). Seven items were developed through a review of literature (e.g., Ha˚kansson, 1982). A principle component analysis of the adaptation items indicated three factors. Together, these three factors explained 77% of the total variance. The three factors were subjected to an oblique rotation, resulting in an interpretable solution. These factors are adaptations by customer production (four items, a=.84), adaptations by customer purchasing (three items, a=.86), and adaptations by customer information exchange (two items, a=.87). The arithmetical means of the three multiitem scales were used to build the construct ‘‘supplier-specific adaptations of the customer’’. The construct relationship advancement by a RP of the customer captures the positive influence of a manager in the customer firm within a focal supplier relationship setting who both fulfills relational performance contributions and possesses sources of relational power. The relational performance contributions scale was based on scales developed by Ancona and Caldwell (1990) and Chakrabarti and O’Keefe (1977). Several of their items were adopted and modified to the context of the present study. Some items were newly developed reflecting their concepts. A principal component analysis with varimax rotation was performed on 21 items assessing relational performance contributions of a RP. Three factors with eigenvalues greater than 1.0 were extracted, which explained 70% of total variance, representing interests (nine items, a=.93), coordinating cooperational activities (eight items, a=.93), and information brokering (four items, a=.85). The arithmetic means of the three multiitem scales were used to measure the construct relational performance contributions of the RP (a=.83). The relational power sources scale was developed through an evaluation of relevant studies on power sources (e.g., Boje and Whetten, 1981) and characteristics of effect-

A. Walter / Journal of Business Research 56 (2003) 721–733 Table 1 Confirmatory factor analysis results Factor/ item

Construct reliability

Cronbach’s alpha

0.88

.88

0.55

0.83

.82

0.58

0.87

.87

0.73

.72

Relationship advancement by a RP of the customer RPC1 .81*** 0.67 0.80 RPC2 .83***

.80

Supplier SI1 SI2 SI3 SI4

Standardized factor loading

involvement in customer NPD .79*** 0.65 .73*** .83*** .86***

Supplier commitment SC1 .85*** SC2 .66*** SC3 .67*** SC4 .77*** Supplier ST1 ST2 ST3 ST4 ST5

Average variance extracted

trust .76*** .73*** .64*** .77*** .90***

Supplier-specific adaptations of the customer SSA1 .64*** 0.47 SSA2 .74*** SSA3 .68***

*** Parameter estimates are significant at the .001 level.

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were used to measure the construct relational power sources of the RP (a=.74). Because the hypotheses focused on the influence of a single person, the persons who had the highest scores concerning the role elements ‘‘performance contributions of the RP’’ and ‘‘power sources of the RP’’ were included in the following analyses. Confirmatory factor analysis (CFA), with the covariance matrix as the input, was conducted using LISREL 8 to test the measurement model. However, the chi-square value for the model was significant [c2(125) = 173, P =.003], the overall fit (GFI = 0.929, AGFI = 0.902, CFI = 0.976, RMR = 0.044, RMSEA = 0.039) was acceptable (cf. Anderson and Gerbing, 1984; Baumgartner and Homburg, 1996). Table 1 contains standardized ML parameter estimates for the measurement model, proportions of variance extracted, construct reliability values, and Cronbach’s alpha values. All scales exhibit reasonably high reliabilities. All Cronbach’s alphas exceed the threshold value of .7. The average variance extracted except one, and all of the construct reliabilities exceed the threshold values of 0.5 and 0.7, respectively (Fornell and Larcker, 1981). Discriminant validity between the seven factors and the two secondorder constructs is given applying the criterion suggested by Fornell and Larcker (1981). Thus, the measurement model’s results can be interpreted as acceptable. Appendix B documents correlations among the constructs. 3.3. Hypotheses tests

ive marketing-oriented boundary spanners (e.g., Crosby et al., 1990). A principle component analysis of 13 relational power source items produced three factors with eigenvalues greater than 1.0. Together, these three factors explained 64% of the total variance. The three factors were rotated to an oblique solution. The factors could be interpreted as good personal relationships to and detailed knowledge of relevant third parties (five items, a=.82), social competence (four items, a=.82), and good personal relationships to and detailed knowledge of the partner firms (four items, a=.81). The arithmetic means of the three multiitem scales

