1 Master thesis in Corporate Communication
Examining a crisis situation from the supplier’s perspective: how trust and commitment can vary depending on crisis attribution and crisis response strategy
University of Amsterdam
Graduate School of Communication
Student: Marzia Conti
Student number: 11400153
Thesis Supervisor: Dr James Slevin
2 Abstract
In a crisis situation, the main concern for an organization should be to protect itself from
reputational and economic damage. In order to do that, each organization should focus on building a solid stakeholder chain. Supplier companies have been recognised as one of the most influential stakeholder, because of their loyal and positive interest, and their concrete stake in the firm. Nevertheless, few academic research have been conducted in order to understand the suppliers’ perspective in a crisis situation that can involve an organization with which they collaborate. Through a web experiment, this study investigates in how supplier’s trust and commitment toward an organization can change, depending on the crisis type, and on the crisis attribution. The
hypotheses are partially supported by the results, and practical implication about which is the best way to face a crisis in order to preserve supplier’s trust and commitment are discussed in the conclusion.
Introduction
Defining the situation
The market is constantly evolving, and every day organisations have to face with the positioning of a new competitor in their business sector. To survive the competition, a company needs to ensure for itself a solid chain of stakeholders. The value of the company is, in fact, not merely created by a simple customer-firm relationship, but it is created through a more complex network of exchanges that involves different organizational stakeholders, resulting in a stakeholders’ chain (Hartman and Stafford, 1998; Lee Miller and Lewis, 1991; Normann and Ramirez, 1993). The nowadays
challenge for a firm, is to appear more attractive to stakeholders, clients, suppliers and their
environment (Benedixen and Abratt, 2007). The supplier-buyer relationship is an important part of the business marketing (Webster, 1992), and, according to Wilson (1995), the effectiveness of the business marketing of an organization is mainly a result of the long-term relationship between the
3 organization and its suppliers, based on trust, commitment and good reputation. A successful supply chain performance is characterized by high level of trust among the different partners, (Kwon and Suh, 2004), and a study of Peck et al. (2000), shown that considering suppliers as partners, lead to the establishment of a long-term relationship that include benefits such as costs reduction, more flexibility, quality improvement and more competitive strategies. According to Donlon (1996), a solid supply chain management involves continuous processes flow, time saving, and information and technology sharing. Organizational trust and commitment are essential element in a cooperative work context (Achrol, 1991). The concept of trust can be defined as the extent to which a business partner is seen as honest, competent and benevolent from the other partner or client (Ryssel, Ritter and Gemünden, 2004). Commitment is another measure of organizational wellness, because if there is an high level of commitment among the business partners, it means that there is a durable
intention to develop and maintain the business relationship (Moorman, Deshpande and Zaltman, 1993). Anderson and Weitz (1992) described as the four dimensions of the inter organizational commitment, loyalty, a certain willingness to make short-term sacrifices, a long term orientation, and the willingness to maintain the relationship. These factors lead the business actors to operate in order to preserve relationships with exchange partners, to prefer long-term relationships to shorter ones because of the long-term relationship benefits, and to have a broader view about risks and investments (Morgan and Hunt, 1994). Organizational trust and commitment are key ingredients for a successful, long-term, business relationship (Gundlach, Achrol, and Mentzer, 1995).
The role of suppliers
A supplier-buying firm relationship, like any other business relationship, is built on the mutual exchange and on the fulfilment of promises (Gronroos, 1994), and if these requirements are met, the supplier-buying firm relationship is the key to develop a competitive advantage (Mudambi and Helper, 1998). In a global market, a firm is able to choose its partners among a large number of competitors, in order to reach that competitive advantage above mentioned, but a supplier company
4 is as well able to select the firms to which work with. That is why it is so important to develop and maintain a solid supply chain, so that, in an eventual crisis situation that can harm the reputation and the economic wellness of the organization, the organization is able to continue its business and to overcome a crisis. The importance of a solid supply chain has been recognised as one of the key factor for the organisation to be competitive in the market (Johnston et al., 2004) but most of the research that have been conducted in this field, mainly focus on the organisational perspective (Holmen and Pedersen, 2010), so it is hard to understand how the suppliers ‘strategies and attitudes toward an organization can change, when one of their buying firm is involved in a crisis. Since suppliers ‘strategies and reactions in crisis situation are a quite unexplored field in the academic literature, the focus of this study lies in the suppliers’ perspective, in crisis situations.
Supplier’s reaction to crisis situation
A crisis situation can be defined as a sudden event that can harm the organisational reputation and its financial aspect (Coombs, 2007). In this situation, stakeholder and, in this specific case, supplier companies, may want to quit the relationship because they do not want to be associated with the name of the firm that is having a crisis, or because they do not want to face with economic and reputational losses (Coombs and Holladay, 2005 ; McDonald and Härtel, 2000). Supplier though, can also react in a more positive way, deciding to keep working with the organisation despite the crisis, depending, for instance, on the crisis attribution or on the strength of the relationship with the firm (Coombs and Holladay, 2005). If the crisis, in fact, does not depend on the organisation itself, stakeholders may engage in a more positive framing for the crisis, and they may do not have
intention to quit the relationship (ibid.). If the organisation is, instead, considered responsible for the crisis, stakeholders can be disappointed and they can quit the relationship, and they can as well spread negative words about the organisation (Coombs and Holladay, 2005 ; McDonald and Härtel, 2000). The crisis response strategy is important to determine the best reaction that an organisation can adopt in case of crisis. Coombs (2006) identified three categories of crisis response: deny,
5 diminish and deal. In this study the focus will be on the most common responses that have been used in the literature: the denial response, that is seen as poor of explanation about the crisis, and does not show positive intention in solving the crisis, and the apology response, in which the organisation shows its positive intentions in solving the crisis, it admits its eventual responsibility and it is open to the external communication (Dutta and Pullig, 2011). The aim of this study is to test whether an apology response is associated with more positive outcomes, in terms of trust and commitment, compared with a denial response.
