1
The influence of information quality on
social contracts: a buyer perspective
MSc SCM
University of Groningen, Faculty of Economics and Business
Author:
Jeffrey Ajani
Student number: 3488012
Email:
j.a.r.ajani@student.rug.nl
Date:
23-6-2019
Supervisor:
Kirstin Scholten
Co-accessor:
Manda Broekhuis
Word count:
11.644
Abstract
Purpose: The exchange of information between buyers and suppliers shapes the nature of their relationship even before a formal contract is signed. Therein, mainly the quality of information is relevant to the relationship performance. Therefore, this study aims to gain an understanding of how the quality of information shared can contribute to a social contract in order to gain mutual benefits. Method/Design: This study uses an explorative case study approach. To gather data, multiple semi-structured interviews have been performed in manufacturing companies.
Findings: The findings show how the perceived accuracy and objectivity of information contribute to the development of a shared culture, mainly through the development of trustworthiness. Besides that, it is found that the usefulness of information contributes to the establishment of a shared culture through transparency and customer orientation. Furthermore, the exchange of value adding information leads to combined competences and a shared vision resulting in a shared strategy.
Contributions: This study contributes to literature, as evidence is provided that high information quality leads to trustworthiness, perceived customer orientation and transparency which contribute to the establishment of a shared culture or strategy in a social contract.
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Table of content
1. Introduction ... 3
2. Theoretical framework ... 5
2.1 Social contracts in buyer-supplier relationships ... 5
2.2 Information sharing in buyer-supplier relationships ... 9
2.3 Information quality ... 9 2.4 Conceptual model ... 11 3. Methodology ... 13 3.1 Research design ... 13 3.2 Research context ... 13 3.3 Case selection ... 14 3.4 Data collection ... 15 3.5 Data analysis... 16 4. Findings ... 20 4.1 Shared values ... 23 4.2 Shared norms ... 25 4.3 Shared expectations ... 27 5. Discussion ... 29
5.2 Contribution of perceived customer orientation and transparency to a shared culture ... 30
5.3 Contribution of value adding information to a shared strategy ... 32
6. Conclusion ... 33
6.1 Managerial implications ... 33
6.2 Limitations and directions for further research ... 33
7. References ... 35
Appendix A: Interview Guide ... 40
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1. Introduction
Over the last decades, academics have stressed the importance of information sharing in buyer-supplier relationships, as information sharing may lead to benefits such as lower logistical cost and better decision making (Madlberger, 2009; Seidmann & Sundararajan, 1997). Even though the supply chain management literature is very clear on the mutual benefits of information sharing (Asgari, Nikbakhsh, Hill, & Farahani, 2016; Han & Dong, 2015; Teunter, Babai, Bokhorst, & Syntetos, 2018), some academics argue that too much information sharing can be harmful due to a risk of opportunistic behavior by the supplier (Y. Huang, Li, & Ho, 2016). As both high and low amounts of information sharing are not ideal, another perspective that buyers could focus on to gain mutual benefits is information quality (Michnik & Lo, 2009). Information quality negates the need to share large amounts of information, as only the quality of information is relevant to performance (Y. W. Lee, Strong, Kahn, & Wang, 2002). After all, a high amount of information sharing does not necessarily involve an exchange of relevant information, whereas sharing high quality information does. Accordingly, it has been argued that shared information must be relevant, timely, complete and considered within the task at hand to add value (Y. W. Lee et al., 2002), further establishing the argument to focus on information quality. Besides that, Olorunniwo & Li (2010) argue that collaboration built on good quality information sharing is essential, and positively contributes to supplier satisfaction (S. Li & Lin, 2006). However, the main challenge buyers face, is a lack of understanding on how the exchange of good quality information may lead to mutual benefits (G. Q. Huang, Laut, & Makj, 2003).
Good quality information sharing is particularly important during the initial stages of a relationship when both parties become familiar with each other. In this stage, before a formal contract is made, information sharing helps to establish shared norms, values and expectations (Eckerd & Hill, 2012), which form the basis of a social contract. A social contract is an informal and unwritten agreement, consisting of behavioral standards that serve as the foundation of the relationship (Broekhuis & Scholten, 2018; Heide, Wathne, & Rokkan, 2007). Literature on social contracts emphasize the use of good quality information sharing in social contracts to build collaborative relationships (Eckerd & Hill, 2012; S. Li & Lin, 2006; Olorunniwo & Li, 2010), as information with little reliability or validity is of no use to buyers (Moberg, Cutler, Gross, & Speh, 2002). After all, the quality of information is regarded as a product, ultimately serving as a tool to satisfy buyer’s needs (Michnik & Lo, 2009). As such information quality, which can thus be described as the value of information, is critical for the development of a social contact (Y. W. Lee et al., 2002; S. Li & Lin, 2006).
4 influence of various information quality attributes on social contracts. As literature falls short in explaining how buyers can use the exchange of good quality information in order to create a stronger relationship (Eckerd & Hill, 2012), the aim of this study will be to explore how the quality of information shared, may contribute to the social contract. This leads to the following research question:
How can the quality of information shared contribute to the social contract in buyer-supplier relationships?
