Buyer-supplier alliances in the automobile industry

Journal of Orànizational Behavior J[ Oràniz[ Behav[ 10\ 602Ð629 "1999#

BuyerÐsupplier alliances in the automobile industry] how exit!voice strategies in~uence interpersonal relationships RONALD H[ HUMPHREY0 AND BLAKE E[ ASHFORTH1 0 1

Summary

Department of Manaèment\ Virìnia Commonwealth University\ Richmond\ Virìnia\ U[S[A[ Department of Manaèment\ Colleè of Business\ Arizona State University\ Tempe\ Arizona\ U[S[A[

Although automobile manufacturers emphasize that they are building more cooperative\ long!term relationships with their suppliers\ we hypothesized and found that buyers are actually pursuing a dual strategy approach\ in which they use threats on out!group suppliers while providing help to in!group members[ Our hypotheses were based on the exit\ voice\ and loyalty typology\ and on research from leaderÐmember exchange theory[ We also found that the macro!level strategy set the context for the micro!level interactions between buyers and suppliers[ The degree to which the buyers and suppliers interacted in a friendly\ informal manner depended more on the in! or out!group status of the supplier _rm than on the interaction style preferences of the suppliers[ These _ndings are consistent with Mischel|s "0866# theory that individual di}erences predict behavior under weak environmental conditions but not under strong environments[ Compared to buyers\ suppliers were more likely to prefer a friendly\ informal interaction style[ These _ndings were predicted based on the research on emotional display rules and emotional labor[ Copyright Þ 1999 John Wiley + Sons\ Ltd[

Introduction In the last decade\ the relationships between buyers and suppliers in the American automobile industry have undergone tremendous changes[ With the shift in emphasis from price to quality\ automobile manufacturers have had to restructure their ties with their suppliers[ Spokespeople for the automobile manufacturers generally emphasize how they are trying to build more cooperative relationships with suppliers\ based upon long!term contracts\ information sharing\ and trust "Gardner\ 0882#[ In contrast\ supplier representatives often emphasize how the automobile manufacturers are shrinking the number of suppliers\ and are using the threat of termination to demand price reductions and quality improvements[ We will examine] "0# the strategies used by buyers to in~uence suppliers| performance regarding price\ quality\ and delivery times^ and "1# how these strategies a}ect the interpersonal relationships between company representatives and buyers[ Because the _rst issue concerns macro!level Correspondence to] Ronald Humphrey\ Department of Management\ Virginia Commonwealth University\ 0904 Floyd Avenue\ Box 733999\ Richmond\ Virginia 12173!3999\ U[S[A[ E!mail] rhhumph0Ývcu[edu

Copyright Þ 1999 John Wiley + Sons\ Ltd[

Received 5 November 0886 Accepted 7 November 0888

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processes\ whereas the second concerns micro!level interactions\ the two issues are generally treated separately[ However\ macro!level researchers studying inter_rm alliances are beginning to recognize the importance of variables such as trust that are usually conceptualized in micro! level terms "Gulati\ 0884#[ The incorporation of micro!level processes can add to our under! standing of inter_rm alliances[ We must also begin to understand how behavior that is usually attributed to the personal characteristics of the actor is shaped by the organizational context[ For example\ leadership style is generally thought to be a stable individual characteristic\ yet as Osborn and Ashforth "0889^ p[ 038# argue\ {All leaders are embedded in networks of roles\ work and information ~ows\ meansÐends chains\ precedents and procedures\ and so on\which may obligate them to behave in certain ways[| Although buyers are likely to have a preferred communication style that represents their underlying personality\ their ability to use their preferred style may depend upon the organizational context[ In particular\ it may depend upon the strategy that their _rm is pursuing with regard to suppliers[ We also believe that many processes that occur at one level occur in a parallel fashion at another level\ and that we can gain new insights by applying micro!level theories to macro issues\ and vice versa[ In their article on intra! and interorganizational cooperation\ Smith et al[ "0884^ p[ 00# state\ {Since cooperation at any level must ultimately be reduced to cooperation between individuals*such as managers from di}erent organizations*the distinction between the levels is blurred[ Thus\ macro researchers can probably learn much about cooperation from past and current studies at the micro level[| At the macro level\ we will show how the use of exit and voice strategies create {in!groups| and {out!groups| of suppliers[ We will then relate this to the work on leaderÐmember exchange theory\ which describes how leaders also create in! and out!groups among their subordinates[