Length of the relationship and frequency of transactions
The duration of the relationship is a significant variable when investigating in supplier reaction to a crisis event. It has been found that a long-term relationship enables the organisations to achieve a competitive advantage over the others (Ganesan, 1994). Both the supplier company and the buyer firm can benefit from a long term relationship: the supplier company can gather feedback about their products and the organisation can purchase items on sale or in short supply (Anderson and Weitz, 1992). The frequency of transaction is also an important factor. The more frequent are the transactions between the supplier and the buyer firm, the easier is to recover the transaction costs (Williamson, 1979), so both of the parties should be interested in achieving and maintaining a solid a durable relationship. Then, in a crisis situation, the frequency of transactions and the duration of the relationship, may influence the supplier’s decision to keep or quit the relationship with the organisation that is facing with a crisis. The relevance of this study covers the organisational perspective as well as the supplier perspective. Deriving results from this study will allow
organisations to gather information about the best strategy to adopt in case of crisis, in order to limit the reputational and economic losses, in relation with suppliers, and the supplier companies can clarify some aspects of the strategies that they employ regarding their clients, in a crisis situation. As Fassin (2009) stated, suppliers company are one of the most influential stakeholder for an organisation, because they have a real and concrete stake and loyal interest in the organisation, and
6 together these two market actors, are responsible for delivering to the consumers goods or services to fulfil their needs (Mentzer et al. 2001). That is why is so important for organisations to build and maintain a solid and durable relationship with suppliers (Olhager and Selldin, 2004). The previous considerations lead to the main research questions for this study: How the supplier’s commitment and trust toward an organisation can be affected, in a crisis situation, by the crisis response strategy and by the crisis attribution chosen by the organisation? And how the supplier’s commitment and trust can be affected, in a crisis situation, by the duration of the relationship and by the frequency of transactions? Understanding how these factors can influence the supplier’s trust and commitment, can give a contribution to this field of study, defining which is the best reaction to adopt in a crisis situation, and how to deal with different suppliers, in order to preserve the relationship with this key stakeholder.
Theoretical Background
Suppliers companies as determinant stakeholders
The focus of this study will be on the supplier relationship with a firm in a crisis situation, and it is important to understand how and why supplier companies are considered as one of the most
influential stakeholder for an organisation, and why they are defined stakeholders. So, according to Freeman (1984), stakeholder can be described as any group that can affect or that is affected by organisational performances. This definition seem to be too broad, so it is possible to take into account a narrower approach by Mitchell et al. (1997) and Frooman (1999), that refers to the level of saliency or influence of stakeholders. The saliency or influence can be described as the extent to which stakeholders provide valued resources to the organisation, the extent to which stakeholders risk these resources> and risk economic costs in case the organisation fails or ended the
relationship, and the power they have over or in the organisation. According to that, we can refer to Donaldson and Preston’s (1995) instrumentality of stakeholder theory. They stated that, from an instrumental perspective, the stakeholder theory gives to the organisation a framework to examine
7 eventually existing connection between the practice of stakeholder management and the
achievement of corporate goals. It is now possible to introduce suppliers as stakeholders in this organisational context.
The supply chain
In the continuously evolving market, not only one supplier deals with the firm, but a large number of suppliers is available and many companies may work for the same firm (Lambert, Cooper and Pagh, 1998), resulting in what can be defined supply chain. The supply chain does not refer to a single relationship supplier-firm or to a single business, but it can be considered as a pattern of relationships and businesses (ibid.). It can also be defined as a set of entities directly involved in the flow of material, services or information, from the source to the consumer (Mentzer et al. 2001). Due to the globalisation, a corporation can have access to a global market to reach different suppliers, and it is necessary for the firm, to look at a more effective way to coordinate the flow of material inside and outside the company (ibid.). The relationship between the supplier and the firm is mainly based on time and quality, and in the competitive market, where, due to the rapid
technological and economic changes, there can be uncertainty, the company needs to have a certain flexibility in the supply chain management (ibid.). La Londe (1997) proposes that supply chain management is the process of managing relationships, information, and materials in order to deliver customer services and economic values through coordinated activity regarding the flow of goods, from the source to the consumer. Lambert, Stock, and Ellram (1998) propose that, to achieve a solid supply chain, the firm should adopt, toward the suppliers, a process approach (Cooper, Lambert and Pagh, 1997). It means that the focus of every process is to meet the customers ‘needs and that the organisation needs to be organised around these processes (ibid.). So, to focus on an effective supply chain is the key for the long term well being of any organisation (Olhager and Selldin, 2004), and further, the actuation and the understanding of supply chain management is an essential
8 prerequisite to achieve goals and to keep a leading position in the global market (Power, Sohal and Rahman, 2001).
The supplier perspective
In the last years, the importance of a solid supply chain is recognised as one of the key factor for a competitive advantage for an organisation (Johnston et al., 2004). For instance, it has been
investigated to what extent a durable relationship with selected partners lead to a competitive
position for the company, (Walter et al., 2003) and it has been found out that long term relationships enable firms to be more efficient and more effective (ibid.). On the counterpart, Handfield and Nichols in 1999, define the relationship between an organisation and its suppliers, as one of the most fragile and tenuous, mainly based on reciprocal trust (Johnston et al., 2004). It is then not yet clear which is the direction of the organisation-suppliers relationship. After all it seems that, as Holmen and Pedersen (2010) already explain in their study, many researches are available regarding the supplier relationship management, but almost all of them focus on the organisational
perspective, an less attention has been given to the suppliers’ point of view. Supplier companies are not often seen as real actors in the market, but instead they have their own missions and strategies, and the aim of this study is to see how supplier companies react when an organisation that they are working with is facing with a crisis.