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2. Theoretical framework
2.1 Social contracts in buyer-supplier relationships
In the pre-contractual phase, which consists of the supplier selection and negotiation process, a social contract between a buyer and a supplier is created (Broekhuis & Scholten, 2018; M. Li & Choi, 2009). The social contract defines the shared norms, values and expectations developed by partners in a relationship (Eckerd & Hill, 2012), so agreements about specific output and behavior are established (Heide et al., 2007). These agreements are not documented, but serve as a basis for their ongoing interactions (Heide et al., 2007). In table 1, the operationalization of social contracts in buyer-supplier relationships is shown.
Furthermore, shared norms, values and expectations have been assumed to reflect closely tied relationships (Calton & Lad, 1995; Villena, Revilla, & Choi, 2011). Therefore, buyer-supplier relationships approaches in literature still revolve around this separation between long-term, cooperative versus short-term, adversarial relationships. (Kim & Choi, 2015). However, buyer-supplier relationships can be categorized in a more comprehensive way. For example, Kim & Choi (2015) have proposed a model in which the relational posture and intensity are distinguished. As such, in this study the terms ‘shared norms, values and expectations’ may reflect different levels of, for instance, the intensity of buyer-supplier collaboration.
2.1.1 Shared norms
6 2.1.2 Shared values
Shared values are defined as “an organizational fit emphasizing the compatibility of fundamental characteristics between two firms” (Jung-Gehling & Strauss, 2018, p349). Shared values are established in the buildup phase of the buyer-supplier relationship and enable long term relationships between firms (Jap & Ganesan, 2000). In literature, shared organizational culture and organizational strategy are the most common organizational characteristics associated with the level of interorganizational compatibility (Hagedoorn, 2006; Kontoghiorghes, Awbrey, & Feurig, 2005; Rajaguru & Matanda, 2013; Sun, 2008). They will be used as variables of shared values in this study. Organizational culture is commonly known as ‘the way we do things around here’, and is expressed in the characteristics of an organization such as customs, way of thinking and rules for behavior (Sun, 2008). A shared organizational strategy is defined as a common vision and combined competences for buyers and suppliers (Pasher & Ronen, 2011). Furthermore, a shared organizational strategy can lead to a mutual understanding of organizational goals, which enables the achievement of these goals with minimal risk (Jung-Gehling & Strauss, 2018). Therefore, In social contract theory it is assumed that buyers wish to keep the power to select their own values as much as possible, to be part of a community which shares common personal and cultural values (Dunfee, Smith, & Ross, 1999). For example, General Motors (2017, p. 119) state “We seek to partner with suppliers who share our purpose and values”, stressing the buyer’s perspective on the importance of shared values in social contracts.
2.1.3 Shared expectations
7 Shared expectations of buyers and suppliers on these areas may lead to alignment in activities, increased trust and willingness to cooperate in the future (Andersen et al., 2009). As such, buyer-supplier relationship performance is affected based on the shared expectations between buyers and suppliers. Identification of buyer and seller expectations regarding each other's behavior will successfully influence their interactions and become exhibited in norms that frame their relationship (Dunfee et al., 1999). Contrastingly, in particular situations, shared values can coincide with shared expectations (Dunfee, 1991). For example, when the shared values in a dyadic relationship encompass environmental sustainability goals, which might compromise the shared expectation of maximizing profit. Hence, disconfirmation of expectations in social contracts can lead to supplier dissatisfaction, due to a deviation from the supplier’s ethical norms (Eckerd & Hill, 2012), stressing the importance of shared expectations in social contracts.
8 Social contract
variable
Definition Items References
Shared norms
A mutually agreed upon shared view on the future,
encompassing collaborative actions, long
term orientation and shared goals (Dunfee,
1991; Eckerd & Hill, 2012; Jap & Ganesan, 2000; Villena et al., 2011)
Relational norms in social contracts constitute buyer-supplier dedication to a set of common goals and a long term relationship.
(Eckerd & Hill, 2012)
Social norms are defined by collective beliefs about appropriate behaviors, such as mutual trust and time commitment.
(Eckerd & Hill, 2012; Bicchieri, Muldoon, & Sontuoso, 2011) Ethical norms in a social contract define
the full scope of ethical obligations between buyers and suppliers.
(Dunfee, 1991)
Shared values
“an organizational fit emphasizing the compatibility of fundamental characteristics between two firms” (Jung-Gehling
& Strauss, 2018, p349)
Shared organizational culture is defined as collective deeply rooted values and beliefs that are shared by personnel in both organizations.
(Sun, 2008)
Shared organizational strategy is referred to as a common vision and combined competences for buyers and suppliers.
(Pasher & Ronen, 2011)
Shared expectations
“two parties' similar expectations for collaboration” (Eby, Meade, Parisi, & Douthitt,
1999, p. 368)
Communication refers to the expected frequency, scope and credibility of the information received from an exchange partner.
(Andersen et al., 2009)
Role specification refers to the mutual expectation to follow a specified set of obligations and activities.
(Andersen et al., 2009)
Planning horizon is defined as expectations about the longevity of the exchange.
(Andersen et al., 2009)
Trustworthiness is defined as the belief or expectation that a party's word or promise is reliable.
