The Role of Culture on Psychological Contract Creation
& Reactionary Breach Behaviour in Intercultural Buyer-Supplier Relationships
Master Thesis
MSc Supply Chain Management University of Groningen
Word Count: 10,367 Date: January 27, 2020 Author: J.C.A Baumgartner Student Number: S2852888 Supervisor: dr. ir. N.J. Pulles Co-assesor: dr. ir. T. Bortolotti
Abstract
Purpose
The research attempted to identify how cultural characteristics in intercultural buyer-supplier relationships play a role in the creation of psychological contracts. As well as the propensity to which individuals in boundary spanner roles react once a breach has occurred.
Design/Methodology/Approach
The research took a qualitative approach by conducting semi-structured interviews with procurement practitioners within an industrial packaging company. The questions attempted to research the psychological contracts individuals in boundary spanner roles have with their intracultural and intercultural buyer-supplier relationships.
Findings
The findings suggest that cultural distance may influence psychological contract incongruence in buyer-supplier relationships through differing degrees of behavioural expectations,
communication styles, market orientation and a greater learning curve in adapting to
expectations across cultures. Consequently, resulting in a greater tendency for psychological contract breach when managing intercultural dyads in comparison to intracultural
relationships. No apparent differences in post-breach behaviour were identified. However, boundary spanner role professionalism was attributed to the lack of observability in
expression and actions. Potentially resulting in breaches and the reactionary behaviour to be hidden in exchange partner relationships.
Practical Implications
The research may assist practitioners in the management of both intracultural and intercultural buyer-supplier relationships. The findings imply that those in boundary spanner roles should have similar cultural characteristics to further mitigate potential psychological contract
incongruence. Furthermore, as the presence of psychological contract violation may be hidden as a result of professionalism inhibiting the exchange partners expression and actions for discontent. Awareness of the potential consequences of psychological contract breach is vital.
As they could be difficult to identify and may result in the deterioration of trust and the collapse of the exchange as a whole.
Originality/Value
The research contributes to the field of supply chain management by addressing the lack of research concerning psychological contracts in intercultural exchanges within buyer-supplier relationships.
Table of Contents
1. INTRODUCTION 4
2. THEORETICAL BACKGROUND 6
2.1 Phases of Psychological Contract Development in Buyer-Supplier Relationships 6
2.1.1 Creation & maintenance 7
2.1.2 Disruption 8
2.1.3 Renegotiation, repair & exit 8
2.2 The Role of Culture on Psychological Contract Creation 10 2.3 The Cultural Differences in Psychological Contract Reactionary Breach Behaviour 11
3. METHODOLOGY 12
3.1 Research Design 12
3.2 Case Selection 13
3.3 Data Collection & Analysis 14
3.5 Interview Protocol & Operationalisation 15
4. RESULTS 17
4.1 Psychological Contract Creation 17
4.1.1 Product & behavioural expectations 17
4.1.2 Transactional & relational psychological contracts 18
4.1.3 Direct & indirect communication styles 18
4.1.4 Learning curve in understanding expectations 19
4.2 Psychological Contract Disruption, Renegotiation, Repair & Exit 19
4.2.1 Renegotiation 20
4.2.2 Repair & exit 20
4.2.3 Psychological contract violation 21
5. DISCUSSION 21
5.1 Psychological Contract Creation Incongruence 21
5.2 Psychological Contract Reactionary Breach Behaviour 23
5.3 Theoretical Implications 24
5.4 Practical Implications 25
5.5 Limitations & Future Research 26
6. CONCLUSION 26
7. BIBLIOGRAPHY 27
8. APPENDICES 31
1. INTRODUCTION
Global value chains now attribute to more than two-thirds of the world’s trade and its growth is continuously on the rise (World Trade Organisation, 2019). The increase in the
globalisation of supply chain structures (Eckerd, Boyer, Qi, Eckerd & Hill, 2016) have prompted buyers and suppliers alike to manage and interact with exchange partners across various nationalities. The presence of cultural distance in cross-border buyer-supplier relationships is evermore evident requiring individuals to navigate and adapt to unfamiliar norms and values from abroad. Country-specific knowledge is thus becoming progressively obsolete as firms are seeking to attract individuals with the ability to acclimate to varying cultural surroundings (Earley & Peterson, 2004).
Cross-border buyer-supplier relationships require social exchanges, from which both exchange partners elicit certain behaviour. However, their actions are oftentimes guided by varying deep-rooted cultural norms and values (Child & Kieser, 1979). Subsequently, this may lead to incongruence between buyers and suppliers. As cultural distance may result in varying assumptions and beliefs regarding the obligations (Morrison & Robinson, 1997) one has within the dyad potentially leading to conflicts. Moreover, the tendency for individuals from disparate cultures to react differently to similar supply chain disruptions has been shown to lead to varying outcomes be it either positive or negative (Chen, Su & Ro, 2017; Eckerd, et al., 2016; Helper et al., 2011). It is, therefore, crucial for individuals managing buyer-supplier relationships to be aware of these cultural differences in order to harness the benefits and mitigate the negative implications. This research, therefore, places its focus on the cognitive and behavioural aspects of intercultural buyer-supplier exchanges, specifically on the presence of psychological contracts in these dyads.