Crisis attribution
A crisis is a negative and sudden event that harm the reputation and the financial aspect of the organisation, and it involves the organisation as well as its stakeholders, physically, financially and emotionally (Coombs, 2007). Crises situations are mainly seen as a threat to the organizational reputation. They can in fact damage the reputation and this loss can affect how stakeholders interact with the organization (Barton, 2001 ; Roberts and Dowling, 2002). As Ahluwalia et al. (2000) pointed out, there are little empirical evidence about how stakeholders react to a crisis situation or
9 to a response strategy that has been used to manage the crisis. One of the more salient variable in a crisis situation is the crisis attribution. In fact, the attribution of crisis responsibility has
consequences for the organisation: if the organisation is responsible, there will be a reputational damage and stakeholders will get disappointed, they can quit the relationship with the firm and they may will spread negative words about the organisation (Coombs and Holladay, 2005 ; McDonald and Härtel, 2000). If the crisis has an external attribution, the organisation is not considerate responsible for the crisis, or at least, it cannot be considered as the cause of the crisis, and this may lead a more positive crisis framing by the stakeholders (Coombs and Holladay, 2005). In this study I will take into account the internal and external locus of control. Locus of control is a variable that tells us if the organisation is responsible for the crisis’s cause, or if the crisis’s cause depend on the external environment (McAuley et al., 1992; Russell, 1982; Wilson et al., 1993).
Trust and commitment
The aim of this research is to see whether in crisis situation, the level of trust and commitment of the supplier company toward the firm can change, depending on the crisis attribution, and on the crisis response strategy. Trust is a very important variable in the supplier-buying firm relationship, as demonstrated by Dwyer et al. (1987), Morgan and Hunt (1994), Ellram (1995) and Smeltzer (1997). These authors shown that a successful and collaborative relationship is characterized by high levels of trust. Trust can be conceptualized as the integrity and reliability that two partners find in each other (Morgan and Hunt, 1994; Anderson and Narus, 1990). In an organizational context, the concept of trust is far away from the concept of trust that is commonly used in a sociological context: it is not blind trust, faith in the business partner, but is the result of different components (Lämsä and Pučėtaitė, 2006). The belief that the partner is willing to display benevolence, the influence of the partner’s performance, and the attitude that one partner display toward the other, are elements that characterize the concept of organizational trust (ibid.). If the relational exchange between the supplier and the buying firm is characterized by high levels of trust, then both of the
10 parties are enabled to focus on the benefits of a long-term relationship (Ganesan, 1994; Doney and Cannon, 1997), and the chances of obtaining a successful supply chain are increased (Kwon and Suh, 2004). A lack of trust is demonstrated to be associated with ineffective and inefficient performances (ibid.). Organizational commitment can be defined as a psychological state that involves the business partners, and that influence the decision to continue or not the relationship (Meyer and Allen, 1991). It can be described as the motivation that lead one organization to maintain the relationship with another (Geyskens and Steenkamp, 1995). According to Moorman, Zaltman and Deshpande (1993), commitment is represented by the importance that is given to a business partner in a relationship, and the desire to maintain that relationship. When these two variables are present together, than they produce favourable outcomes such effectiveness, efficiency and productivity (Morgan and Hunt, 1994). Despite the academic literature often mentions about trust and commitment in business relationship, the supplier’s perspective is still unexplored (Kwon and Suh, 2004). The previous considerations lead to the following hypotheses:
H1: The supplier’s commitment toward the organisation will be stronger when associated with an external locus than when it’s associated with an internal locus of control.
H2: The supplier’s trust toward the organisation will be higher when associated with an external locus of control than when associated with an internal locus of control.
Crisis response strategies
Regardless the crisis attribution, the organisation needs to adopt a crisis response strategy in order to protect itself from reputational damages and economic losses (Barton, 2001; Benoit, 1995; Coombs, 1999), and the key to best protect the organisation is to choose the appropriate response strategy (Coombs and Holladay, 1996). The Situational Crisis Communication Theory provides to the organisational management three different crisis response strategies: deny, diminish and deal response strategy (ibid. ). The deny response strategy establish that the crisis did not happen, the
11 diminish alter the perception of the crisis in order to give it a positive frame and to make it appear less important than it really is, and the deal response strategy show to the stakeholders that the organisation is working in order to repair the damages caused by the crisis (Coombs, 2007).
Coombs (2006) defined for each strategy several response options, such as attack the accuser, denial and scapegoat for the deny strategy, excuse and justification for the diminish strategy, and
ingratiation, concern and apology for the deal strategy. A study of Dutta and Pullig (2011) focus more on the denial and apology responses, pointing out that a denial response, poor of explanations about the crisis, is less effective when talking about restoring trust, than an apology response, which give, together with excuses, some information about the crisis, about the intention to solve it, and it provide reassurance that the crisis event is not going to occur again. For this reason, in this study I will focus on these two responses, that lead to the following hypotheses:
H3: The supplier’s trust will be higher after being exposed to a crisis with an external locus of control compared to being exposed to a crisis with an internal locus of control, but it will be more pronounced when the apology strategy is used compared to when the denial strategy is used. H4: The supplier’s commitment towards the organisation will be stronger after being exposed to a crisis with an external locus of control compared to being exposed to a crisis with an internal locus of control, but it will be more pronounced when an apology strategy is used compared to when a denial strategy is used.