Macro in~uences on individual behavior According to Mischel "0866#\ situations can be classi_ed as either stron` or weak according to their ability to in~uence behavior[ Under strong situations\ situational factors best predict behavior\ whereas under weak conditions\ individual di}erences predict better[ Chatman "0878^ P[ 223# argues that strong situations are most likely when {everyone construes the situation similarly\ the situation induces uniform expectancies\ the incentives of the situation induce a response to it\ and everyone has the skills to perform in the situation[| Although it is often assumed that leaders {lead| and thus control the situation\ Hunt et al[ "0867# argue that a considerable portion of leaders| behaviors are non!discretionary acts determined by the organ! izational setting[ Osborn and Ashforth "0889\ p[ 037# explain how managers| attention*and thus behavior*is captured by the organizational context] {Attention is patterned largely through organizational structures and processes*notably behavioral scripts*which reinforce man! agement|s operationalization of the organizational mission\ and through myths that attempt to bridge certain discontinuities in that operationalization[| The environment in the early 0889s indicates that automobile buyers were in strong situations that restricted the behaviors of individual agents[ First\ the buyers were aware that the general strategy was to reduce the number of suppliers[ All of the American automobile makers were moving to incorporate elements of the Japanese system of handling suppliers\ which called for developing long!term relationships with a small number of suppliers[ The American automobile Copyright Þ 1999 John Wiley + Sons\ Ltd[

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manufacturers conducted benchmarking studies that examined the number of suppliers used by the most successful Japanese manufacturers[ Ford mainly studied Toyota\ whereas Chrysler studied Honda[ "See Dyer\ "0885# for a discussion of the extent to which Chrysler successfully adopted the Japanese Keiretsu style of managing relationships with suppliers#[ The resulting reduction in the number of suppliers was substantial[ For example\ within the electronics:electrical systems segment\ Chrysler reduced the number of suppliers by 24 per cent over a four year period "Anonymous\ 0886#[ Second\ the Big 2 automobile manufacturers developed programmes requiring their buyers to demand price cuts from their suppliers[ These programmes speci_ed the range of price cuts "generally 4Ð09 per cent# that the buyers would have to achieve\ and thus restricted the latitude that buyers had in awarding contracts[ For example\ in 0878 Chrysler developed the Supplier Cost Reduction E}ort "SCORE# programme[ This programme was designed to develop a culture of continuous cost improvements among suppliers and has resulted in tremendous reductions in the cost of components[ For instance\ for 0886 alone the SCORE programme resulted in U[S[ ,0[12 billion dollars in savings] ,219 million was saved in 0886\ with the rest accumulating over the remainder of the product cycles "Fitzgerald\ 0886b#[ Third\ the demand that suppliers meet new and increasingly stringent quality requirements also created a strong environmental situation that limited the buyers| freedom to select suppliers[ Many suppliers were unable to meet the burdens imposed on them by the various quality programmes such as the QS!8999 series "Bandyopadhyay\ 0885#[ These quality programmes required new technology that was too expensive for some of the smaller suppliers and also required more sophisticated management techniques[ Consequently\ buyers found that they were no longer able to award contracts to some of their former suppliers because of quality compliance problems[ Fourth\ the quality demands have been pushed further down the supply chain[ The _rst tier suppliers\ who supply parts directly to the automobile suppliers\ are now being required to make sure that their suppliers "the secondary tier# also meet the same standards that they have to meet "Carbone\ 0885#[ It is reasonable to believe that these programmes created behavioral scripts in terms of the demands buyers would have to make\ and focused the attention of the buyers on whether suppliers would be long! or short!term partners[ Likewise\ the suppliers were also restricted by their economic situation\ which often determined whether they could meet the new demands placed upon them[