The work of Rousseau (1989: 126) introduced the concept of psychological contracts as “an individual’s belief that a promise of future return has been made, a consideration or
contribution has been offered (and accepted), and an obligation to provide future benefits exists”. However, the understanding of these obligations may vary between individuals due to so-called psychological contract incongruence. Furthermore, if the psychological contract is not upheld between parties one of the actors involved may experience a subjective perception that the other party did not fulfil their promised obligations resulting in what is known as a psychological contract breach (Morrison & Robinson, 1997). The breaching of psychological contracts in buyer-supplier relationships may be detrimental to the sustenance of a partnership as research has shown that the negative reactionary behaviour exhibited after a breach has occurred may have a significant negative effect on trust, possibly resulting in the erosion of the relationship as a whole (Kingshott & Pecotich, 2007; Wang & Huff, 2007). The influence of culture is assumed to play a role in the understanding of one another’s expectations
(Morrison & Robinson, 1997) as well as the reactionary behaviour exhibited after such a breach has occurred in buyer-supplier relationships (Chen, Su & Ro, 2017; Eckerd, et al.,
2016; Thomas, Au & Ravlin, 2003). However, extant research on the psychological aspects of buyer-supplier relationship management, in general, are limited (Hill, Eckerd, Wilson &
Greer, 2009). The aforementioned is specifically prevalent in the context of supply chain disruptions (Ellis, Shockley & Henry, 2011) and cross-cultural exchanges, as the possibilities for further exploration are abound. The potential influence of culture upon psychological contracts and the continued globalisation of supply chain structures provide a substantiated basis in support for further research (Eckerd, et al., 2016).
Extant literature concerning psychological contract breach in buyer-supplier relationships have covered topics relating to unethical behaviour (Hill, et al., 2009), trust and commitment (Kingshott & Pecotich, 2007; Wang & Huff, 2007), relationship resilience (Kaufmann, Esslinger & Carter, 2018) the influence of severity and timing on reactionary behaviour (Eckerd, et al., 2013) switching behaviour (Mir, Aloysius, & Eckerd, 2017) and order quantity re-adjustments (Eckerd, et al., 2016). However, research on the possible influence culture has on the creation of psychological contracts and the reactionary behaviour exhibited after a breach has occurred within intercultural buyer-supplier relationships is exceptionally sparse.
The work of Eckerd, et al., (2016) is the only identified study related to psychological
contracts specifically in buyer-supplier relationships taking the aspect of culture into account.
The successful management of intercultural buyer-supplier relationships in the context of psychological contracts, therefore, requires further analysis. As cultural distance may play a role in fostering disparate understandings of expectations and obligations across the
buyer-supplier dyad. Potentially resulting in exchange partners from various cultures to react differently to psychological contract breach. The research, thus, attempts to further understand how cultural characteristics impact the dynamics of buyer-supplier cognition occurring during the creation of psychological contracts and the behaviour after an exchange partners
psychological contract has been breached. Based on the aforementioned two research questions are developed.
1. How does culture influence the cognitive creation of psychological contracts within intercultural buyer-supplier relationships?
2. How does culture influence the behaviour within intercultural buyer-supplier relationships once a psychological contract breach has occurred?
This research contributes to the field of supply chain management by addressing the lack of literature concerning psychological contracts in intercultural exchanges within buyer-supplier relationships. For the first research question my findings indicate that during the creation of psychological contracts, incongruence may have a greater tendency for manifesting in intercultural buyer-supplier relationships in comparison to intracultural buyer-supplier relationships. Therefore, intercultural relationships could have a greater propensity to exhibit psychological contract breach caused by differing degrees of behavioural expectations, communication styles, market orientations and a greater learning curve in adapting to
expectations across cultures. For the second research question. No clear cultural influences were noted concerning disparate behaviour as a result of psychological contract breach.
Albeit, my findings imply that this may be due to the influence of culture being hidden. As the direct observation of culture could be inhibited due to practitioners limiting their expression as a consequence of professionalism in the business environment. Therefore, practitioners should be wary of the potential influence of culture and it’s outcomes on behaviour. As they may still persist post-breach although they are not easily noticeable.
In my research, I first introduce a model for the development of psychological contract processes in exchange relationships as a tool for analysis. The model is then followed by the known influences of culture on psychological contract creation, breach as well as research concerning the propensity to which individuals across cultures react towards supply chain disruptions. Following this, the methodology on how I conducted the research through the use of qualitative interviews involving procurement practitioners and its results are explained.
Lastly, a discussion with my interpretations of the findings using relevant literature and the final conclusions are presented.
2. THEORETICAL BACKGROUND
2.1 Phases of Psychological Contract Development in Buyer-Supplier Relationships
The psychological contract is “a cognitive schema, or system of beliefs, representing an individual's perceptions of his or her own and another's obligations, defined as the duties or responsibilities one feels bound to perform” (Rousseau, Hansen & Tomprou, 2018: 1). The concept of psychological contracts emerged in the 1960s (Argyris 1960; Blau, 1964;
Levinson, 1962; Schein, 1965) attributing its origins to social exchange theory (Cullinane &
Dundon, 2006). The notion was further developed by Rousseau (1989) primarily in the context of cognition and behaviour at the intra-organisational level. However, since its inception, it has been adopted to extant literature in various fields including supply chain management within buyer-supplier relationships (Eckerd, et al., 2013; Eckerd, et al., 2016;
Hill, et al., 2009; Kaufmann, Esslinger & Carter, 2018; Kingshott & Pecotich, 2007; Mir, Aloysius, & Eckerd, 2017; Wang & Huff, 2007).