Tests of the hypotheses were performed using a structural equation model. This model also reflected a good fit to the data [c2(125) = 173, P =.003, GFI = 0.929, AGFI = 0.902, CFI = 0.976, RMR = 0.044, RMSEA = 0.039]. All of the relationships predicted in the structural model were found to be in the hypothesized direction. Furthermore, the model explains a substantial portion of the variance of the most endogenous variables: supplier involvement in NPD (38%), supplier commitment (41%), supplier trust (21%), and supplier-specific adaptations of the customer (10%).

Table 2 Parameter estimates of the relationship model Proposed model Path

Estimate (standardized)

t Value

Supplier commitment ! supplier involvement in NPD Supplier trust ! supplier involvement in NPD Supplier-specific adaptations of the customer ! supplier involvement in NPD Relationship advancement by a RP of the customer ! supplier involvement in NPD Supplier trust ! supplier commitment Supplier-specific adaptations of the customer ! supplier commitment Supplier-specific adaptations of the customer ! supplier trust Relationship advancement by a RP of the customer ! supplier commitment Relationship advancement by a RP of the customer ! supplier trust Relationship advancement by a RP of the customer ! supplier-specific adaptations of the customer

0.210 0.217 0.117 0.263 0.431 0.180 0.245 0.209 0.321 0.309

2.40 2.68 1.52 3.36 5.82 2.33 3.01 2.78 4.12 3.52

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The standardized solution estimated by the LISREL 8 program was used for interpreting the structural relations results (Table 2). As was expected, supplier commitment and supplier trust were found to be significant predictors of supplier involvement in NPD (Hypothesis 1 supported: P < .01; Hypothesis 2 supported: P < .01). Supplier-specific adaptations have a marginally significant positive effect on supplier involvement in the customer’s product development ( P < .10). Thus, there is in some degree support for Hypothesis 3. Further, relationship advancement by a RP of the customer has a significant influence on supplier involvement in NPD (Hypothesis 4 supported: P < .01). Increasing supplier trust positively influences supplier commitment (Hypothesis 5 supported: P < .01). Supplier-specific adaptations were positively associated with supplier commitment and supplier trust (Hypothesis 6 supported: P < .05; Hypothesis 7 supported: P < .01). Supplier commitment and supplier trust are greater when relationship advancement by a RP of the customer is higher, supporting Hypothesis 8 ( P < .01) and Hypothesis 9 ( P < .01). Finally, relationship advancement by a RP of the customer has a significant effect on the customer’s supplier-specific adaptations (Hypothesis 10 supported: P < .01). Because data for this study were collected from a single key informant, questions about the degree to which the results may have been affected by common method variance or bias might be raised. A confirmatory single-factor analysis approach was used to address this potential problem (cf. Bharadwaj and Howell, 1996). A model positing that a single factor underlies the study variables did not fit well at all [c2(135) = 928, P =.000, GFI = 0.653, AGFI = 0.560, CFI = 0.605, RMR = 0.110, RMSEA = 0.177] compared to the fit of the five-factor confirmatory factor analysis. These results suggest that common method bias or variance alone cannot explain the results of the present study.

