Relationship magnitude and its role in interorganizational relationship structure

Journal of Business Logistics, 2003 by Golicic, Susan L, Foggin, James H, Mentzer, John T

A large part of managing supply chains consists of managing multiple relationships among the member organizations (Cooper et al. 1997; Mentzer et al. 200 1a, b). Connections among these organizations range from single transactions to complex interdependent relationships. As the business environment becomes more complex, organizations within supply chains realize that many benefits can be obtained from long-term relationships (Ganesan 1994). Building interdependent or closer relationships with customers is thought to increase customer satisfaction (Berry and Parasuraman 1991). Day (2000) even goes so far as to say that committed relationships are among the most durable of advantages because of their inherent barriers to competition. Thus, many firms are moving away from adversarial exchanges toward closer and more long-term relationships (Holmlund and Kock 1993; Kalwani and Narayandas 1995).

Much has been written in both the popular press and academic literature about the drivers and expected benefits from various supply chain relationships such as alliances, partnerships, collaborative relationships, and supply chain management. However, a high level of ambiguity still exists among the different definitions and descriptors of relationships (Cravens, Shipp, and Cravens 1993; Lambert, Emmelhainz, and Gardner 1996; Rinehart et al. 2002). The terms to describe these various relationships are often used interchangeably, creating confusion for both practitioners and academics.

Theory is built on defined and interrelated constructs (Kerlinger and Lee 2000). For theory to be validated and advanced, each construct must have a single, clear definition. It is therefore important for researchers to be consistent in their usage of interorganizational relationship terms. For managers, ambiguity in relationship terms can mean disconnects in the expectations between suppliers and customers. Misaligned expectations can lead to dissolution of the relationship or even lawsuits (Mottley 1998). For relationships to be as effective and efficient as possible, a mutual understanding of expectations is necessary. Clear, consistent usage of the different relationship descriptors is a step toward accomplishing this.

Therefore, the purpose of this paper is to introduce the concept of relationship magnitude as an antecedent to relationship structure types and to clarify the distinction between the two, using both the literature and an exploratory research study. Representative literature from several disciplines, such as marketing, logistics, strategic management, economics, psychology, and sociology, was examined to provide comprehensive views of the relationship terms studied. Next, the methodology for an exploratory study with company executives on the characteristics of interorganizational relationships is presented followed by a discussion of the study findings. Finally, implications of this research, as well as opportunities for future research, are presented.

RELATIONSHIP STRUCTURE

Inconsistency in the definitions and use of relationship terms has created problems for the interpretation and replication of research findings. One reason for this may be that researchers are not consistent in selection of characteristics to differentiate and lead to different relationship structures. Personal relationships are structured based on needs and the level of attraction or intimacy between two or more people. The attributes of trust and commitment often describe the intimacy or level of closeness of the relationship as opposed to the type of relationship (e.g., friendship, marriage). Analogous to this, we propose the structure of interorganizational relationships is composed of relationship type, with the distinct construct of relationship magnitude antecedent to type. Both of these are discussed in more detail.

Relationship Type

Interorganizational relationships have historically been categorized by where they fall on a governance spectrum. The channels literature was the first to propose a range of relationships from arms length transactions (or market governance) to vertical integration (or hierarchical governance). More recently it has been recognized that integration involving more than one firm may be more appropriately placed at the latter end of this range since one firm cannot effectively accomplish the control and management of the whole channel (or supply chain). Several authors have since acknowledged these two end points, arms length and integration, and placed interfin cooperative relationships (types of relationships where there is cooperation between or among the firms involved) in the middle (Contractor and Lorange 1988; Heide 1994; Landeros and Monczka 1989; Nevin 1995; Webster 1992).

The different cooperative relationships have been identified as partnerships, alliances, joint ventures, network organizations, franchises, license agreements, contractual relationships, service agreements, and administered relationships, to name a few. Some authors have proposed where these relationships fall in relation to each other on the range between the types of arms length and integration (Contractor and Lorange 1988; Webster 1992). These studies attempted to categorize the relationships under a particular type based on the relationship characteristics. Thus, type is defined here as the group or class of relationships that share common traits or characteristics.