How exit and voice strateìes create in! and out!`roups It has been suggested that relationships between buyers and suppliers can be classi_ed according to whether buyers are using an exit strategy or a voice strategy "Helper\ 0880#[ Exit and voice are terms from Hirschman|s "0869# model of political behavior "his typology also included loyalty as one of the components#[ In her application of these terms to the automobile industry\ Helper "0880^ p[ 04# states that {In an exit| relationship\ a customer that has a problem with a supplier _nds a new supplier[ In a {{voice|| relationship\ the customer works with the original supplier to resolve the problem[| Helper "0880^ p[ 14# speculates that it might be possible {for customers to establish voice relationships with key suppliers and exit relationships with the rest[| Although Helper|s argument about dual strategies is reasonable\ it has never been tested[ Hence\ a major Copyright Þ 1999 John Wiley + Sons\ Ltd[

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purpose of this study will be to test whether a dual strategy "exit!voice# model best explains buyerÐsupplier relationships[ Dual strategies for handling relationships exist at the micro level as well as at the macro level[ LeaderÐmember exchange "LMX# theory posits that leaders use di}erent leadership styles with {in!group| members "the {cadre|# than with out!group members "the {hired hands|#[ Considerable support exists for the proposition that the same leader can use two di}erent styles with sub! ordinates "Dansereau et al[\ 0862\ 0864^ Graen et al[\ 0861^ Scandura and Schriesheim\ 0883#[ With in!group members\ the leader uses consideration and a more friendly and informal lead! ership style\ whereas with the out!group the leader uses a more formal\ impersonal approach[ With regard to buyerÐsupplier relationships\ we will examine whether buyers use two di}erent interaction styles with their suppliers[ In particular\ we will examine whether they use a more friendly\ informal style with one group "the in!group# of supplier representatives\ and a more formal\ task!oriented style with the other group "the out!group#[ We will also examine the role that performance plays in determining in!group or out!group membership[ According to LMX theory assignment to the in!group is due to the performance of the subordinates[ Subordinates who perform well are rewarded with the privilege of in!group membership and with special managerial favors[ Likewise\ it is likely that buyers will use an in!group communication style and a voice style strategy with their high performing suppliers\ and an out!group communication style and exit strategy with their low performers[ Whether buyers and suppliers pursue a formal or informal conversational style with each other is likely to be due in part to whether they have compatible personalities\ common values\ and so forth[ When buyers share common values with suppliers\ it is only natural that they will comment on non!business related news items\ sports\ or family events "e[g[\ Dorsey\ 0883#[ However\ the type of interpersonal interaction between buyers and suppliers is also likely to be strongly in~uenced by the organizational strategy that the buyer has to implement[ Thus we posit that when the buyer must use threats and other negotiation tactics associated with the exit strategy\ the buyer is more likely to use a more impersonal approach typically used with the out!group[ Likewise\ when the buyer is implementing a voice strategy\ the buyer is more likely to use a friendly\ personal interaction style and to treat the supplier as a member of the in!group[ In general\ then\ we posit that the macro!level strategy sets the context for the micro!level interaction\ and thus the macro level shapes the micro level[ There is no logical reason why a buyer pursuing an exit strategy with a supplier cannot have a friendly conversation with the representative from the supplier organization[ Case studies provide examples of friendly conversations between adversaries engaged in even more serious disputes^ for example\ Winston Churchill reports numerous friendly conversations with his guards and captors when he was a prisoner of war "0880#[ However\ it is emotionally di.cult for most people to have friendly conversations with those they have to undergo tough negotiations with[ Thus the research on emotions at work "Ashforth and Humphrey\ 0882\ 0884a# suggests that buyers are likely to distance themselves emotionally from agents representing low performing suppliers[ Because the public statements of automobile spokespeople and of supplier representatives are so di}erent "Gardner\ 0882^ Shellum\ 0880#\ it is important to survey both buyers and suppliers[ This is especially true when interpersonal relationships are also under consideration[ However\ most studies survey only one party or the other\ and focus either on micro or on macro issues\ both not both[ As theorists have begun to recommend\ alliances need to be examined from a dyadic perspective that examines both structural and interpersonal factors "Morris and Holman\ 0877#[ Thus we will examine both micro and macro factors from the viewpoints of both buyers and suppliers[ Copyright Þ 1999 John Wiley + Sons\ Ltd[