4. Discussion 4.1. Managerial implications The results of this study are relevant for manufacturers seeking to involve appropriate suppliers in NPD. From a managerial perspective, three important conclusions emerge from the study. (1) Manufacturers should move from arm’s length, and, often, adversarial relationships to close relationships with suppliers. (2) Supplier-specific adaptations should be conducted to develop close relationships with suppliers and enhance their involvement in NPD. (3) People in customer firms entrusted with the management of important supplier relationships must recognize their role as RPs. The findings of this study highlight the need for customers to move towards a relational oriented approach in order to encourage and enable suppliers to participate in NPD

processes. The result of this study suggest that customers benefit from adopting a strategy of developing suppliers’ trust and commitment. Therefore, supply and purchasing managers should treat suppliers less as vendors and more like partners. However, it should be considered that some suppliers are more and others less attractive partners for close relationships (cf. Ellram, 1990; Spekman, 1988). Commodity suppliers and suppliers that strive to produce products of the highest quality (technology specialists) might not be interested in behaving as loyal partners and/ or developing close relationships with customers (cf. Kaufman et al., 2000). Commodity suppliers compete successfully on the basis of low costs. Usually, relation-specific investments of these suppliers (e.g., managerial practices, collaborative techniques to anticipate customer needs, personnel sharing, product adaptations) cannot be fully recovered. Technology specialists attract customers on the base of innovative products and reduce reliance on a few customers. They might transfer interfirm know-how gathered through collaborative customer relationships to rival customers in their search for new (key) customers. Effective supplier involvement in customer NPD requires that mismatches between the supplier and customer firm are eliminated by partner-specific adaptations. The present study reveals that a customer firm that adapts its manufacturing processes, planning, organizational buying behavior, structure, and information exchange to accommodate a particular supplier’s needs and wants, supports this supplier to participate timely and purposefully in NPD. However, without the careful management of supplier-specific adaptations, customers can end up with a high and unintended dependence on the supplier (Brennan and Turnbull, 1999). Therefore, supply managers need a good understanding of what their suppliers expect before entering into technology partnerships where they are asked to commit resources to them. The results of this study indicate that the role of a RP is of crucial importance to the development and maintenance of a close supplier relationship. Supply and purchasing managers should become dedicated relationship managers, lobbying internally and externally for support and resources to develop, maintain, and enhance close relationships with appropriate suppliers. 4.2. Research implications Research in marketing is increasingly focusing on understanding antecedents and dimensions of value-creating relationships with suppliers. The main purpose of this study was to develop and test a model of relationship-specific factors that foster a supplier’s contributions to product development. The estimated model provides good support for the hypotheses that supplier involvement in customer NPD is driven by a supplier’s commitment and trust. The findings confirm other studies that have revealed trust and commitment as essential ingredients for successful collaborative

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relationships (e.g., Moorman et al., 1992; Morgan and Hunt, 1994). Furthermore, the study reveals that supplier-specific adaptations of the customer and relationship advancement by a RP of the customer have a considerable impact on supplier involvement in customer NPD. Adaptive behavior of a customer towards a supplier tends to ‘‘feed back’’ into increased trust and commitment of the supplier (cf. Wilson and Mummalaneni, 1986). Activities and attributes of boundary spanners (Adams, 1976; Aldrich and Herker, 1977) are critical issues in relationship management (cf. Crosby et al., 1990), yet, empirical research concerning its effects on relationship outcomes is limited. This empirical analysis of 247 supplier –customer relationships shows that RPs in the customer firms contribute to the suppliers’ integration in NPD. The findings reveal that RPs have a significant direct and an indirect impact on supplier involvement. The indirect influence of RPs is mediated through supplier-specific adaptations and the supplier’s trust and commitment. These findings confirm that the role of supply managers and purchasing managers is indeed in a transition moving towards being that of a RP. The individuals who acted as RPs, identified appropriate actors (e.g., experts and decision makers) on the part of the business partners, brought these significant persons together, and advanced their dialogue and mutual trust. The RPs coordinated cooperational activities between suppliers and customers, supported the interorganizational learning process, and contributed to the constructive resolutions of existing conflicts. Social competence, network knowledge, and a portfolio of good personal relationships were found to be crucial attributes of successful relationship managers. The present study not only answers important questions concerning the management of relationships, it also raises questions for further research. Even the best RP will hardly be able to utilize the potentials of a supplier relationship if he/she has to get by without the support of further key persons. The management of collaborative relationships is frequently a task for teams (Narus and Anderson, 1995). Whenever two or more individuals work together within a business relationship context, the quality of team collaboration has a strong impact on relationship outcomes (Helfert and Vith, 1999). What are the team functions of a RP? Does he/she hold the position of a team leader, and if not, how can dysfunctional competition with the formal team leader be avoided? Is a RP always a promoter? We have only examined the influence of the RP on a single business relationship. Based on information from our interviews, we can expect that the key person in a company is involved in more than one business relationship at the same time. Consequently, this person may not always be able to foster each relationship with the same priority. Furthermore, a RP might act as an opponent in other business relationships of his/her company in order to develop and maintain his/her own relationship(s).