Moderators variables: length of the relationship and frequency of transactions
According to Wernerfelt (1985) and Asanuma (1989), it takes time to develop a solid and effective supplier-organisation relationship, and, the longer is the relationship, the better the two market actors understand each other, in order to develop an efficient communication (Stigler and Becker, 1977). Most of the firms aim to reach a durable relationship with suppliers, in order to achieve a competitive advantage (Ganesan, 1994). The organisation can take advantages from a long term
12 relationship with sellers getting, for instance, merchandise in short supply, getting the best prices for items on sale, and getting information about the new products, and the supplier company can as well take advantage from such a relationship by obtaining information about the product they sell and about competitive activities (ibid.). A study of Noordewier, John and Nevin (1990), shows that the relational elements, such as long term duration, enhance the outcome of performances in the supplier-buyer firm relationship, and Anderson and Weitz (1992) describe the long term
relationship as commitment, referring to the way in which independent channel members work together to reach the consumers’ needs, and to increase their profit. Taking this into consideration, can be interesting to see whether the duration of the supplier-buyer relationship can affect the decision of the supplier company to continue working for the buyer firm in a crisis situation, and if it affects the perception of the crisis. Regarding the frequency of transactions, a research shows that the more frequent transactions are between supplier and buyer firm, the easier is to recover the costs of transaction, and when the frequency of transaction is low or transactions are not recurrent, it is harder to recover costs that derive from the governance of the organisational structures
(Williamson, 1979). So, if the frequency of transactions is high, the supplier company has more incentives to invest in the relationship with the buyer firms and to commit itself to a stronger relationship with its client (Lai et al. 2005). This mechanism can also lead to different outcomes, from the supplier perspective, when an organisation is facing a crisis, so the following hypotheses:
H5: The longer is the relationship between the supplier and the organisation, the stronger the commitment towards the organisation would be, in case of both external and internal locus of control.
H6: The more frequent the transactions between the supplier and the organisation are, the stronger the commitment toward the organisation would be, in case of both external and internal locus of control.
13 Figure 1. Model of the present study.
Method Section
Research method
To investigate in this field, I decided to conduct a web experiment. This type of experiment, compared to the field experiment or to the laboratory experiment, presents relevant advantages (Reips, 2000). Through a web experiment, it is in fact easier to have access to a large sample of respondents, it gives the possibility to reach a more diverse population, it is more convenient regarding time and costs, and in this way it is possible to present the experiment to the respondent, instead of submitting the respondent to the experimental conditions (ibid.). Because of the lack of relevant literature regarding the supplier-buying firm relationship, from a supplier perspective, I thought that an experiment would have been the best method option to carry on this study. With an experiment it is in fact possible to manipulate the independent variables, in this case, the attribution of the crisis and the crisis response strategy employed by the organization. This way I had been able
14 to present the respondents a fictional crisis scenario, in which the independent variables were
manipulated, and I had been able to collect data about a situation that does not exist in the reality, but that could have been real. The scenarios, in the form of written texts, presented the description of a crisis situation that can potentially involve any organization. The respondents have been asked to answer the survey questions that followed the manipulation, as if the crisis was involving an organization with which the work. The design of this experiment is a two by two between-subject factorial design, with both factors (Crisis response: 2 level, Denial and Apology, and Locus of Control: 2 level, External Attribution and Internal Attribution) as between-subject variables. The four conditions of the experiment can be found in the table below. A pre test has been conducted, and submitted to a convenience sample of 6 respondents, in order to verify that the manipulation texts were effective and easily understandable by the sample population. Moreover, there is no control group, because the study focus in how the trust and commitment toward the organization can change, when the crisis attribution and the crisis response strategy are manipulated. In an
experiment with control group, a group of respondents should have been submitted a survey without any manipulation, in order to verify if the manipulation submitted to the experiment group has been effective. Nevertheless, due to the relatively short time assigned to this study, I wanted to focus on the responses that involve a manipulation, so the decision to skip the control group. Respondents have been randomly allocated to the four fictional scenarios that described each of the four conditions.
Table 1. The 4 experimental conditions.
Crisis Response
Locus of Control Deny Apology
External Attribution Deny x External Attribution Apology x External Attribution Internal Attribution Deny x Internal Attribution Apology x Internal Attribution
15 The experiment is presented in the form of an online questionnaire, that involve a manipulation through a text, in which the independent variables are manipulated.
Sample
The respondents have been selected among different supplier companies, operating in Benelux, Germany and Italy. A supplier company is meant to be any organization that provides goods or services to another, so the respondents are employed either in supplier companies that provide goods (food, materials) or in supplier companies that provide services (technical advices, business consulting). Moreover, in this study, I was not specifically interested in investigating into
comparing responses of a low-level employee with the ones of an high-level employee, so the employees level was not a criterion of selection. I first got in contact with employees responsible for human resources department, and through them, I obtained a list of employees to whom I could submit the survey link, resulting in selecting a snowball sample. The final sample included 92 respondents, but only the respondents who completed the whole questionnaire were selected, resulting in a sample of 84 respondents.