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Strateìes in buyerÐsupplier relationships Hirschman|s "0869# exit\ voice\ and loyalty typology has been successfully applied to a variety of macro and micro issues\ ranging from the movements of people across countries to the movement of employees in and out of organizations[ The concept of ne`lect has also been added to the typology\ where neglect refers to focusing on non!work "or non!productive# issues "Farrell and Rusbult\ 0881^ Withey and Cooper\ 0878#[ Considerable attention has been given to the loyalty concept "Minton\ 0881#[ Researchers have explored whether loyalty can be either active or passive "Withey and Cooper\ 0881#\ and whether it has both attitudinal and behavioral components "Lock and Saunders\ 0881#[ Researchers have also examined whether barriers to exiting the organization increase employee attachment although not commitment "Cannings\ 0881#[ From a buyerÐsupplier viewpoint\ barriers to exiting might consist of transaction costs and limits on alternative relationships^ attached but uncommitted suppliers might be those who stay in the relationship but are unwilling to invest in expensive quality improvements[ Researchers have noted that loyalty promotes voice "Lock and Saunders\ 0881#\ although this may be moderated by organizational characteristics\ situational features\ and individual di}erences "Graham and Keeley\ 0881#[ With regard to the automobile industry\ Helper "0880# reasoned that high levels of loyalty and commitment are necessary when using a voice strategy\ because the voice strategy entails high costs that can only be recouped over time[ For example\ the voice strategy requires extensive communication systems\ the exchange of proprietary infor! mation\ and the sharing of production secrets for the purpose of improving each other|s e.ciency[ This line of research suggests that if buyers are using di}erent strategies "exit and voice# with an in!group and an out!group of suppliers\ then perceptions of the probability of maintaining a long!term relationship will be a key factor distinguishing membership in in! and out!groups[ Thus] Hypothesis 0 "Loyalty#] Compared to the out!group\ suppliers in the in!group are more likely to report a high perceived probability of maintaining the relationship[ The aim of any buyer strategy should be to improve the performance of the supplier[ At one time\ buyers mainly focused on improving price performance\ i[e[\ in obtaining the lowest possible price from the suppliers[ However\ now the aim is to improve quality and delivery time as well as price[ Yet improvements in quality often require suppliers to make expensive technical changes[ Because the automobile manufacturers are far larger than their suppliers\ one possibility would be for the manufacturers to o}er technical and _nancial assistance to their suppliers[ Because this strategy requires an investment of resources\ it makes sense only if the buyer expects the relationship to last long enough to justify the investment[ For example\ Chrysler sends teams of employees to conduct week long workshops that teach suppliers the basics of lean manufacturing systems[ Because these workshops are expensive Chrysler is very selective in deciding which suppliers receive the training "Fitzgerald\ 0886a#[ However\ another strategy would be for buyers to threaten to terminate the contracts of those suppliers who fail to make improvements in quality and delivery time[ Helper "0880# refers to the second strategy as an intensi_cation of the exit strategy that has traditionally been used by automobile manufacturers[ The research on transaction costs helps explain why many manufacturers may be reducing the number of supplier _rms while increasing the closeness of the relationships with the remaining suppliers "Williamson\ 0864#[ Transaction costs are related to the type of relationships formed between organizations\ with the complexity of the technology in use being a key factor "Osborn and Baughn\ 0889#[ Because quality improvements generally require an increase in com! Copyright Þ 1999 John Wiley + Sons\ Ltd[