Psychological contracts have found their relevance in buyer-supplier relationships, as they are built through the accumulation of trust and commitment (Miocevic, 2016), both of which are central to the maintenance of psychological contracts. The construct of trust is considered to be the foundation for social exchange in psychological contracts (van den Heuvel & Shalk, 2009). Moreover, an individual’s commitment to an organisation is also closely tied to their psychological contracts (Rousseau, 1989). The management of these buyer-supplier
relationships is said to take two forms namely, of contractual and relational governance.
Contractual governance is the use of formal written contracts as a tool for safeguarding measures. Relational governance, on the other hand, enforces the obligations, promises and expectations in exchanges through social processes (Poppo & Zenger, 2002) and unwritten psychological contracts. The current research places the focus on the latter with regards to cognitive and behavioural aspects of intercultural buyer-supplier exchanges, specifically on psychological contract creation as well as the reactionary behaviour after the breach has occurred. The aforementioned will be further elaborated through a model covering the development of psychological contracts in exchange relationships through distinct phases.
Figure 1: Model of Psychological Contract Processes (Rousseau, Hansen & Tomprou, 2018)
Rousseau, Hansen & Tomprou (2018) developed a model of psychological contract processes into several phases and their corresponding interrelations for exchange relationships (Figure 1). The model was initially created for inter-organisational use for practices in human
resources. However, the authors have also suggested its potential application in buyer-supplier exchanges. Based on the literature’s citations (Rousseau, Hansen & Tomprou, 2018) the following is from my knowledge the first attempt in applying the model for buyer-supplier relationships.
2.1.1 Creation & maintenance
The first phase, namely, the creation phase (Figure 1) is in which individual psychological contracts between exchange partners are formed. Psychological contracts are idiosyncratically held by individuals within an organisation (Morrison & Robinson, 1997) and are created through economic and social exchanges with other actors (Rousseau, McLean Parks, 1993).
An individual’s belief of reciprocity between actors is said to be the precursor for establishing a psychological contract. However, an individual’s psychological contract is only firmly ingrained once the opposite party has created an obligation for reciprocity. Therefore, “when an individual perceives that contributions he or she makes obligate the organisation to reciprocity (or vice versa), a psychological contract emerges” (Rousseau, 1989: 124). Once the psychological contract is established and becomes stable within an individual. The second phase, namely, the maintenance phase is reached. Individuals within this phase use the
psychological contract to support the relationships status quo and to guide their interactions
with the exchange partner. The longevity of this phase is dependent on the fit of the exchange partner and whether a disruption occurs within the relationship (Rousseau, Hansen &
Tomprou, 2018). Moreover, once a psychological contract has been formed certain factors have been shown to reinforce the notion. Promises made publicly in front of other witnesses (e.g. employees) or in a written format (e.g. emails, contracts) strengthen an individual’s perception of the other parties obligations (Rousseau, 1989).
2.1.2 Disruption
Once the maintenance phase is reached disruptions may occur. A disruption is described as an affective event which inhibits routine activities to proceed between exchange partners
(Rousseau, Hansen & Tomprou, 2018). In the context of buyer-supplier relationships, the following could be attributed to internal events caused by the exchange partner or external events outside their locus of control (Eckerd, et al., 2016). Extant literature proposed two causes contributing to exchange partners experiencing psychological contract breach namely, reneging and incongruence. Reneging is the act in which an exchange partner is aware of their obligations, however, they fail to do so due to either their unwillingness or inability.
Incongruence, on the other hand, arises when both exchange partners have differing
perceptions of their obligations towards one another (Morrison & Robinson, 1997). Once a disruption does occur it is followed by a breach of one parties psychological contract. A psychological contract breach may result in reactionary behaviour of either positive or negative valence. The reactionary behaviour exhibited is dependent on the valence of the emotional response and not on whether the exchange partner exceeds or falls short of their obligations (Rousseau, Hansen & Tomprou, 2018).
2.1.3 Renegotiation, repair & exit
A positive evaluation of the emotional state enables a transition towards the renegotiation phase in which obligations are revised or new ones are negotiated between exchange partners.
Once the negotiations have been achieved a transition to the maintenance phase is warranted.
However, a negative evaluation of the emotional state leads to a transition towards the repair phase (Rousseau, Hansen & Tomprou, 2018). If exchange partners in the repair phase
manage to restore or revise the obligations a transition towards the maintenance phase may be possible. However, if this is not accomplished an exit of the relationship between exchange partners is probable (Rousseau, Hansen & Tomprou, 2018). Individuals under this state may therefore be unable to restrain their expressions of frustration, anger or betrayal through facial gestures, posture and tone (Morrison & Robinson, 1997). Enabling their negative emotions to determine the behaviour they exhibit towards their exchange partner. Therefore, resulting in an adversarial outcome such as the erosion of trust or the exit of an exchange relationship as a whole (Kingshott & Pecotich, 2007; Wang & Huff, 2007).
Term Definition
Psychological Contract “A psychological contract is defined as the subjective conceptualisation of an exchange agreement between parties. As such, psychological contracts are an
individual’s idiosyncratic interpretation of the terms of an exchange. Those terms may be overt or implied, written or orally exchanged, and commonly understood or not” (Eckerd, et al., 2013: 568).
Psychological Contract Breach “Psychological contract breach occurs when an individual perceives insufficient fulfillment of
obligations from an exchange partner” (Eckerd, et al., 2013: 568).
Psychological Contract Violation
“Following a breach, the individual may experience negative affective reactions. This emotional state is defined as psychological contract violation.