(Andersen et al., 2009)
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2.2 Information sharing in buyer-supplier relationships
The promotion of frequent interactions between a buyer and supplier, in which their social contract is build (Calton & Lad, 1995), creates a close connection which incentivizes the sharing of sensitive information and the creation of common strategies (Villena et al., 2011). However, during these initial interactions, information sharing plays an important role in the development of the social contract (Eckerd & Hill, 2012). Conformingly, Villena et al. (2011) stress the importance of information sharing, as it may result in a reduction of conflicts and stimulate teamwork. Moreover, information sharing may reduce demand uncertainty and logistical costs (Haines, Hough, & Haines, 2017).
Mohr & Spekman (1994) define information sharing as “the extent to which critical, often proprietary, information is communicated to one’s partner”. Cao, Vonderembse, Zhang, & Ragu-Nathan (2010, p. 6617) provide a more comprehensive definition: “The extent to which a firm shares a variety of relevant, accurate, complete and confidential ideas, plans, and procedures with its supply chain partners in a timely manner”. As this definition incorporates multiple main aspects of information quality, indicating the relevance to this study, information sharing will be defined as such.
2.3 Information quality
Information from buyers has little value to suppliers if it has poor reliability or validity (Moberg et al., 2002). Therefore information quality aspects such as accuracy, timeliness, and reliability have a significant impact on buyer-supplier performance (S. Li & Lin, 2006), as they relate “the value of the information shared by supply chain partners” (Lee, Kim, Hong, & Lee, 2010, p. 663). In literature, information quality is linked to social contracts, as S. Li & Lin (2006) associate high levels of information sharing with high levels of inter-organizational relationships. Moreover, Eckerd & Hill (2012) propose that information exchange between buyers and suppliers can foster a social contract based on long-term commitment, which may result in supplier satisfaction.
10 Categories Information quality variables Definitions References Correctness of information Perceived accuracy (Accuracy and Believability)
Information is perceived as correct, believable, reliable and certified free of error
Ayadi et al. (2013); Michnik & Lo (2009); R. Wang & Strong (1996)
Perceived objectivity
Information is perceived as unbiased and impartial
Ayadi et al. (2013); Michnik & Lo (2009); R. Wang & Strong (1996)
Usefulness of information
Value-added Information is sensitive, critical, beneficial and its use provides advantages
Ayadi et al. (2013); Michnik & Lo (2009); R. Wang & Strong (1996)
Timeliness The age of the information is appropriate for the task at hand
Ayadi et al. (2013); Michnik & Lo (2009); R. Wang & Strong (1996)
Clarity
(Interpretability and ease of understanding)
Information is clear, without ambiguity and easily comprehended
Ayadi et al. (2013); Michnik & Lo (2009); R. Wang & Strong (1996)
Accessibility Information is available and quickly retrievable
Ayadi et al. (2013); Michnik & Lo (2009); R. Wang & Strong (1996)
Table 2 – Operationalization of information quality
2.3.1 Correctness of information
Correctness of information consists of attributes which relate to internal characteristics of information (Michnik & Lo, 2009), and implies that information has quality in its own right (Y. W. Lee, Strong, Kahn, & Wang, 2002). In this study, correctness of information relates to the perceived accuracy and objectivity. Information is perceived as accurate when it is correct, reliable and certified free of error (Ayadi et al., 2013; Michnik & Lo, 2009). Ayadi et al. (2013) have found that perceived accuracy of information is the most important attribute to affect trust in a buyer-supplier relationship. On a critical note, most companies focus more on the accuracy of information relative to other information quality attributes (Y. W. Lee et al., 2002; R. Wang & Strong, 1996). However, it is not clear whether this highlights the importance of the accuracy of information, or if the importance of the other attributes are underestimated by companies (Y. W. Lee et al., 2002). Nevertheless, this focus on a single attribute may result in deficiencies and, for example, lead to misinterpretation of the data (R. Wang & Strong, 1996).
Perceived objectivity is referred to when information is perceived as unbiased and impartial (Ayadi et
11 information (Xu, Liu, & Liu, 2014). Moreover, in order for a supplier to attract buyers, information shared by them may be biased (Dyer & Chu, 2003). This shift from objective standards often results in incorrectness of information (Xu et al., 2014).