Stimuli
The respondents have been randomly allocated to the four different experimental conditions. At the beginning of the questionnaire, a manipulation, in the form of a text presenting a fictional crisis scenario is shown to the respondents. It has been made clear that the situation that they are reading about is fictional, but, for the sake of the research, it has been asked to the respondents to answer the questions as if the situation was real. No organisations is named in the survey. The crisis is represented as a fire accident. In the case of internal attribution of the crisis, the fire has begun because employees forgot to turn off a machine at the end of the day, nobody checked it, and during the night the fire broke into the company. In the case of external attribution of the crisis, the fire accident started because of a pyromaniac, that has been recognised through the cameras, and
16 further arrested. The experimental design involves the manipulation of the crisis response, as well as the crisis attribution. In the case of the deny strategy, it has been made clear, through a statement made by the CEO of the company, that the crisis has not happened, and that the CEO denies every kind of responsibility regarding the accident. In the case of the apology strategy, it has been made clear through a statement made by the CEO of the company, that the organisation takes full
responsibilities for what happened, that they are trying to solve the crisis as fast as possible, and that the organisation is open to any form of investigation and communication with stakeholders (for the survey text see Appendix Section 1). The manipulation check has been performed through a question regarding the attribution of the crisis. So, for example, in the case of the fictional scenario that presents an external attribution to the crisis, the manipulation check question would be such “ The organization is not considered responsible for what happened”, and there would be two answer options with “Yes” and “No”. For the scenario that presents an internal attribution to the crisis, the manipulation check would be such “The organization is considered responsible for what happened”, and there would be two answer options with “Yes” and “No”. The question has been asked after the stimuli. After, respondents have been asked to answer a short questionnaire, that would have taken no longer than 10 minutes. Demographic variables are assessed at the beginning of the survey (Age, Gender and Nationality), and crisis attribution, crisis response, trust, commitment, frequency of transaction and length of the relationship are assessed using pre-existing scales (See Appendix Section 2). At the end of the questionnaire respondents have been thanked for their participation and reassured about the complete anonymity of the survey.
Operationalization of variables
Most of the existing measures of commitment focus on organizational commitment and consumer commitment scales, and therefore they are not directly generalizable to interorganizational
relationship. A work of Zineldin and Jonsson (2000), took into consideration seven items from the commitment scale of Meyer and Allen (1984), Morgan and Hunt (1994) and Mowday et al. (1979),
17 that satisfied my definition of commitment. For this study I decided to measure the commitment through a seven-point Likert scale where 1 means “Strongly disagree”, and 7 means “Strongly agree”, in order to optimize the reliability of the measure (Symonds, 1994). A study of Lewis (1993) demonstrated that a seven-point Likert scale has a stronger correlation with T-test results, compared to a five-point. Finstad (2010), stated that a seven-point Likert scale seems to be more suitable for electronic distribution, and research confirmed that data collected from Likert scales are less accurate when the items of the scale are less than five and more than seven (Johns, 2010), so the choice of a seven-point Likert scale seemed to be the best option. The level of measurement resulted to be interval, because trough a Likert scale, it is possible to ascribe quantitative value to qualitative data, in order to allow statistical analysis. (Jamieson, 2004) In order to make the items of the scale clearer for the respondents, the word “supplier” has been replaced by the word
“organization” (for the items of the scale see Appendix Section 2). The supplier’s trust has been operationalized by adapting the scale by Rempel and Holmes (1986) to measure inter-organisational trust. The scale is originally made to measure organisational trust towards suppliers, so, for the purpose of this study, the word “supplier” has been replaced by “ This organization”, every time the word “supplier” is mentioned. The items have been measured through five‐ point Likert scales from 1 (strongly disagree) to 5 (strongly agree). For this study I decided to measure the trust through a seven-point Likert scale where 1 means “Strongly disagree”, and 7 means “Strongly agree” (for the items of the scale see Appendix Section 2). The locus of control has been operationalized by using Griffin, Babin, and Darden’s (1992) three‐ item scale for blame, measured through five‐ point Likert scales from 1 (strongly disagree) to 5 (strongly agree). For this study I decided to measure the locus of control through a seven-point Likert scale where 1 means “Strongly disagree”, and 7 means “Strongly agree” (for the items of the scale see Appendix Section 2). The crisis response strategy has been measured based on Coombs (2007) Crisis Response Strategies, regarding the denial and the apology strategy definition, as follows:
18 1. Denial: Crisis manager asserts that there is no crisis.
2. Apology: Crisis manager indicates the organization takes full responsibility for the crisis and asks stakeholders for forgiveness.
The crisis response strategy has been measured through seven‐ point Likert scales from 1 (strongly disagree) to 7 (strongly agree). Data about the duration of the relationship have been collected through this question: “How long is the relationship with this organization?”, and the respondents have been left free to answer filling the right number of years in a blank space, so the variable’s level of measurement resulted to be interval. Data about the frequency of transactions have been collected through this question: “How frequent are the transactions with this organization?”, and the respondents have been left free to answer filling the right number of transactions per month in a blank space, so the variable’s level of measurement resulted to be interval as well.