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Answers to these questions are relevant to the design of supply strategies, tactics, and training programs that would enable purchasing-oriented boundary spanners (e.g., supply mangers, purchasing mangers, purchasing agents) to function as effective managers of collaborative relationships with suppliers. 4.3. Limitations Although the empirical findings generally support the conceptualized model, the limitations of the present study must also be recognized. The first limitation is the ignorance of further potential antecedents of supplier involvement in NPD and subsequently moderate explanatory power of the model. Findings of Campbell (1998) and LaBahn and Krapfel (2000) suggest that dependence on the customer and an innovation-oriented firm strategy may influence supplier’s involvement in NPD. Customer-specific adaptations of processes and procedures may facilitate the supplier’s integration in their customers’ NPD. Halle´n et al. (1991) found that both supplier and customer adapt to each other. Second, the data for this analysis were obtained from a single informant in the supplier company. This is a common practice in marketing research (Philipps, 1981). Kumar et al. (1993) have suggested that choosing the appropriate key informant could alleviate some of the potential problems. We have invested a considerable amount of time to identify a person that is equally well-informed about the supplier and customer company in general, and the interfirm relationship in question. It remains vigorously debated in the literature whether multiple respondents from each interviewed supplier are necessary to ensure the validity of results such as those of this study (John and Reve, 1982). However, results from pilot interviews did not indicate large differences between the key informant’s view of the relationship and the view of the customer’s employees, providing support for the validity of data collected solely from supplier informants. Because this research focused on factors that motivate and enable a supplier to participate in the NPD, only key informant data from the supplier were used. However, the results suggest that supplier involvement in NPD also depends strongly on motives, strategies, and capabilities of the customer. Examining perceptions of both parties is likely to be beneficial. In this study, mostly SMEs were interviewed. Those companies might be more dependent upon their customers because each customer generally accounts for a substantial proportion of its business. Findings by Kamath and Liker (1990) suggest that dependent suppliers are more willing to engage in innovation-oriented relationships to maintain their customer base even if the results are not clearly cost effective in the short term. Therefore, trust and commitment may have higher importance levels as the present study might suffer from a company size clustering bias.

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Acknowledgements The author thanks the JBR reviewers for helpful comments on previous drafts of this article.

Appendix A. Measures The survey for this empirical investigation was conducted in German. The following questionnaire items were translated for inclusion in this contribution. Supplier involvement in customer NPD (Mean = 3.60, S.D. = 1.65) To what extent is your firm involved in NPD on the side of the customer firm? (1 = not at all, 7 = to a very high degree) SI1: SI2: SI3: SI4:

Idea generation Product concept development Prototype building Prototype testing

Supplier commitment (1 = strongly disagree, 7 = strongly agree) (Mean = 5.37, S.D. = 1.36) SC1: We consider our current collaboration with this customer as part of a long-term relationship. SC2: We are willing to invest time and money to develop the relationship with this partner. SC3: We would not supply another customer at the expense of this current customer. SC4: We place the long-term cooperation with this customer before our short-term profit. Supplier trust (1 = strongly disagree, 7 = strongly agree) (Mean = 5.45, S.D. = 1.30). ST1: We are convinced that this customer handles information from us confidentially. ST2: We take on the risk not to include all details of our relationship in legal agreements. ST3: We believe that this customer exploits the benefits of our cooperation to our disadvantage. (reverse scored) ST4: We are convinced that this customer performs its tasks professionally. ST5: We consider this customer as trustworthy. Supplier-specific adaptations of the customer (Mean = 2.94, S.D. = 1.42) What adaptations has your customer made in order to meet your company’s needs and wants? (1 = none, 7 = very large) SSA1: Supplier-specific adaptations of production Adaptations of quality-control procedures Adaptations of production planning

Adaptations of production processes Adaptations of production technologies SSA2: Supplier-specific adaptations of purchasing Adaptations of buying terms Adaptations of the buying organization Adaptations of purchasing procedures SSA3: Supplier-specific adaptations of information exchange Adaptations of technical information exchange Adaptations of nontechnical information exchange Relationship advancement by a RP of the customer (Mean = 4.85, S.D. = 0.99) RPC1: Relational performance contributions To what extent does the person in question perform the following activities within the relationship? (1 = not at all, 7 = to a very high degree) Representing interests The person in question . . . actively seeks contact with employees of the partner company. . . . seeks the exchange of information with employees of the partner company. . . . represents our interests towards the partner firm. . . . purposefully addresses specific employees of the partner organization to establish a collaboration. . . . puts employees of our company in contact with persons on the side of the customer, who may provide desired information. . . . represents the partner’s interests towards our firm. . . . puts employees of the customer’s company in contact with persons in our company, who may provide desired information. . . . purposefully puts people of both companies in contact. . . . puts employees of both companies in contact with agents of relevant third parties. Coordinating cooperative activities The person in question . . . coordinates the relevant relationship activities within and outside of the organization. . . . plans the objectives to be reached with the partner company. . . . controls the relationship activities. . . . monitors deviations from the planned extent of business development with the partner company. . . . makes sure that arrangements between the partners are kept. . . . works out compromises between the partner companies. . . . solves conflicts emerging between the partner companies.

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. . . takes part in negotiations with the partner company. Information brokering The person in question . . . conveys information between the partner organizations. . . . is, for the employees of our company, the one to contact in regard to partner-specific questions. . . . informs employees within his/her own organization about the needs of the partner company. . . . is, for employees of the partner company, the one to contact in regard to questions concerning our company. RPC2: Relational power sources Social competence To what extent does the person in question possess the following skills? (1 = not at all, 7 = outright) Skills to create and shape positive relationships between the individuals involved. Skills to get along adaptively and professionally with the people involved. Skills to effectively coordinate tasks of the actors. Skills to constructively work with the people involved. Good personal relationships to and detailed knowledge of relevant third parties To what extent does the person in question possess the following attributes? (1 = not at all, 7 = outright) Good personal relationships with people who belong to (potential) other customers of the supplier. Good personal relationships with people who belong to competitors of his/her company. Good personal relationships with people who belong to (potential) other suppliers of the customer. Good personal relationships with people who belong to competitors of the partner company. Detailed knowledge about important third parties. Good personal relationships to and detailed knowledge of the partner firms To what extent does the person in question possess the following attributes? (1 = not at all, 7 = outright) Good personal relationships with important people in his/her own company. Good personal relationships with important people in the partner company. Detailed knowledge about the own company. Detailed knowledge about the partner company.

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Appendix B. Correlation matrix of measurement scales

Construct

1

(1) Relationship advancement by a RP of the customer (2) Supplier-specific adaptations of the customer (3) Supplier trust (4) Supplier commitment (5) Supplier involvement in customer NPD

1.0

2

.31

1.0

.40 .44 .48

.34 .39 .36

3

4

5

1.0 .58 .48

1.0 .50

1.0

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