2.3.2 Usefulness of information
Usefulness of information underlines the necessity that information quality needs to be considered within the context of the task at hand and emphasizes the accessibility and clarity of information (Y. W. Lee et al., 2002; R. Wang & Strong, 1996). Therefore, information must be timely, clear, accessible, and add value (Michnik & Lo, 2009). Accordingly, Ayadi et al. (2013) link the following attributes to usefulness of information: Value-added, Timeliness, Clarity and Accessibility. Value-added is referred to when information is beneficial and its use provides advantages (Ayadi et al., 2013; R. Wang & Strong, 1996). In literature, sharing value-adding information has been widely addressed to as a strategy for achieving competitive advantage through the creation of customer value (de Chernatony, Harris, & Dall’Olmo Riley, 2002). Timeliness is referred to when information under consideration is appropriate for the task at hand, with respect to its issuing time (Ayadi et al., 2013; R. Wang & Strong, 1996). Timely sharing of information is important, as overdue information might not be usable anymore and therefore loses its quality (R. Wang & Strong, 1996). Consequently, Ayadi et al. (2013) have found that timeliness is one of the most important attributes for the information provider to fulfill, to ensure high trust levels with the receiving party. Clarity is defined as: Information is clear, without ambiguity and easily comprehended (Ayadi et al., 2013; R. Wang & Strong, 1996). Unclear information decreases the usability of the information, due to risks of misinterpretation (Z. Wang, Ye, & Hua, 2014). Hence, clarity is essential to ensure the quality of information (Dhillon, Caldeira, & Wenger, 2011). Accessibility is defined as: Information is available and quickly retrievable (Ayadi et al., 2013; R. Wang & Strong, 1996). Törnquist & Gustafsson (2004) have found that the accessibility of information has a significant impact on the joint planning process. Accordingly, Y. W. Lee et al. (2002) and R. Wang & Strong (1996) have found that the information receiving party regards accessibility as an important information quality aspect.
2.4 Conceptual model
12 goals. Accordingly, the following research question can be derived: How can the quality of information
shared contribute to the social contract in buyer-supplier relationships?
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3. Methodology
3.1 Research design
As this study seeks to explore how the quality of information shared in a buyer-supplier relationship affects the norms, values and expectations within a social contracts, an exploratory case study design has been applied to this study. Yin (1981, p. 98) defines a case study as “an empirical inquiry that investigates a contemporary phenomenon in depth and within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident.”. Even though buyer-supplier social contracts may be affected by many attributes of information quality, the argument that contextual factors may also influence this phenomenon cannot be refuted (Shukla, 2009). Besides that, a case study fits the explorative nature of this study, as the influence of information quality on social contracts is studied in a real-life context (Yin, 1981). Consequently, an in depth study was required, as the aim of this study was to gain an understanding of how information sharing may contribute to the social contract in buyer-supplier relationships. Therefore, the unit of analysis in this study is ‘the buyer-supplier relationship’.
3.2 Research context
This study focuses on the manufacturing setting. The manufacturing setting is particularly relevant in this study, as information quality is of significant importance to buyer-supplier performance in this setting due to manufacturer’s high dependability on downstream forecasts and logistical information (Asgari et al., 2016; Trapero, Kourentzes, & Fildes, 2012). Besides that, supplier relationship management is an important factor for manufacturing firms to achieve mutual benefits (Al-Abdallah, Abdallah, & Bany Hamdan, 2014). Within the manufacturing setting, companies of different industries have been selected for generalizability of the results. As the procurement departments of all selected companies have relationships with various suppliers, with different levels of intensity regarding information quality, all organizations fit the context of this study. In table 3 an overview of the selected companies and their characteristics can be found.
Company Employees Industry Activities
Company A 5800 Digital communication industry
Development and manufacturing of digital communication machines.
Company B 1650 Electric glass industry Manufacturing glass for flat panel displays. Company C 3800 Engineering industry Designing, develops and manufacturing
engineered aircraft systems.
Company D 1450 Straw board industry Development and manufacturing of solid boards. Company E 1360 Chemical industry Design, manufacturing and distribution of fiber
and yarns for industrial purposes.
Company F 16300 Heating industry Manufacturing of valves, pumps, heat exchangers and other related hardware products.
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3.3 Case selection
In table 4b, the case selection is shown. As there is no ideal number of cases, but a number between 4 and 10 or more is sufficient (Eisenhardt, 1989), 17 cases have been selected in this study divided over 12 interviews. In order to create theoretical replication, the cases are designed to cover different theoretical conditions (Yin, 2003). Therefore, selection criteria in terms of a combination of dependent variables are represented in table 4a. The case selection is based on the variables of shared norms and values, as shared norms are an outcome of shared values (Dunfee, 1991). More specifically, relational norms may be an outcome of a shared organizational strategy and social norms may be an outcome of a shared organizational culture (Sun, 2008). These linear relationships contribute to the structure of the case selection, as this allows for comparing different social contract compositions based on how agreements on information quality have contributed to the social contract. In order to operationalize the case selection, a total of eight selection criteria have been determined to translate the four variables into more general terms. The selection criteria of shared organizational strategy, relational norms and social norms all originate from their definitions. The selection criteria of shared organizational culture reflect its main characteristics as stated in the theory section. During the interviews, the establishment of a shared culture was shown to occur more often than a shared strategy. Buyer-supplier relationships with a shared strategy seemed relatively rare. This explains the empty fields in the shared strategy row at table 4b.