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munication and joint action between buyers and suppliers\ transaction costs increase with quality programmes and with the number of suppliers[ Quality improvements may also require expensive new technology\ which may be beyond the reach of smaller suppliers[ Dividing up the market among many suppliers also reduces the economies of scale[ All of these factors suggest that manufacturers may be using exit strategies to shrink their supplier base\ while increasing the help they give to their top suppliers[ As a result\ suppliers are now being divided into in! and out! groups[ Naturally\ suppliers under the threat of termination will also perceive that they have less negotiation power[ Hence] Hypothesis 1 "Help:voice strategy#] Compared to the out!group\ suppliers in the in!group are more likely to report that buyers provide help to in~uence performance with regard to price\ delivery time\ and quality[ Results from the survey of buyers will con_rm that buyers give more help to in!group suppliers[ Hypothesis 2 "threats:exit strategy#] Compared to the out!group members\ suppliers in the in! group are less likely to report that buyers use threat strategies to in~uence performance with regard to price\ delivery time\ and quality[ The buyer survey will con_rm that buyers are less likely to use threats on in!group members[ Hypothesis 3 "perceived power#] Compared to the out!group members\ suppliers in the in! group will perceive that they have more power in negotiations with the buyers[ Buyers will rate in!group members as having more power than out!group members[

Macro in~uences on interpersonal relationships Ben Franklin|s famous maxim states that\ {It is possible to disagree without being disagreeable[| However\ his maxim is famous precisely because it pinpoints a problem area for most people[ Research on job characteristics and perceptual processes suggests that the need to make unpleasant demands would tend to create negative attributions towards the actor[ Humphrey and his colleagues argue that job characteristics in~uence both primary and secondary work behaviors\ which in turn in~uence perceptions "Humphrey\ 0874^ Humphrey and Ashforth\ 0884^ Humphrey and Berthiaume\ 0882#[ Primary work behaviors consists of those behaviors necessary to perform the task\ such as typing and _ling\ whereas secondary work behaviors consist of emotional displays and other behaviors indicative of the actors| reactions to the work[ In terms of buyerÐsupplier relations\ relaying the manufacturer|s demand that prices be cut by 4 per cent would be a primary work behavior[ Although this message would be due to the organization|s policy rather than to the personality of the buyer\ it is likely that the supplier|s perceptions of the buyer|s personality traits would be in~uenced\ and that the supplier would perceive the buyer as less friendly[ Research on actorÐobserver di}erences demonstrates that observers overattribute behavior to the personal dispositions of the actor "Jones and Nisbett\ 0860#[ Thus\ even if the buyer had been able to maintain a friendly demeanor\ it is likely that the supplier would still suspect that the buyer enjoys acting coercively[ However\ in most cases the buyer will feel pressure to adopt emotional displays consistent with the tough message about reducing prices\ and thus in fact will act more aggressively when making demands[ As Rafaeli and Sutton "0878# argue\ organizations develop display rules that specify the emotions that should be displayed while performing a particular job[ Consequently\ buyers| secondary work behaviors and emotional displays will usually reinforce the impressions created by their primary work behavior[ Copyright Þ 1999 John Wiley + Sons\ Ltd[