Psychological contract breach and violation are two conceptually distinct constructs, wherein breach relates to the cognitive aspect and violation relates to the emotional aspect of a failure in the psychological contract.” (Eckerd et al., 2013: 569).
Reneging “Reneging is when agents of the organisation recognise that an obligation exists but they knowingly fail to follow through on those obligations. Reneging occurs either because the organisation is unable to fulfill a promise or because it is unwilling to do so” (Morrison &
Robinson, 1997: 233).
Incongruence “Incongruence is when an employee has perceptions of a given promise that differ from those held by the
organisational agent or agents responsible for fulfilling that promise. These different perceptions result because the terms of a psychological contract are inherently perceptual” (Morrison & Robinson, 1997: 235).
Table 1: Key Definitions
2.2 The Role of Culture on Psychological Contract Creation
Culture is defined as “the collective programming of the mind which distinguishes the members of one group or category of people from another” (Hofstede, 2010: 6). Culture impacts cognition in terms of how individuals process information (Thomas, Fitzsimmons, Ravlin et al., 2010) Therefore, Individuals have been shown to have disparate understandings of psychological contracts. The aforementioned may be attributed to divergent schemata which in return is influenced by one’s own culture. (Morrison & Robinson, 1997) As, psychological contracts are based on promises that may be expressed either verbally or inferred through behaviour (Rousseau & Shalk, 2000: 6). “What promises mean and the degree to which they are binding are subject to different sets of cultural assumptions”
(Rousseau & Schalk, 2000: 7).
Psychological contracts are already complicated between individuals. Let alone if these two individuals come from different cultures. Incongruence between actors may, therefore, arise as both parties could have very different understandings of the implicit obligations within their relationship (Morrison & Robinson, 1997) Furthermore, psychological contracts lie on a continuum and assume two separate forms namely, of transactional or relational nature (Rousseau, McLean Parks, 1993). Transactional contracts emphasise economic exchange and are characterised as short-term monetary obligations. Psychological contracts of such nature consist of limited interactions and thus the identity of parties involved is irrelevant. Relational contracts, on the other hand, consist of both economic and social exchange. Psychological contracts of this nature are characterised as long-term monetary obligations with the inclusion of socio-emotional obligations such as loyalty, support and commitment. (Rousseau, McLean Parks, 1993; Thomas, Fitzsimmons, Ravlin, Au, Ekelund & Barzantny, 2010). These too are influenced by culture as research has found that cultural characteristics may determine an individual’s market orientation in social networks be it of transactional or relational nature (Luczak, Mohan-Neill & Hills, 2010; 2014; Thomas, Au & Ravlin, 2003).
For example, in Chinese collectivist culture, the concept of Guanxi is prominent in exchange relationships and is defined as “the existence of direct particularistic ties between two or more individuals” (Tsui & Farh, 1997: 60). In which a preference for personal long-term
relationships are taken (Millington, Eberhardt, & Wilkinson, 2006). Psychological contracts in cultures that hold such values may, therefore, be more relational in nature. However,
individualistic cultures such as the U.S have been shown to have a greater inclination towards being short-term sighted (Eckerd, et al., 2016). Implying that cultures with similar values may have an inclination to adopt a transactional approach. Therefore, if dissimilar market
orientations are present between exchange partners in intercultural relationships further psychological contract incongruence may ensue.
Extant literature in the context of supply chain disruptions within buyer-supplier relationships indicates that disparate cultures have varying cognitive thresholds as to when they consider their psychological contract to be breached (Eckerd, et al., 2016). As so-called threshold effects dictate whether an individual perceives a breach to have occurred (Morrison &
Robinson, 1997). Moreover, culture has also been observed to play a role in determining the tolerance one has for breaches as certain cultural characteristics have been attributed with higher flexibility (Eckerd, et al., 2016) and predisposition to accept breaches (Kickul, Lester
& Belgio, 2004). Thus, individuals from varying cultures may have a tendency to react differently to psychological contract breaches. The aforementioned may also be evident between buyers and suppliers at the inter-organisational level as individuals across cultures have been observed to react differently to supply chain disruptions (Chen, Su & Ro, 2017;
Eckerd, et al., 2016; Helper, et al., 2011).
2.3 The Cultural Differences in Psychological Contract Reactionary Breach Behaviour
Since culture impacts cognition in terms of how individuals process information it therefore, also determines their motivation for behaviour (Thomas, et al., 2010). Extant literature provides sound support for the notion that culture plays a role in the decision-making process and the actions managers make within and outside an organisation (McSweeney, Brown, Iliopoulou 2016). Extant literature between American and Japanese auto-manufacturers concerning quality issues with suppliers (Chen, Su & Ro, 2017) as well as U.S and Chinese nationals (Eckerd, et al., 2016) clearly elicit these cultural differences.
In comparison to the Japanese, American automakers responded negatively to issues
concerning product quality problems by exerting punitive measures through blame attribution.
Which in turn sparked conflict within their buyer-supplier relationships. However, a different approach was taken by the Japanese automakers as they identified product quality issues as an opportunity to improve their components. The supply chain disruption, therefore, served as a joint problem-solving opportunity, resulting in a positive or at worst no negative influence on the buyer-supplier relationship. The disparate outcomes as a result of the American and Japanese buyers reactions were empirically shown to stem from diverse cultural
characteristics. The study in question accounted for best practices in supplier relationship management and Japanese firms with both keiretsu and non-keiretsu structures. Therefore, the influence of supplier governance structures were isolated (Chen, Su & Ro, 2017).