Variable Selection criteria Label
Shared organizational culture Common way of thinking regarding collaboration C
Common rules for behavior B
Shared organizational strategy
Common vision V
Combined competences CC
Relational norms Common goals F
Long term relationship orientation L
Social norms Mutual time commitment TC
Mutual trust T
Table 4a – Case selection criteria
Company A B Company C D Company E F
Variable C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C17
Shared org. culture - C C B - C B C C B C C C B B C B
Shared org. strategy CC - - - - V V - - CC - - - V -
Relational norms F L F L L F L F F L L F L L L F L
Social norms TC T T TC TC TC T T T TC TC T T TC T T TC
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3.4 Data collection
The primary source of data in this study is gathered in twelve semi-structured interviews with purchasers of the aforementioned companies (see table 5). In interviews 4-6, 8 and 10, two cases have been discussed. In the remainder of the interviews 1 case was discussed per interview. The interviews were held in a semi-structured manner, to allow for preparation of questions ahead of time, while additional information can be gathered when new questions emerge. As this study aims is to gain an understanding of buyer-supplier interactions on a strategic level regarding information sharing, interviews with managers that are knowledgeable on these matters was required. Therefore, interviews have been held with purchasing or procurement managers, which operate on a strategic level. In order to create transparency and in order to prepare the interviewees, an interview guide (appendix A) and a form of consent (appendix B) have been sent to the interviewees prior to each interview. The form of consent was mainly used to ask for permission to record the interview. The interview guide was established based on existing literature and constructs. The interview guide has been used to guide the interviews and prepare the interviewee on the interview questions and two specific buyer-supplier relationships according to the case selection matrix.
Case Topic Interviewee Company Duration
C1 Partnership through combined competences A
Company A
56:57
C2 Relationship built on openness and honesty through audits B 52:25
C3 Trust development through frequent contact resulting in high
investments C 49:54
C4 Customer orientation by supplier
D Company B 1:36:53
C5 Misalignment in norms and expectations C6 Full transparency and frequent communication
E
Company C
1:33:09 C7 Transparency and trust was built through extensive, continuous
audits
C8 Relationship built on integrity, honesty and fair dealing with
open information exchange F 1:31:46
C9 Shared strategy through a common vision for the future C10 Despite limited transparency, relationship built on honesty and
fair dealings G Company D 59:00
C11 Customer oriented supplier, commitment from both sides
H
Company E
1:42:41 C12 Alignment in norms, values and expectations from the start,
exchange of employees
C13 Site visits and full transparency created trust and an
understanding I 49:26
C14 Full transparency and no audits based on familiarity with
supplier J 1:02:45
C15 Good and transparent communication created trust
C16 Patience of supplier during testing phase thanks to high mutual
investments K
Company F
1:01:22 C17 Quality fluctuations caused frequent audits and a low level of
trust in the supplier L 58:03
16 During the interview, opening questions were asked such as “Could you give us an introduction to you
as a person, your education and professional background?” to provide context. Consequently, questions
were asked in relation to the main variables such as “How did you ensure the accuracy of the
information?”. Furthermore, questions such as “How satisfied are you with the relationship with the supplier?” were asked to identify the social contract outcome. The interviews were all transcribed and
translated to English when necessary. To ensure the reliability of this primary data, the interview transcripts have been shared with the interviewees for verification and to ensure completeness of the data.
3.5 Data analysis
17 Quotation Descriptive Code Theme Inf. Quality (main) Inf. Quality (sub) Social contract (sub)
So we have shared goals in terms of: when we sell a machine to a logistic center, they have a chance to sell their systems as well around our packaging machine. And also the other way around, so timely and good information sharing from both sides is important. (C1)
Combined competences Interfirm alignment Usefulness of information Timeliness Shared strategy Correctness of information Perceived accuracy
But we are talking about a million pound contract. The process will take much longer, as we have a lot of more contact with the supplier about the entire case: where are we standing now, where do we came from and how do we want to act in the future? It's a much broader process, also internally, because we have to invest in each other on a global scale. (C9)
Shared vision
Usefulness of
information Value added Combined
competences
When we do supplier selection we also send a request for information. In that request for information, we are asking some questions about the environment and such: do they have a policy, do they have Arbo? We always send these purchasing conditions to our suppliers and verify them later. (C2)
Environment
Certificates Correctness of information
Perceived
objectivity Shared culture Working
conditions Table 6 – Example of coding tree: Shared values
Quotation Descriptive Code Theme Inf. Quality (main) Inf. Quality (sub) Social contract
Additionally, you will look at the social aspects: how are they working related to the environment? … If these requirements are met, then you can calculate in Excel who will become the new supplier. (C10) Adherence to CoC Rules of conduct Correctness of information Perceived accuracy Ethical norms
We have a standard NDA, so if we send drawings to a suppliers, they aren’t allowed to disclose that. This NDA we have with suppliers has to be signed by them. (C16)
Confidentiality (influenced by
shared values)
18
We openly discuss that, can you share more information? …the guy said okay I will drop by your office and I will open my books. You can have a look in it, but you are not allowed to make a photo copy. (C11)
Open financial books Transparency Usefulness of information Accessibility Social norms
What went good in the relationship was the transparent information sharing. It was a clear negotiation, that is good and a mutual agreement was made. (C7)
Full information sharing Usefulness of information Accessibility Clarity