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The literature on emotional labor also suggests that it may be emotionally dissonant for buyers to feel friendly towards suppliers they may have to threaten with termination "Ashforth and Humphrey\ 0882\ 0884a#[ For example\ doctors and other medical personnel frequently have to convey bad news to patients^ consequently\ they have developed a variety of coping mechanisms to help them neutralize potentially disturbing emotions\ such as referring to patients by their symptoms "the kidney in room 192# rather than by their names[ Likewise\ buyers who have to deliver bad news about price cut!backs will be motivated to distance themselves from the suppliers that are most likely to su}er[ The literature on labelling also indicates that under times of stress people are motivated to scapegoat weaker groups "Ashforth and Humphrey\ 0884b#\ so buyers may also be motivated to derogate suppliers that are about to lose their contracts\ and may label them as incompetent\ poor performers[ As mentioned earlier\ leaderÐmember exchange theory states that the same leader uses di}erent leadership styles with di}erent groups of subordinates "Dansereau et al[\ 0862\ 0864^ Graen et al[\ 0861#[ According to LMX theory\ the members of the out!group are generally less productive\ while the members of the in!group seek to be more productive in exchange for the privilege of being in the in!group[ In return for the in!group|s support\ the leader uses consideration and a friendly interpersonal style with the in!group\ whereas the leader uses a less personal approach and relies more on formal authority with the out!group[ Research on communication e}ectiveness indicates] "0# that sales agents and other service agents have preferred interaction styles^ but also "1# that agents have to adjust their styles to _t the situation "Humphrey and Ashforth\ 0883#[ As the above arguments indicate\ buyers are likely to adjust their styles according to whether they are communicating with an in! or out!group member[ The same is true for suppliers[ Literature reviews also demonstrate that sales agents often try to establish personal ties with their clients as a way of establishing a relationship and increasing sales "Dorsey\ 0883^ Humphrey and Ashforth\ 0883#[ Because it is often thought that emotions can subdue rationality "Ashforth and Humphrey\ 0884a#\ many organizations take steps to prevent their buyers from establishing personal ties with supplier representatives[ The heads of purchasing for all the Big 2 automobile manufacturers publicly expressed their concerns that interpersonal relationships could lead buyers to award contracts to suppliers who had higher unit costs\ lower quality and slower delivery times[ Manufacturers have handled these concerns in a variety of ways[ For example\ some manu! facturers rotate buyers so that they cannot build a long history of communicating with particular supplier representatives\ and they often have rules limiting or prohibiting meetings with suppliers in informal settings[ We believe that these rules ignore the positive roles that emotions can play in organizational life "Ashforth and Humphrey\ 0884a# and note that a}ect is one of the foun! dations for interpersonal trust in organizations "McAllister\ 0884#[ Recent research on automobile manufacturers worldwide has demonstrated that trust can play a bene_cial role in the automobile industry "Landry\ 0887^ Sako and Helper\ 0887#[ However\ given the present climate in U[S[ automobile manufacturing\ we believe that buyers in general will be motivated to use a less relationship!oriented style than will suppliers[ We see no reason to expect that in! and out!group members will di}er in their preferred interaction styles\ because both in! and out!group agents are motivated to make sales\ and thus both will be motivated to try to establish personal ties[ "In this regard\ this study is di}erent from many other studies done on leaderÐmember relationships\ because in many settings members of the out!group are less motivated to perform[ Also\ in this study supplier representatives are not responsible for the in! or out!group status of the _rm they represent\ because they cannot determine the success of the _rm in meeting price\ quality\ and delivery time requirements[# However\ establishing personal ties will be more di.cult for out!group members\ because they Copyright Þ 1999 John Wiley + Sons\ Ltd[