Results Section
Manipulation checks
Before to start analysing the hypotheses, a manipulation check has been conducted, with two independent sample t-test, in order to verify if the manipulation texts have been understood by respondents. I wanted to check both on the effectiveness of the crisis attribution manipulation, and on the response strategy manipulation. In order to perform a manipulation check for crisis
attribution, a variable named “CONDITION_2” has been created, in which value 1 means that the respondent has been submitted to a text in which the attribution of the crisis was external, and value 2 means that the respondent has been submitted to a text in which the attribution of the crisis was internal. This variable has been used in the t-test, together with the variable “AttributionScale”. In order to proceed with the analysis, it has been necessary to reverse the item Q20_2 of the crisis attribution scale. After that, nevertheless the scales that have been used in this study are all pre-existing scales, the crisis attribution scale has been tested again with a reliability test, which resulted
19 in a Cronbach’s alpha of .927. The Levene’s test resulted to be not significant, F = .047, p > .05, so it is possible to assume the variances to be equal. There is no significant difference between the respondents who were submitted to a crisis with external attribution (M = 14.44, SD = 4.37) and the respondents who were submitted to a crisis with internal attribution (M = 9.60, SD = 4.41), t (82) = 5.04, p > .05. To test the manipulation of the strategy, a new variable named “CONDITION_2apo” has been created, in which value 1 means that the respondent has been submitted to a crisis with an apology response, and value 2 means that the respondent has been submitted to a crisis with a deny response. This variable has been used in the t-test, together with the variable “StrategyScale”. The item Q22_1 for the strategy scale has been reversed, and the strategy scale has been tested with a reliability test, that has shown a Cronbach’s alpha of .840. The Levene’s test resulted to be not significant, F = 1.472, p > .05, so it is possible to assume that the variances are equal. There is no significant difference between the respondents who were submitted a crisis with an apology response (M = 10.37, SD = 2.92), and the respondents who were submitted a crisis with a deny response (M = 5.63, SD = 3.02), t (82) = 7.307, p > .05. Looking at the results of these two t-tests, it is possible to infer that the manipulation has been successful.
Hypotheses testing
To test the H1 an independent t-test has been performed, with “CONDITION_2” and commitment. The item Q17_7 of the commitment scale has been reversed, and the reliability test conducted on the commitment scale with reverse item, resulted in a Cronbach’s alpha of .865. The Levene’s test resulted to be not significant, F = .578, p > .05, so it is possible to assume the variances to be equal. There is no significant difference in commitment between the respondents who were submitted to a crisis with an external attribution (M = 36.12, SD = .79) and the ones who were submitted to a crisis with an internal attribution (M = 33.93, SD = 6.30), t (82) = 1.656, p > .05. There are no evidences to support H1, so it is not possible to infer that the commitment will be stronger when associate with an external locus of control.
20 To test the H2, an independent t-.test has been performed, with “CONDITION_2” and trust. The items Q18_2, Q18_3 and Q18_4 of the trust scale have been reversed and the trust scale has been tested with a reliability test. The reliability test has shown a Cronbach’s alpha of .768. The Levene’s test resulted to be not significant, F = .039, p > .05, so it is possible to assume the variances to be equal. There is no significant difference in trust between the respondents who were submitted to an external crisis attribution (M = 23, SD = 4.28), and the ones who were submitted to an internal crisis attribution (M = 20.79, SD = 4.16), t (82) = 2.39, p > .05. There are no evidences to support H2, so it is not possible to infer that the trust will be higher when associated with an external locus of control.
In order to test H3, a One Way ANOVA has been performed. The variable “CONDITION_4” has been used as independent variable, in which 1 means that the respondents have been submitted to a manipulation with external crisis attribution, and an apology response, 2 means that the respondents have been submitted to a manipulation with external attribution and a deny response, 3 means that the respondents have been submitted to a manipulation with an internal crisis attribution and an apology response, and 4 means that the respondents have been submitted to a manipulation with internal crisis attribution and deny response. The dependent variable that has been used is the
“NewCommScale” for commitment. The model is overall significant, F (3, 80) = 5.109, p < .05, and the effect size eta squared is small, ƞ2 = 0.16, but it is possible to infer that the commitment differed significantly across the different conditions. The multiple comparison table has shown that there is a statistically significant difference among the condition 1, p = .012, condition 3, p = .04, and
condition 4, p = .012, but condition 2 resulted to do not significantly differ, p > .05. So, the supplier’s commitment resulted to be stronger when associated with a crisis with an external attribution and an apology response, when associated with a crisis with an internal attribution and an apology response, and when associated a crisis with internal attribution an a deny response. Therefore, H3 is partially supported.
21 In order to test H4, a One Way ANOVA has been performed. The variable “CONDITION_4” has been used as independent variable, with the same values used in testing H3, and the variable “TrustScale” for trust has been used ad dependent variable. The model is overall significant, F (3, 80) = 4.063, p < .05, and the effect size eta squared is small, ƞ2 = 0.13, but it is possible to infer that the trust differed across the different conditions. The multiple comparison table has shown that there is a statistically significant difference among the condition 1, p = .003, condition 2, p = .016, and condition 4, p = .003. Condition 3 resulted to do not significantly differ, p > .05. Supplier’s trust resulted to be higher when associated with a crisis with an external attribution and an apology response, but also when it is associated with a crisis with an external attribution and a deny
response, and when it is associated with a crisis with an internal attribution and a deny response. Therefore H4 is partially supported.
In order to test H5 a multiple regression has been performed. First, a moderation variable has been computed, named “moderationvariable”, that is obtained by multiplying the variable Q35 about the length of the relationship, with “AttributionScale”. The new variable obtained has been used in the regression analysis as independent variable, and commitment has been used as dependent variable. The multiple regression matrix has shown that the analysis is significant, F (1, 82) = 4.253, p < .05, that there is a small effect of correlation (r = .222), and the model can explain the 49% of the variance in commitment (R2 = .049). The moderation variable is significant, b = .017, t = 2.062, p < .05, and for every unit increased in score for the moderation variable, the commitment will increase of 0.17 units. The findings support the H5, and it is possible to infer that the longest is the
relationship between supplier and buying firm, the strongest the supplier’s commitment will be in a crisis situation.