Also by meeting up face-to-face this created a better understanding of the relationship, I think currently this is a pitfall within our company, we meet and visit this supplier insufficiently. I think this severely influences and limits the information-exchange. (C13) Face-to-face Communication Correctness of information Perceived accuracy Relational norms Usefulness of information Accessibility Table 7 – Example of coding tree: Shared norms
Quotation Descriptive
Code
Theme Inf. Quality (main)
Inf. Quality (sub)
Social contract
Most of the time they send the information a day or 2 late, because they’re too busy. (C1)
Information sharing
Information is late
Usefulness of
information Timeliness Communication
They showed their flow, how they handle a purchase order and how to handle complaints. So their process. Also you get to know the different people. So it is important to get a team and that the people know each other. The goal is to understand each other, to get to know each other, understand the company, understand their culture and understand the processes to build trust. The next step was to reach alignment. (C6)
Build
understanding Site visit
Usefulness of information
Accessibility Role specification
Value added Trustworthiness
19 Furthermore, table 8 summarizes the assurance of validity and reliability of the data collection and analysis in this study. For this, the method as proposed by Yin (2009) is used. To ensure construct validity, fitting operational measures have been identified for the concepts of study, as the operationalization of concepts was based on a literature review. Moreover, the interview questions were continuously adapted between the interviews to gather the right data. To ensure internal validity, patterns were found as certain conditions are believed to lead to other conditions, by means of data analysis methods such as pivot tables and data filtering. To ensure external validity, this study’s findings can be generalized within the manufacturing setting, as companies of various industries have been selected. Furthermore, the operations of this study are reliable and can be repeated. For this, the interviews have been prepared with a form of consent regarding anonymity, so interviewees could speak freely. Besides that, an interview guide was sent to prepare the interviewees for the questions regarding a predetermined case and to guide the interviews. Furthermore, the interviewees have been provided with a choice of language, to avoid a lower quality of data due to language barriers. Finally, the interview recordings have been transcribed word for word to avoid author interpretation and data loss.
Category Application
Construct validity Operationalization of concepts based on literature review. Continuous adaptation of interview questions based on the evaluation of previous interviews, to increase construct validity. Internal validity Patterns were identified based on the direct and indirect relationships found in the cross-case
and within-case analyses.
External validity Focus on various industries within the manufacturing setting, with different perspectives and levels of intensity regarding information quality and transparency.
Reliability
Preparation of interviewees by means of a form of consent regarding anonymity and an interview guide for transparency. Providing interviewees with the choice of language to avoid language barriers. Literal transcription of the interview recordings.
20
4. Findings
21
Information
quality
Shared values
Shared Norms
Shared expectations
Perceived accuracy
Shared culture
Technical capabilities:
- Excellent capabilities (All except 1,12,16) - Capabilities in development (1,12,16) Relational norms Business quality: - Specification adherence (all) - Product testing (1,10,15,16) Role specification/ Communication Business role: - Communication of expectations (1,3,4,6,8,10,12,14,17) - Communication of standards (5-8,14) Professionalism: - Financial state (3,6,10,11,13,14)
- Policy on collaborative activities (1,2,5,6,7)
Logistics:
- Delivery times (all)
- Forecast sharing (7,16)
Planning horizon
Relationship type:
- Long term relationship (all except 14)
Trustworthiness
Site visit/audit:
- Build understanding (all but 3,4,5,14,15,17)
- Requirements check (all but 4,5,14,15,17)
- Certification adherence (all but 3,4,5,14,15,17)
Reputation:
- Reputation was assumed to be correct (5,14,15)
- Reputation needed verification (1,2,4,5)
Perceived objectivity
Certificates:
- Working conditions (all except 8)
- Environment (all except 8) Ethical norms
Rules of conduct: - Confidentiality (all)
- Bribery not accepted (all)
- Perceived adherence to CoC (all but 3)
Audit unnecessary: - Reputation (4,5,15)
- Experience with supplier (14)
- Location of supplier (17)
- Time investment/outcome insignificant (13)
22
Information
quality
Shared values
Shared Norms
Shared expectations
Timeliness Shared culture Customer orientation: - Flexible (11,13,17) - Reliable (2-4,6,13,14,16) - Adaptable (4,6,8,11,14,16) Relational norms Relationship type: - Long term relationship
(all except 14) Communication
Scope of communication: - Frequent (1,3,6,14) - Face-to-face (1-3,8,9,12,13,15) Accessibility Transparency:
- Full information sharing (1-3, 6-10, 12-14)
Relational norms
Relationship type:
- Shared goals (all except 5,17)
Role specification
Relevancy:
- Only relevant information is shared (all except 1,10)
Social norms
Openness:
- Honesty (all except 3,5)
- Build understanding (1,3,10,11,13,14) - Reciprocity (13) Clarity Customer orientation: - Reliable (4,6,7,9,12-17) - Adaptable (1,4,9,16) Interpretability:
- Same business language (all except 3,11,17)
- Good documentation (all except 5)
Value added Shared Strategy Interfirm alignment: - Shared vision (8,9,12) - Combined competences (1,8,12,16) - Flexibility (9,12,16) Relational norms Relationship type: - Supplier involvement (1,8,9,12,16)
- Reciprocity (9,16) Role specification
Goodwill:
- Deliver incidental order (13)
- Supplier is never audited (4,5,13,14,15,17)
- Extra time for testing (1,16)
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4.1 Shared values
Values between buyers and suppliers are shared starting from their first contact. Similar values can be shown in alignment in organizational culture or strategy. This study has found that the perceived accuracy of information regarding the supplier’s technical capabilities, professionalism and reputation contributes to a shared culture. As such, buyers are inclined to do business with suppliers that can accurately prove their operational excellence, financial healthiness and provide examples of satisfied customers. Eventually, this consistently led to a shared culture. Furthermore, the exchange of value adding information consistently led to interfirm alignment through a shared vision and/or combined competences. The findings show that this interfirm alignment may result in a shared strategy.