Furthermore, similarities were observed in another cross-cultural comparison study between individuals from the U.S and China. In light of psychological contract breaches caused by supply chain disruptions, those from the U.S exhibited a greater tendency for strong and immediate negative reactions (Eckerd, et al., 2016). Similar negative reactions by individuals from the U.S due to supply chain disruptions have also been seen in extant literature (Chen, Su & Ro, 2017; Helper, et al., 2011). The Chinese nationals, on the other hand, displayed flexibility with a higher tolerance for breaches. Those from the U.S. in comparison to the
Chinese were more reluctant to work with the same partner and expressed less trust although the supply chain disruptions caused similar impacts to both parties (Eckerd et al., 2016).
In align with the model of psychological contract processes (Figure 1) one could therefore, assume that cultures which internalise varying characteristics may tend to have a greater propensity to exhibit either positive or negative reactionary behaviour caused by
psychological contract breach. The aforementioned is evident in cases regarding American and Japanese automakers as well as between U.S and Chinese nationals, as the manner culture’s perceive and behave to supply chain disruptions in buyer-supplier relationships differ. Buyers from America entered an emotional state possibly shifting towards the repair phase. Exhibiting a lower tolerance for breaches, greater tendency to emit strong and immediate negative behaviour towards their suppliers while experiencing a higher loss for trust. Buyers from Japan and China on the other hand, averted a negative emotional state possibly shifting towards the renegotiation phase. Instead, reacting positively with a higher propensity to accept breaches and show flexibility towards suppliers resulting in a lower loss for trust.
Subsequently, cultural characteristics may have an influence on the propensity to which individuals within intercultural buyer-supplier relationships react after a psychological contract breach has occurred. As, has predominantly been portrayed in most intercultural business exchange literature. Cultural distance may, therefore also be seen as either a strength or a weakness, as opposed to only a barrier. It is, thus, crucial for practitioners in boundary spanner roles to understand how culture influences individual psychological contracts and to what extent these behavioural differences may be utilised or mitigated to their firms benefit.
To further explore how culture may play a role in the dynamics of the cognitive and
behavioural processes of individuals in buyer-supplier relationships the methodology of the research will be elaborated on.
3. METHODOLOGY
3.1 Research Design
The research attempted to further understand how cultural characteristics impact the dynamics of buyer-supplier cognition during the creation of psychological contracts and the behaviour occurring after an individual's psychological contract has been breached. The model of psychological contract processes (Rousseau, Hansen & Tomprou, 2018) was used as a guideline to analyse the dynamics of culture in the various phases prior to and following psychological contract breach within buyer-supplier relationships.
The research used an inductive multiple case study approach at the relational level building on semi-structured interviews with procurement practitioners to observe the role of culture in
these relationships. The case study approach for several reasons lends itself particularly suitable for this research. Firstly, it allowed for phenomena to be studied and observed in its natural setting through actual practice, Secondly, it allowed for how, what and why questions of the phenomena to be answered. Thirdly, as the study was exploratory in nature it allowed for the identification of unknown variables in which phenomena were not well understood.
Lastly, relevant theory could then be generated through a clear understanding of the phenomena (Meredith, 1998). Moreover, qualitative methods have also been proposed as more appropriate than quantitative methods when studying actions in cultural settings, as the method has the ability to observe “the embeddedness and dynamism of the phenomenon”
(Boscari, Bortolotti, Netland & Rich, 2018: 10). The aforementioned also provides further grounds for the choice of method supporting the observation of reactionary behaviour in buyer-supplier relationships.
3.2 Case Selection
The multiple case study approach was chosen for this research, as it allowed for the identification of patterns across cases (Eisenhardt, 1989). The unit of analysis is at the relational level, therefore single cases consisted of relationships across buyers and suppliers.
For the research a single industrial packaging firm was approached. Multiple international buyer-supplier relationships was a prerequisite to capture the cultural dynamics within the exchange relationships. Moreover, a theoretical replication logic was chosen as disparate results were expected to be obtained from a diverse set of cases (Seawright & Gerring, 2008).
Eisenhardt (1989) proposes that anywhere between four to ten cases are ideal, as the empirical grounding is questionable when below four cases. Moreover, with over ten cases coping with the volume and complexity of the data becomes difficult.
Criteria Procurement practitioners Sales practitioners
Experience managing intracultural
relationships with suppliers. X -
Experience managing intercultural
relationships with suppliers. X -
Experience managing intracultural
relationships with buyers. - X
Experience managing intercultural
relationships with buyers. - X
Experienced events in which
psychological contract breach occurred due to the supplier.
X X
Experienced events in which
psychological contract breach occurred due to the buyer.
X X
Table 2: Multiple Case Study Selection Criteria
Criteria for the selection and exclusion of the cases within the firm considered both the buyer and supplier side of the dyad (Table 2). However, as the theoretical background builds heavily on prior research related to the buyer side and with the inclusion of over ten cases resulting in over complexities for data analysis (Eisenhardt, 1989). Procurement practitioners were specifically targeted to limit the scope of research. The selected interviewees therefore, had procurement experience managing both domestic and foreign suppliers. Thus, cases involving experiences with both intracultural and intercultural relationships were selected for case replication. Moreover, it was a requirement for procurement practitioners to have experienced events of psychological contract breach both from the buyer and supplier side within these relationships.