22 Table 2. Regression results to test H5
Variable B SB ß t p
Constant 33.990 .818 41.541 .000
Moderationvariable .017 .008 .222 2.062 .042
In order to test H6 a multiple regression has been performed. Again, a new interaction variable has been computed, named “moderation_Q36” that is obtained by multiplying the variable Q36 about the frequency of transactions, with “AttributionScale”. This new variable obtained has been used as independent variable in the regression, while commitment has been used as dependent variable. The multiple regression analysis resulted to be significant, F (1, 82) = 4.658, p < .05, and it shown that there is a small degree of correlation (r = .232), and that the model can explain the 54% of the variance in commitment (R2 = .054). The moderation variable is significant, b = .013, t = 2.158, p < .05, and for unit increased in the score of the moderation variable, the commitment increased of 0.13 units. Therefore it is possible to infer that H6 is supported, and that the more frequent are the transaction between supplier and buying firm, the strongest the supplier’s commitment will be in a crisis situation.
Table 3. Regression results to test H6
Variable B SB ß t p
constant 33.443 .974 34.350 .000
23 Discussion
It has been shown, from previous research, that the crisis locus of control assesses if the cause of the crisis was controllable or not by the organization, and that a certain attribution of responsibility can lead to anger and to a more negative evaluation of the organization involved in a crisis (Weiner, Amirhan, Folkes, and Verette, 1987). An external attribution is, on the counter part, associated with low intentionality, so the organization is not considered responsible for the crisis (Coombs and Holladay, 1996). Nevertheless, the finding of the present study did not confirm the hypotheses 1 and 2, that were suggesting that the supplier’s trust and commitment were higher when associated to an external attribution of the crisis. An explanation to this behaviour can lie in the fact that has been proven that partners in a crisis situation in which trust and commitment are violated, are more likely to repair the business relationship when the crisis attribution is internal (Hodgins and Liebeskind, 2003). This is because a crisis actor that is assuming a full blame for a crisis with an internal attribution, seems to be more honest and sincere in his intention to do not repeat the same mistake in the future (Tomlinson, Dineen and Lewicki, 2004). Regarding the influence of the crisis response strategy, the premises of this study, were leading to the consideration that the apology response strategy was the best option to adopt in a crisis situation, in order to limit economic and reputational damages, compared to the deny response strategy (Dutta and Pullig, 2011). It has been found that the apology strategy together with an external attribution is always associated with an high level of trust and commitment, but also that high level of commitment is associated with crisis with internal attribution and both apology and deny response strategy, and higher level of trust is associated with a crisis with an external attribution but deny response strategy, and with a crisis with internal attribution and deny response strategy. The reasons why an high level of trust and commitment is not always associated with external attribution and apology response is because the apology response can also lead to negative effect when used in a crisis situation (Kim, Dirks, Cooper and Ferrin, 2006). An explanation of this finding can be found in the research of Ohbuchi, Kameda and
24 Agarie (1989), in which they stated that an apology response is often associated with the admission of full responsibility for the crisis, and that it can fail in restoring a positive image for the
organization involved in a crisis (Riordan, Marlin and Kellogg, 1983). According to Coombs (2006), the deny strategy response can be considered a good option when the organization is able to prove that it is not responsible for the crisis, and when the crisis requires that there is no rumour spread about the situation. The moderation hypotheses in this study were aiming to investigate if the duration of the relationship and the frequency of transaction could have had an effect on supplier’s commitment and trust, in both external and internal crisis attribution. A long business relationship and an high frequency of transaction are reported to be associated with a competitive advantage (Ganesan, 1994), long-term relationship benefits , and a better understanding of the business partners in term of communication and efficacy (Stigler and Becker, 1977). As Lai et al. (2005) pointed out, these two characteristics lead the supplier company to a stronger commitment toward its partners and they give to the supplier company more incentives to invest in the relationship with the buying firm. The moderation hypotheses in this study were fully supported by the results. So, when the frequency of transaction is high, and when the duration of the business relationship is considerably long, then the trust and the commitment of the supplier company toward the buying firm is higher.
Limitations of the study
The results and the implications of this study are influenced, to a certain degree, by the way in which the research has been conducted. First of all, the time spent for this study has been relatively short, especially considering the time assigned to the data collection period. Responses have been recorder for a three weeks time, and 92 responses have been collected, that can be considered a sufficient number of respondents for statistical analyses. Nevertheless, having the possibility to expand the data collection period would represent the chance to reach a larger sample of respondents. Another limitation lies in the fact that the crisis that has been presented to the
25 respondents was fictional. The method that has been used in this study was an experiment, because due to the lack of consistent studies about the supplier-buying firm relationship, an experiment seemed to be the best option. Despite that, presenting to respondents fictional situations can always affect the validity of the experiment because respondents would be perhaps more emotionally involved when reading about a crisis that they know to be real. In my opinion, a case study conducted among suppliers of an organization that has been really involved in a crisis would be another valid option for scholars who might want to repeat this study. Moreover, due to the limited time assigned to the research, only two response strategies have been used. Devoting a longer time to the research would give the possibility to include in the experimental design other conditions related to other possible response strategies that could be employed.
Conclusion
How crisis attribution affect supplier’s trust and commitment
The aim of this study was to collect data about suppliers ‘trust and commitment toward an organization that is facing a crisis, in order to have a better understanding of which should be the best strategy to adopt in such a situation, to prevent and limit economic and reputational damages. The crisis attribution, the crisis response strategy, the length of the relationship and the frequency of transaction were used to assess the trust and the commitment toward an organization that is facing a crisis. Considering the results of this study regarding the crisis attribution, it is possible to point out the important role of communication. The way in which a crisis is framed to the stakeholders, may affect their perception of the crisis because the attribution can be manipulated by the message with which the crisis has been communicated, and because this message may affect stakeholders’ feeling about the crisis (Weiner et al. , 1998). So, in a crisis situation, the organization should be really careful in communicating with stakeholders, using a frame that is able to protect them, and to eliminate, or at least to reduce, the reputational damage (Allen and Caillouet, 1994).