4.1.1 Shared organizational culture
This study has found that all information quality variables except value added may contribute to a shared culture. The perceived accuracy and objectivity of information regarding the key values of the supplier was evident to do business and thus build a social contract: “All suppliers need to meet our key values
and all the technical selection criteria. To verify this information, next week we will go to our raw materials supplier, to check not only because they can submit the procedure, but do they really execute it?” (C4). As this information may still be biased, buyers try to verify it. Consequently, this contributes
to a shared culture: “We always ask: can you mention some big customers. We always ask to those
customers: what kind of company is that?...Currently, our organizational cultures are fully aligned”
(C2). So early in the relationship, information that suppliers share regarding their technical capabilities, professionalism, reputation and certificates on working conditions, child labor and environmental sustainability is perceived in a certain way by buyers. When perceived as correct, trustworthiness in the supplier will grow, resulting in enhanced commitment and cooperation to eventually build a shared culture. Accordingly, based on whether suppliers adhere to these business requirements, they may be selected or not: “That’s the way you start with information sharing. That you expect that they have the
same behavior as you have. That is what you have to discover. If that is not true, then stop. Because then you can’t trust the people. So you have to find the mutual trust so you can ask delicate questions.”
(C3). However, in case 14, buyers accept a risk of opportunistic behavior, as they did not verify shared information: “They shared quite some information, is always difficult to assess the accuracy because
we didn’t visit the plant in China. But we assumed that is was quite okay.” (C14). This assumption was
based on previous experience with this supplier, which enacted trustworthiness. Moreover, the risk of opportunistic behavior was taken due to cost considerations. Instead, they relied on certifications: “it is
not practical and it is time consuming if you would check every supplier and go to their plant to see whether they are producing exactly the way they mentioned. Basically for that you have ISO standards”
24 When the business requirements are met and a supplier is selected, more detailed and critical information is exchanged. Therein, the timeliness, accessibility and clarity of the shared information shows the supplier’s commitment to the relationship. In most cases the reliability of the supplier as shown in their ability to share up-to-date information when needed, led to a shared culture. Interestingly, timely and clear information sharing contributed to the buyer’s perception of customer orientation, resulting in a shared culture: “The Chinese did meet the requested delivery times of information and everything was
well documented. It was very well organized and clear…So they were very, very customer oriented…Our organizational cultures were aligned.” (C9). However in case 1, shared information was mostly late
which the buyer perceived as unprofessional, divergent behavior. Hence, a shared culture was not developed. Despite this, the buyer identified significant financial opportunities in a partnership with this supplier and through supplier development, competences were combined and a shared strategy was built. Furthermore, in all cases transparency was an important determinant in the development of a shared culture, through the development of trust. In case 13, “we visited them and discussed opportunities and
exchanged a lot of information with each other. They were very transparent. I really like visiting and exchanging information beforehand because it creates trust, an understanding and a support base.”.
This led to the development of a shared culture.
4.1.2 Shared organizational strategy
As opposed to a shared culture, a shared strategy was not reached in most cases. As can be seen in table 9, only in cases 1, 8, 9, 12 and 16 a shared strategy was found. The explanation for this difference is found in the risks associated with sharing sensitive, critical value adding information, which is required for the development of a shared strategy. As indicated, buyers are searching for high quality, transparent and customer oriented suppliers. Alignment in these areas lead to a shared culture. However, a shared strategy requires a partnership with even more commitment from both sides: “When we name a supplier
strategic, we have a program for that, in which their management is also connected to our management. So not only purchasing and sales people, but also on the management side, that there is contact and relationship building” (C16). As can be seen in table 9, the value added by shared information affects
the nature of the buyer-supplier relationship in terms of depth through interfirm alignment and a shared vision: “It was very quickly established how to work together, is was very easy and not very formal. We
also exchanged people during the project from different disciplines and from different levels, from both sides…It is double, because the culture is on the same level. But also the business professionally is very close to each other. That helps.” (C12). However, even though in case 1, the quality and customer
orientation were not sufficient, a shared strategy was developed because of the added value that would be generated when sharing information and working together closely: “information sharing with them
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be interesting for us to sell packaging machine to them, so it helped quite a lot in the whole process.”
(C1). Therefore, an important antecedent of a shared strategy is combined competences as a result of the exchanged value adding information.
4.2 Shared norms
After values are shared, a supplier is selected and through the process of shared culture or strategy development, shared norms are built. Subsequent information sharing will result in the establishment of shared norms in the social contract such as “weekly meetings to discuss progress” (C9). It is found that relational and ethical norms are directly influenced by shared values and indirectly by information quality. For example, sharing value adding information can result in the exchange of employees (interfirm alignment), through which the supplier is involved in the buyer’s process or development projects (relational norm). Or the availability and mutual belief in the value of environmental certificates, as established through perceived objectivity of information and trustworthiness, may result in a buyer’s perception that a supplier will adhere to their CoC (ethical norm). Social norms however, are directly influenced by both information quality and shared values alike. Consequently, this study has not found evidence that expectations may result in norms.