3.3 Data Collection & Analysis
Interviewees matched the aforementioned criteria by having them explain their role within the company as well as to what extent they had managed domestic and foreign suppliers
throughout their careers in align with their cultural background. Furthermore, as defined by the work of Rousseau, Hansen & Tomprou (2018) psychological contract breach within relationships was identified by confirming the insufficient fulfillment of expectations and obligations. Interviewees were, therefore, requested to elaborate on instances both
intracultural and intercultural in which they had experienced feelings as though suppliers insufficiently fulfilled their expectations and obligations towards their company. As well as instances in which they had insufficiently fulfilled the expectations and obligations towards their suppliers.
The interviews were recorded with the consent of the interviewees, as recordings are considered to be fundamental to the success of the grounded theory approach (Lawrence &
Tar, 2013). I was informed that time constraints could have posed a problem for the gathering of extensive and accurate data, as the procurement practitioners were said to have busy schedules. To mitigate the concern a list of questions were provided to the practitioners beforehand. The list included the questions posed in the interview protocol. The
aforementioned would allow the interviewees to prepare their answers beforehand and obtain a general idea of the research. Moreover, since the nature of the study could be seen as sensitive with the inclusion of emotional behaviour within a business context. The
interviewees were assured that their identities would remain anonymous. Therefore, they were told that once the study had been conducted the individual interview recordings would be deleted. Thus, further facilitating the provision of extensive and accurate data.
Once the interviews were conducted and data had been collected the recordings were
transcribed into text format. Based on the work of Strauss & Corbin (1990) the coding process of the transcriptions were conducted in three steps. Open coding which is the first step
allowed for the analysis of data in which phenomena were identified. These phenomena were categorised and given descriptions. Axial coding the second step concerns itself with relating the previously categorised codes to one another. Selective coding the third step enables for the selection of a core category and creating an overall picture of the concept.
3.5 Interview Protocol & Operationalisation
Interviewees were posed questions included in the interview protocol (Table 3). Further probing questions were posed to delve deeper into the phenomena of intracultural and
intercultural relationships The questions attempted to research the influence culture has on the psychological contracts individuals have with their suppliers and the influence culture has on the reactionary behaviour resulting in the breach of those contracts.
1. Interview Opening Questions
A. Please begin by explaining what your role is within the company.
B. Could you explain to what extent you have managed intracultural and intercultural relationships with suppliers throughout your career?
2. Psychological Contract Breach Questions (adapted from Rousseau, Hansen &
Tomprou, 2018)
A. Could you think of an instance in which you have felt as though a supplier insufficiently fulfilled your expectations and their obligations towards your company?
B. Could you think of an instance in which you have felt as though you insufficiently fulfilled your suppliers expectations and your obligations towards them?
3. Psychological Contract Violation Questions (adapted from Morrison & Robinson, 1997)
A. Could you think of an instance in which you have felt frustration, anger and/or betrayal by how you have been treated by a supplier?
B. Could you think of an instance in which the supplier expressed frustration, anger and/or betrayal by how you have treated them?
4. Psychological Contract Incongruence (adapted from Morrison & Robinson, 1997) A. Could you think of some unspoken obligations that you expect your supplier to meet
even though they are not specified in a written contract?
B. Could you think of some unspoken obligations that your supplier expects you to meet even though they were not specified in a written contract?
5. Psychological Contract Reneging (adapted from Morrison & Robinson, 1997)
A. Could you think of an instance in which a supplier was unable or unwilling to fulfill their promise(s)?
B. Could you think of an instance in which you were unable or unwilling to fulfill your promise(s) towards your supplier?
6. Psychological Contract Renegotiation, Repair & Exit (adapted from Rousseau, Hansen & Tomprou, 2018)
A. Could you think of an instance in which you kept a supplier although they did not fulfill your expectations and their obligations towards your company?
B. Could you think of an instance in which you switched from one supplier to another due to insufficient fulfillment of your expectations and their obligations towards your company?
7. Interview Closing Question
A. Do you have any additional insights about managing intracultural or intercultural relationships with suppliers that have not been covered in this interview?
Table 3: Interview Protocol
The interview opening questions determined whether the interviewees experiences matched the multiple case study selection criteria. The first question allowed for the identification of experience within the field of procurement, while the second question determined whether the procurement practitioners had experience managing both intracultural and intercultural
relationships. To identify cases of psychological contract breach and account for the influence of culture. The interviewees were requested to elaborate on instances both intracultural and intercultural in which they had experienced feelings as though suppliers insufficiently fulfilled their expectations and obligations towards their company. The occurrence of psychological contract violation was recognised based on the individual feelings of the interviewees after a breach as well as the suppliers expression of frustration, anger or betrayal towards the
procurement practitioner. Moreover, the influences of psychological contract incongruence and reneging behaviour were also taken into account as defined by the work Morrison &
Robinson (1997). In align with the model of psychological contract processes the analysis of psychological contract creation and the post breach phases of the relationship between buyers and suppliers shifting towards either the renegotiation or repair phases were observed
(Rousseau, Hansen & Tomprou, 2018).
4. RESULTS
Ten procurement practitioners were interviewed, of which nine matched the aforementioned multiple case study criteria (Table 3). A single interviewee’s input was, therefore, excluded from the study since it did not meet the criteria as no experiences of psychological contract breach could be recalled. However, the data gathered was considered adequate enough to support the empirical grounds of the research as it exceeded four cases (Eisenhardt, 1989).
The phases in the model of Psychological Contract Processes (Rousseau, Hansen & Tomprou, 2018) will be used to explain the results.
4.1 Psychological Contract Creation
Psychological contracts within buyer-supplier relationships are formed in the creation phase.