26 The effect of crisis response strategy
When analysing the crisis response strategy, it is important to keep in mind that the crisis situation is the primary element to decide which response can be the best option (Coombs, 2007). The deny response can be used when the crisis manager has the intention to deny that a crisis event happened, or when he or she wants to minimize the negative consequences of the crisis (Allen and Caillouet, 1994). Anyway, there need to be some evidences that support the fact that the crisis has never occurred, or that the crisis event has not harmed the organizational wellness (Newsom, Scott, and Turk, 1992). Nevertheless many authors have stressed on the apology response as the best option to adopt in case of crisis (Benoit, 1995; Benoit and Drew, 1997), accepting the full responsibility for the crisis event is the most expensive choice for an organization (Fuchs-Burnett, 2002; Patel and Reinsch, 2003). Using an apology response can in fact lead the organization to lawsuit and to financial losses (Coombs and Holladay, 2008). It has been found that other strategies, such as compensation and sympathy, are as effective as the apology strategy regarding the perception of the crisis, but, at the same time, they are less expensive than apology ( ibid.). Focusing on victims’ needs, offering compensation, and expressing concerns are seen as accommodative strategies that can lead to better outcomes (Coombs, 2006; Fediuk, 2002).
The importance of a durable and frequent business relationship
The findings of this study regarding the duration of the relationship and the frequency of transaction confirm that, to be competitive, an organization should focus on establishing a durable and solid relationship with its stakeholders (Noordewier, John and Nevin, 1990). An high frequency of transactions has resulted to be associated with an higher level of trust and commitment in a crisis situation, and this finding contribute to stress on the importance of establishing a frequent
relationship with suppliers. It has been shown that suppliers who perform an high number of transactions with the buying firm, perceive their relation as more stable and display an higher commitment, compared to suppliers involved in less recurrent transactions (Lai, Cheng and Yeung,
27 2005). An high frequency of transactions has also shown to be associated with an higher interest in the buying firm, and with an higher chances of successful performances (ibid.). Also the duration of the relationship has resulted to be associated with an higher level of trust and commitment. Previous research shown that when the business relationship is established for long time, the chances that one of the partner might engage in a new relationship decrease (Stigler and Becker, 1977). The
experience that the supplier and the buying firm have in managing their relationship, lead to
favourable and specific assets (Levinthal and Fichman, 1988). Considering these results, the advice would be, for both of the parties, to invest in their relationship in order to create a favourable climate that can lead to a long term duration, and, consequentially, to achieve competitive advantages, so that, in a crisis situation, supplier companies are more willing to maintain the relationship and to help the organization to overcome the crisis (Coombs and Holladay, 2005; Williamson, 1979).
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36 Appendix
Section 1: Survey texts
Survey text with internal attribution and apology response strategy
This morning it has been found out that a fire accident has involved one of your buying firm. The fire has spread into the building from a storage in which it has started. The firemen have evacuated the building and the neighbourhood, and luckily no one has got injured. The policemen have found out that the cause of the accident has been a machine. Somebody should have turned it off at the end of the day, but the designed employee should have forgot about that, and the supervisor haven't checked all the machines before to leave the building. The CEO of the organization has apologised for the accident with the neighbourhood, and with his employees, he has stated that the organisation takes full responsibilities for what happened, that they are working on improving their control procedures for the machines to prevent such accidents in the future, and that they are doing their best to repair the damages caused by the accident.
Survey text with internal attribution and deny response strategy
This morning it has been found out that a fire accident has involved one of your buying firm. The fire has spread into the building from a storage in which it has started. The firemen have evacuated the building and the neighbourhood, and luckily no one has got injured. The policemen have found out that the cause of the accident has been a machine. Somebody should have turned it off at the end of the day, but the designed employee should have forgot about that, and the supervisor haven't checked all the machine before to leave the building. The CEO of the organization, has stated that nothing has happened to their company, and that the organisation is currently working at its' normal standards.
37 This morning it has been found out that a fire accident has involved one of your buying firm. The fire has spread into the building from a storage in which it has started. The firemen have evacuated the building and the neighbourhood, and luckily no one has got injured. The policemen have found out, looking at the cameras, that the cause of the accident has been a pyromaniac that has lighted the fire on purpose. He has been already recognised and arrested for what he has done. The CEO of the organization has apologised for the accident with the neighbourhood and with his employees, he has stated that the organisation is working to solve the damages caused by the accident and that they are all working in order to improve the security of their properties, to prevent such accidents in the future.
Survey text with external attribution and deny response strategy
This morning it has been found out that a fire accident has involved one of your buying firm. The fire has spread into the building from a storage in which it has started. The firemen have evacuated the building and the neighbourhood, and luckily no one has got injured. The policemen have found out, looking at the cameras, that the cause of the accident has been a pyromaniac that has lighted the fire on purpose. He has been already recognised and arrested for what he has done. The CEO of the organization has stated that nothing has happened to their company and that the organisation is currently working at its' normal standards.
Section 2: items of the scales
The items of the commitment scale are the following:
1. We have strong commitment to this organization.
2. We have intention to develop and maintain this relationship. 3. This relationship requires maximum effort and involvement.
4. Our company is fully open and honest in the relationship with this organization. 5. This organization spends enough energy in our relationship organization.
