Competitive and Cooperative Positioning in Supply Chain Logistics Relationships*

Decision Sciences, Nov 2007 by Klein, Richard, Rai, Arun, Straub, Detmar W

ABSTRACT

Cooperative logistics relationships require the sharing of information, which must be enabled by the integration of disparate information systems across partners. In this article, we theorize business-to-business logistics relationships should be managed using cooperative and competitive postures. Based on data from 91 dyadic relationships using interorganizational information technology (IT), we find that performance gains accrue when parties share strategic information and customize IT; mutual trust enables IT customization and strategic-information flows and equitable relationship-specific investments positively impact IT customization, mutual trust, and performance. Among other scholarly and practical implications discussed, partners should compete on resources for IT customization and cooperate to share strategic information. Managers tend to think of relationships with firms as polar opposites and view them as entirely cooperative or entirely competitive. Our results support active balancing and understanding of both competitive and cooperative stances. Such an approach enables conditions for participation symmetry that yields greater performance gains.

Subject Areas: Collaborative Partnerships, Dyadic Data, Exchange Relationships, Field Studies, Information Sharing, Logistics Service Performance, Structural Equation Modeling, and System Integration.

INTRODUCTION: THE MANAGERIAL PROBLEM OF RELATING TO PARTNERS

Recently, collaborative customer relationships and integrated partnerships have been gaining in popularity in business-to-business (B2B) markets (Day, 2000). Traditional intermediaries for logistics and distribution are changing their roles and value propositions through digital networks (Brousseau, 2002). These service providers are drawing on vast informational resources to exploit market knowledge. While early Internet-based initiatives fostered sales and new transaction opportunities, recent innovations redefine relationships, share processes, and increase collaboration (Wladawsky-Berger, 2000; Patnayakuni, Rai, & Seth, 2006; Rai, Patnayakuni, & Patnayakuni, 2006). Accordingly, the ability to easily, efficiently, and economically access information outside firm boundaries (Hitt, 2000) can generate further efficiencies for participants in exchange relationships (Lee & Whang, 2000; Kotabe, Martin, & Domoto, 2003; Vickery, Jayaram, Droge, & Calantone, 2003).

These generalized informational advantages aside, how should managers sculpt their day-to-day relationships with vendors, particularly logistics providers? In which cases should they be concerned about opportunism and in which cases should they not? Every day, managers make decisions about the posture they need to assume regarding business partners. If the posture is competitive, they bargain for the best deal for their own organization. If the posture is cooperative, then they must take into account the consequences of decisions and actions on their business partner.

Earlier management thinking viewed the vertical supplier-firm and customer-firm relationships as quintessentially competitive. In Porter's work on industry structure (Porter, 1985; Porter & Millar, 1985), managers cope with the five forces by improving bargaining power with respect to customers or suppliers. In fact, the force of internal rivalry between competitors is viewed in the same light. The environment in which a manager makes decisions about interacting with other firms is seen as being entirely adversarial.

Management thinking has evolved to perceive customers and suppliers as partners and to focus more attention on the relationship (Brandenburger & NaIebuff, 1996). This evolution has occurred across the administrative disciplines. In marketing, for example, the earlier view of customers was an arm's-length, transactional view (Coviello, Brodie, Danaher, & Johnston, 2002). Later, this was supplemented by a view that not all customers should be held at arm's length. The term relationship marketing captured this perspective, likely introduced by Berry (1983).

In the management literature, the concept of the relational view has emerged to describe situations in which B2B trading partners are, in effect, competing for resources with each other, but in which the advantages conferred by the relationship, in some cases, outweigh the need to be opportunistic (Dyer & Singh, 1998). What this change in paradigmatic focus suggests is that decision makers can no longer assume that their partners are adversarial and that they should be entirely wary in their dealings with them. The new view posits that such cooperative activities as the extensions of trust and information sharing work well in some situations.

Consider the traditional logistics intermediary relationship that is being transformed. Expanded electronic intermediary functions include sharing private information related to inventory movement or financial flows based on me characteristics of the customer's supply chain or product. Such information sharing requires the customization of information technology (IT) systems used in an exchange relationship. By integrating the vendor's logistics IT solutions with their own organizational systems, processes in the client and vendor firms can be aligned (Stein, 1998; Walker, Bovet, & Martha, 2000). In fact, clients can tap into information held by vendors to streamline processes, develop value-added products and services, and strengthen customer ties (Gulati & Kletter, 2005). On the other hand, logistics vendors can pool information about client requirements across time, channels, and services, to globally optimize plans and adapt process execution (Lewis, Rai, Forquer, & Quinter, 2007).