In this phase procurement practitioners elaborated on the expectations they have with their suppliers. Similarities and differences in expectations across both intracultural and
intercultural cases were found throughout the interview and data analysis procedures.
4.1.1 Product & behavioural expectations
The findings indicate that expectations across cases consisted of several factors which could be categorised into two distinct groups. As was stated by a procurement practitioner. “I have to separate it or explain a bit because an expectation could be product wise or behaviour wise. I think product wise the expectation is pretty much clear all the time”. Similarities across intracultural and intercultural cases product wise could be generalised into factors that are explicitly communicated usually through contractual clauses namely, deliverability, quality, volume and price. On the other hand, the behavioural expectations procurement practitioners have within buyer-supplier dyads were related to factors that are not explicitly stated in written agreements, as one of the interviewees noted. “Most of the topics are already covered in written documents but for example honesty, we don’t really have that”. The behavioural expectations that were identified throughout the interview process mainly related to honesty, transparency, communication and the personal effort both parties would exert into the business relationship. Product expectations, therefore, rely on written agreements through contractual governance, while behavioural expectations are unwritten agreements sustained through relational governance (Poppo & Zenger, 2002). Since this research places an emphasis on relational governance and the unwritten agreements within buyer-supplier relationships, the behavioural expectations will be further elaborated on.
4.1.2 Transactional & relational psychological contracts
Similarities with behavioural expectations were found across cultures with honesty being the most universally adopted. However, the degree to which the unexplicit behavioural
obligations were expected and adhered to by individuals had a tendency to differ across intracultural and intercultural cases. For example, as one procurement practitioner mentioned.
“Sometimes there are things that I don’t want to tell the suppliers but my colleagues and even my boss tell them, and I am like why? Don’t say that but for them, it is like yes, because we have to keep the Guanxi”. Guanxi implying the preference for personal long-term
relationships with exchange partners (Millington, Eberhardt, & Wilkinson, 2006). It was found that certain cultures, therefore, placed a greater emphasis on factors such as honesty, transparency and building relationships outside of the business exchange. The contrary was also noted with other cultures taking a more technical oriented and cold standpoint towards their exchange partner limiting the amount of information shared. “I think in our country and some countries we have the point of view that suppliers are companies or business partners that need to deliver… it is a cold relationship, it is very technical oriented, direct, no friendship”. Since psychological contracts lie on a continuum, exchange partners from different cultures may assume contrasting market orientations in their buyer-supplier
relationships, (Luczak, Mohan-Neill & Hills, 2010; 2014; Thomas, Au & Ravlin, 2003) be it of transactional or relational nature (Rousseau, McLean Parks, 1993).
4.1.3 Direct & indirect communication styles
It became apparent that procurement practitioners in intracultural dyads had a superior understanding of one another’s expectations and the relationship at hand. “I think it is easier to get the expectations clear in the Netherlands than in foreign countries”. Individuals managing intracultural relationships were said to be more effective when expressing their expectations to local suppliers. The aforementioned was attributed to no language barriers, similar culture and the same understanding of expectations, as the way business is conducted in intracultural environments was considered analogous.“Locally it is easier to express your expectations as mainly the people working in the local market... have the same impression of their customers so there should be nothing new for them.” As a result, differences in indirect and direct communication styles across cultures was observed “I know that the Dutch are very direct. The Swedes, for instance, are less direct. The French are even more indirect or how do you say? So, there is a lot of cultural distance even within Europe.”
Procurement practitioners indicated a preference for their local style of communicating. When asked whether a direct communication approach was seen as beneficial to understanding expectations it was noted “I think it contributes to understanding each other and more important, understanding the expectations of somebody else. I mean you can always
understand somebody else but in the end, if you can understand the expectation of that person that is even more important because then you are actually doing the right thing”. Therefore, communicating and understanding these expectations was seen as more successful at the local
level “It is no big deal to say no I don’t do that, but for a Chinese guy you know they never say no, you know? They say yes not so much”. Intercultural buyer-supplier dyads, on the other hand, exhibited a greater intensity for unshared expectations. Understanding these implicit expectations within the buyer-supplier dyad was less evident as differences in business culture contributed to the perception of barriers in doing business. “If you go to a foreign market you always have the issue where you have to explain that this is how in the Netherlands here you know? You need to explain and to tell them and they have difficulties understanding that because that’s not how it is in their country”. As psychological contracts are expressed either verbally or inferred through behaviour (Rousseau & Shalk, 2000: 6) “the degree to which they are binding are subject to different sets of cultural assumptions” (Rousseau & Schalk, 2000:
7).
4.1.4 Learning curve in understanding expectations
Procurement practitioners noted a learning curve for understanding one another’s
expectations, these obligations became more evident over repeated interactions. However, this learning curve seemed to be shorter at the local level as similarities in cultural characteristics promoted productivity within the relationship,“Of course, language-wise and culture wise it is much more efficient to communicate with Chinese suppliers than some foreign suppliers”.
However, a longer learning curve was observed across cultures as “the time it gets very open is way shorter with locals than it is with foreigners and when it is with foreigners then it is again up to the culture”. Furthermore, the cultural distance in these relationships was related to difficulties in achieving the objectives of the exchange as a whole. “This is what I realise very often simply, they are not successful because they don’t understand our culture of business”. Therefore, adapting to the expectations of other cultures within intercultural relationships was seen as a prerequisite to benefit from the relationship “they simply would need to adapt themselves to it and they would be successful out of scratch like from the
beginning”. Adaptation to other cultures expectations was achieved through awareness“I used to face problems but now I have made myself understanding of the different cultures of the countries and try to react in the same way“. As well as repeated interactions “I used to explain to them things they could not understand. At the start I used to give them advice and slowly, slowly we have taught them and now it is not a problem”.