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will perceive "correctly# that buyers will prefer using a more impersonal style with them[ Hence\ we o}er the following hypotheses] Hypothesis 4 "preferred interaction styles#] "a# There will be no di}erences between in! and out!group suppliers in their preferred interaction styles[ "b# Compared to buyers\ suppliers "both in! and out!group members# will prefer using more relationship!oriented styles[ "c# compared to out!group members\ in!group suppliers are more likely to perceive buyers preferring more relationship!oriented styles[ Buyers will report using a more relationship! oriented style with in!group members than with out!group members[ The last hypothesis is that out!group members will have to make a bigger adjustment in their interaction style to meet the less friendly style the buyer is using with them[ In other words\ conformity pressures will be greater on out!group members[ Considerable research indicates that success in interpersonal endeavors depends upon the ability to adapt one|s presentation to meet situational requirements[ The literature on self!monitoring "Snyder\ 0863# indicates that individuals di}er both in their ability and preferences for adapting their behavior to _t cir! cumstances[ Some studies have found that high self!monitors are more successful in careers requiring the ability to persuade others[ Sypher and Sypher "0872# found that high self!monitors were more likely to have obtained higher hierarchical levels in a large international corporation[ Other studies have found that self!monitoring is positively related to the performance of real estate salespeople and of computer sales agents "Anderson and Thacker\ 0874#[ Lennox and Wolfe "0873# revised the original self!monitoring scales\ and subsequently relabelled their new version of the scale as a measure of the acquisitive self!presentation style "Wolfe et al[\ 0875#[ People who score high on acquisitiveness seek to get ahead by gaining power\ control\ in~uence\ and status[ Humphrey et al[ "0882# found that the acquisitive self!presentation scale was positively related to income for a sample of insurance agents[ As noted earlier\ we believe that individual di}erences best predict behavior under weak circumstances\ while situational variables best predict behavior under strong environmental conditions "Mischel\ 0866#[ Thus\ even though the acquisitive self!presentation scale has proven to be a strong predictor for sales agents in various settings\ we do not believe that it will explain the degree of adaptive behavior among supplier representatives in the automobile industry\ nor will it predict the success of the agents in obtaining in!group status[ Instead\ we believe that situationally determined di}erences in in! and out!group status will determine the degree to which the agents must adapt their behavior[ Unlike the private individuals buying insurance in the Humphrey et al[ "0882# study\ the buyers in this study must justify their buying decisions to higher authorities[ Also\ they must implement price reduction and quality improvement programmes that have quantitative standards\ thus their latitude to make purchasing decisions based on their liking for the supplier representative is limited[ In addition\ a supplier rep! resentative|s communication skills have little to do with the ability of the entire supplier organ! ization to meet the technical demands inherent in making price reductions and quality improvements[ Consequently\ when out!group members adapt their behavior to adjust to the buyers| interaction style\ it will represent conformity rather than more positive types of adap! tability[ Thus we hypothesize that] Hypothesis 5 "Acquisitiveness#] There will be no di}erence between in! and out!group supplier representatives in acquisitive self!presentation styles[ The supplier representatives| acquisitive style will not predict buyer|s ratings of supplier power[ Hypothesis 6 "Conformity pressures#] The degree to which the suppliers have to adjust their Copyright Þ 1999 John Wiley + Sons\ Ltd[

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communication style will depend upon their in! or out!group status and the buyers| preferences for formal or informal communication[ Together\ the above hypotheses will test whether manufacturers are using a simple strategy with their suppliers\ based upon cooperation and long!term relationships\ or whether they are using a dual strategy in which they use threats on out!group members while providing help to in!group members[ In addition\ these hypotheses will test whether the interpersonal interaction styles used by buyers and suppliers are in~uenced more by their personal preferences or by structural factors\ such as whether the _rm the supplier represents is an in!group or out!group member[

Methods Sample and data collection Because we were interested in the dyadic relationships between buyers and suppliers\ we _rst selected buyers and then asked them to identify the suppliers that they worked with[ Only buyers who purchased components used in the assembly of vehicles were contacted[ The buyers were chosen to represent a wide variety of di}erent types of commodities\ ranging from body parts\ to interior items\ to electronic products[ The buyers were all from the same American automobile manufacturer[ The buyers were assured that their answers would remain con_dential and that their individual responses would not be revealed\ either to their management or to their suppliers[ All 14 buyers who were approached agreed to participate[ The buyers were asked to identify a single product that they purchased\ and to develop a list of their top and bottom suppliers who provided that particular item[ The buyers were told\ {For the {{Top|| group\ think about those suppliers that you have better than average or excellent relationships with[ For the {{Bottom|| group\ think about those suppliers with whom you have average to poor relations[| In order to avoid forcing respondents into classifying suppliers into two groups\ buyers were told that they could list all of their suppliers into the top or bottom group if they felt that was more accurate[ "The suppliers did not know how they were classi_ed[ Thus if the suppliers| ratings di}er by how they were classi_ed by the buyers\ then we can rule out artifactual bias due to our assignment procedure#[ This resulted in a list of 033 suppliers[ Surveys were mailed to the suppliers\ and 66 "34 in the top!group# suppliers returned the surveys\ for a 49 per cent response rate[ The percentage of suppliers in the top group "47 per cent# who returned the surveys closely matches the percentage of top suppliers "45 per cent# in the lists made by the buyers[ We matched the survey responses from the buyers to the suppliers to create 66 dyadic pairs[ However\ to be on the conservative side\ we treated the buyer and supplier samples as separate and used between!subjects analysis "rather than pair!wise# to compare the mean ratings made by the buyers and suppliers[ Thus\ when the buyer items referred only to their own preferences "as in Table 2#\ the sample size was 14[ When the buyers are rating the suppliers the sample size is 66 "this is done on the same principle that allows us to treat performance ratings on subordinates as independent#[ Because we had matched the samples\ we used items from the supplier survey to predict items from the buyer survey "and vice versa#[ Naturally\ the correlations done in this fashion had a sample size of 66[ We realize that our sample size is small and that our results should be interpreted with caution^ it is conceivable that not all auto manufacturers "especially foreign ones# would display the same results[ However\ by focusing on a small number of buyers that we were able to personally contact we obtained more con_dential information than we could have collected with a large Copyright Þ 1999 John Wiley + Sons\ Ltd[