4.2 Psychological Contract Disruption, Renegotiation, Repair & Exit
Once a disruption occurred due to the insufficient fulfilment of any of the aforementioned expectations, psychological contract breaches were identified. These disruptions were accompanied by individuals in boundary spanner roles experiencing either a positive or negative valence. Resulting in the relationship shifting towards either the renegotiation or repair phases (Rousseau, Hansen & Tomprou, 2018).
4.2.1 Renegotiation
In general, the relationships which entered the renegotiation phase after a psychological contract breach had occurred were attributed with a more positive valence caused by less severe disruptions and the inability of suppliers to deliver on obligations opposed to
unwillingness. Feelings of frustration was a more common occurrence in these instances. “I think in this case unable... no betrayal not at all because when you talk to the guys you know they have the best intentions with you but some frustration absolutely”. Second chances were given in cases that were deemed as controllable and improvable. Mistakes were seen as a part of doing business with more severe and repeated indiscretions warranting the banning of a supplier. “If it is controllable or it can be improved then we give them a second chance. If it is about betrayal... then it is about the moral standard and their way of doing business, so we do not give a second chance”. Moreover, prior repeated positive interactions, the length of the relationship and motivation for a supplier to learn and improve influenced decision making in keeping and developing the suppliers which insufficiently fulfilled the expectations of the procurement practitioners. Suppliers within this category were said to have the best intentions in mind but lacked the ability to fulfil their obligations.
4.2.2 Repair & exit
The opposite was seen for relationships which entered the repair phase, as they, on the other hand, were attributed with a more negative valence caused by severe disruptions, neglect and the unwillingness of suppliers to fulfil obligations. The propensity to feel stronger negative feelings such as anger and betrayal opposed to frustration was apparent. “It almost felt as though they were doing it on purpose.. and then when we got a reaction that this was the standard we could have. We knew it was not true because we did a lot of other projects with them as well. So, this we knew and then it was anger and at the end, it was betrayal, like I said before this was done on purpose.” Furthermore, the exit of relationships was present in these cases with the deterioration of trust playing a crucial role. “I think that the most critical factor is the trust in the relationship. I mean if you found out that one of your suppliers is going to, for example, one of our customers directly then trust is gone and that is just a no go and then you’re done. That’s quite simple”. Although, keeping suppliers did occur and was mainly attributed to a lack of alternatives with the necessity to obtain certain product requirements.
The inability to change suppliers was frequent as factors such as price increases, availability, dependency and the current market situation hindered supplier switching. Furthermore, insufficient fulfilment of procurement practitioners expectations was found to cause a deterioration in trust within the relationship.
The role of culture in supplier switching, in particular, had inconclusive results with
procurement practitioners noting opposing views. “The local suppliers would give us a second chance but I have a feeling this is because the Dutch market is not very big so they know that sooner or later you will come across each other again”. While also stating “with foreign suppliers it is easier for them to say yeah better luck next time”. Although, the repairing of
relationships after a disruption had occurred was said to be more difficult within intercultural relationships “The most important thing is to live up to what you promise for the next time, with foreign suppliers I can explain it to them but many times I get a feeling that these guys just think that I am just bullshitting them”. However, no influences for culture was found on switching behaviour.
4.2.3 Psychological contract violation
In both phases, psychological contract violation occurred, namely, feelings of frustration, anger and/or betrayal. The severity of the disruption played a role in the form of psychological contract violation experienced. Feelings of anger and betrayal were more prevalent in severe breaches with frustration occurring more commonly in milder disruptions. However, no further differences were noted in post-breach behaviour associated with an individual’s psychological contract across intracultural and intercultural relationships. Although differing personality traits of individuals were suggested by an interviewee as a predictor for disparate behaviour.“I think there is not so much difference.. if there are stronger reactions this is just difference between personality and not so much between culture”.
Feelings of frustration, anger and/or betrayal occurred consistently after an individual’s psychological contract had been breached. However, it was considered unusual for the interviewees to witness instances of the opposite exchange partner expressing feelings of anger or betrayal if they had not fulfilled their obligations. Moreover, for the interviewees, it was often the case that once they experienced psychological contract violation only frustration was directly expressed to the exchange partner although they at certain circumstances did feel anger and/or betrayal. For example, as one procurement practitioner noted “I say anger but that is always internal so I never express this anger towards them. I express my frustration and I feel that they are neglecting our interests but I never come across angry”. The reason for inhibiting the stronger expressions of anger and betrayal was linked to professionalism. As another practitioner mentioned. “We need to be professional and a lot of people don’t show those emotions, but yes a supplier can express a certain frustration and a little bit of
disappointment. We expected this and this and only got this. So yeah it is not what we expected so yes you can be disappointed by that and that’s fair to express I think”.
5. DISCUSSION
5.1 Psychological Contract Creation Incongruence
Individuals within buyer-supplier relationships used both contractual and relational
governance (Poppo & Zenger, 2002) as safeguarding measures to manage the expectations of the exchange partner. Obligations were categorised into both product and behaviour based.
Contractual governance consisted of product based factors that could be explicitly stated in written agreements such as deliverability, quality, volume and price. Relational governance,