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mass mailing[ Buyers are generally reluctant to disclose information about which suppliers fall into their out!group because if this information became public knowledge it could dramatically a}ect their ability to negotiate with their suppliers[ By focusing on a small number of buyers we were able to obtain con_dential information and measure the dyadic relationships between buyers and suppliers[ The supplier representatives were 84 per cent male\ with the middle third of them falling between 25 and 34 years of age[ Only 02 per cent of the suppliers had less than three years experience as a representative\ 27 per cent had from four to 09 years experience\ 13 per cent had from 00 to 19 years experience\ and the remaining 14 per cent had more than 19 years experience[ Over 65 per cent of them had at least 05 years of education[ The buyers had lower tenure] 21 per cent had less than three years experience as buyers\ 37 per cent had between four and 09 years experience\ 05 per cent had from 00 to 19 years experience\ and 3 per cent had more than 19 years experience[ They were also younger] 7 per cent were under 14\ 45 per cent were between 15Ð24\ 13 per cent were between 25 and 34\ 3 per cent were from 35 to 44\ and 3 per cent were over 44 "3 per cent did not give their age#[ The buyers were 53 per cent male[ The buyers were as well!educated as the suppliers\ with 79 per cent having at least 05 years of education[

Startin` instructions The suppliers were told that the survey concerned their experiences selling a particular product to the automobile manufacturer\ with the product type written in from the list obtained from the buyers[ This focused the suppliers| attention on their relationship with the particular buyer that handled that product[ They were told that the survey concerned both the types of strategies the manufacturer used with them\ and also their interpersonal relationships with the buyer[ The buyer received similar instructions[ Most of the items used in the survey given to the suppliers were also administered to the buyers[ This would allow us to compare their answers and also to avoid the well!known problems with same!source of data[ However\ the suppliers had to answer questions about their relationships with only one other party\ whereas the buyers had to describe their relationships with the top and bottom suppliers[ To keep the buyer survey from being too time consuming\ a few items were excluded[

Measures Exit\ voice and loyalty scales The exit strategy was measured by three items that assessed the degree to which the buyer used threats^ the voice strategy by three items that measured helping^ and loyalty was measured by one item that assessed the likelihood of a continuing long!term relationship[ For exit and voice\ the suppliers were asked\ {The following items ask about your perceptions of the strategies "manufacturer|s name# uses to in~uence your price\ delivery\ and quality[ In the _rst column\ please state how much you feel "manufacturer|s name# attempts to in~uence you by threatening to switch suppliers or to reduce business volume[ In the second column\ state how much "manu! facturer|s name# attempts to in~uence your performance in the areas by providing technical or _nancial help[ Pricing strategies [ [ [ Delivery strategies [ [ [ Quality strategies| "0 little use of the strategy\ and 4 great use#[ The buyers also answered these items\ with slight wording changes to indicate that the questions were about the strategies they use to in~uence the suppliers| price\ delivery\ and quality[ For the suppliers\ the alpha reliabilities were 9[65 for the threats "exit# scale\ and 9[64 for the helps "voice# scale[ For the buyers\ the reliability coe.cients were 9[61 for Copyright Þ 1999 John Wiley + Sons\ Ltd[

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the threats scale and 9[80 for the helps scales[ To measure loyalty\ suppliers were asked\ {What is the long!term percentage probability that you will continue to produce the above product for "manufacturer|s name#