4.2.1 Relational norms
This study has found that through the development of shared values regarding technical requirements, relational norms are established regarding logistics and business quality, as these norms are regarded as business requirements: “Then we do an assessment, that is on business quality, logistics and on costs. If
the score is okay, then we know the company and the structure, that all kind of stuff fits” (C6).
In case 13, the accessibility of information, led to the identification of additional opportunities and the development of more commitment and cooperation in the relationship: “And besides that we also came
to the conclusion due to the information exchange that their capabilities were much larger than we anticipated and they had way more knowledge than we expected. This opened our eyes and gave opportunity for a more intense relationship.” Eventually, this led to a shared culture. In turn, the
established shared culture led to shared goals, through a mutual understanding and reciprocity: “I think
we have a better understanding, we know how both parties are doing businesswise, and also we help each other out and share goals”.
Additional relational norms include a long term relationship orientation and frequent communication. In all cases, long term relationships were established. However, the reason for this is not linked to information quality. However, high mutual investments due to a shared culture or strategy lead to frequent communication: “For this supplier we invested a lot so it was long term. You can earn a lot of
26 4.2.2 Social norms
The information quality variable timeliness is evident in most cases (all except 3, 8, 17). Interestingly, sharing information in time is often an already established norm as result of a shared culture or strategy, through the importance of a contract: “Information is always provided in time. This logical since we are
talking about million pound contract a year” (C9). However, in case 1 a shared strategy is developed
but information is regularly not shared in time. Due to the investment in the supplier and time constraints, actions will be taken by the buyer to emphasize the importance of timeliness: “Most of the time they
send the information a day or 2 late, because they’re too busy…Whenever this happens, I push them to make it happen…we haven’t had enough time to search for a new supplier so we are now investing in this relationship.” (C1). Eventually, discussions during site visits resulted in improvements: “we discussed these issues face to face and cleared things up. After that, the relationship was improved”
In most cases when suppliers freely share information and even provide sensitive financial information, buyers perceive that the relationship is built on openness: “They are very customer focused…the supplier
said okay I will drop by your office and I will open my books. You can have a look in it, but you are not allowed to make a photo copy. I think if you ask an open question most of the time you get an open answer” (C11). Generally, when a shared culture is established, honesty and openness are key norms
for suppliers to reduce problems and increase commitment: “Being open and honest to each other and
if I have some problems, I want to talk about it. I really want to share what I feel, because an open and honest relation with each other that's what I agreed with him” (C2).
In cases 3, 11 and 17 the information shared was not clear due to a language barrier. The relationship could progress without problems, as it was possible to bridge this barrier by means of interpreters.
4.2.3 Ethical norms
When buyers perceive supplier’s information regarding their rules of conduct or certification as unbiased, ethical norms such as perceived adherence to the CoC are build: “we make a list of all kinds
of requisitions. Like the financial state of the company, are they complying with ISO 9001. Also, do they have a CoC. The most difficult part is: if they have a CoC are they acting like that? That’s not visible in a few visits, you learn that over time” (C3). Even though this buyer in case 3 assumed that their supplier
was adhering to their CoC, they weren’t. This underlines the risk taken by buyers when depending on a perception of information quality: “But at a time we were there and saw what was happening behind
the fence, which was not aligned with what they promised and showed within the fence. We made quite a heavy remark and then it was finished” (C3) Therefore, even when all shared information was
perceived as objective, buyers aimed to assure the objectivity of the shared information. As such, all buyers required their supplier to sign an NDA form: “before any data is exchanged we always close
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4.3 Shared expectations
Throughout all communication between buyers and suppliers, shared expectations are established and adapted. From the moment of first contact, the buyer’s perception of the correctness of information shared will influence their thoughts on the trustworthiness of the supplier and raise shared expectations on the role distribution and the way of communicating. In early communication, expectation are also shared regarding the planning horizon. In later stages, in which more commitment to the relationship is established, the already established shared expectations on role specification, communication and trustworthiness may be confirmed or rejected as more information is shared.
4.3.1 Communication
In all cases, expectations on the way of communicating are only shared when needed. So in cases in which the accuracy, timeliness and clarity of information were perceived as insufficient, expectations regarding communication were shared. Especially with suppliers from a different culture, expectations regarding communication were shared when the information they shared was perceived as inaccurate or late: “Most of the time they send the information a day or 2 late, because they’re too busy…This changed
after the conversations we had” (C1). Accordingly, communication influences the development of a
shared culture. For example, in case 1 even though eventually a shared culture and strategy was developed, the development of a shared culture took longer than expected due to the aforementioned low quality of communication.
4.3.2 Role specification
In the early stages of the relationship, buyer’s perception of information accuracy which leads to the development of shared norms regarding business quality and logistics through audits, results in the distribution of roles in the buyer-supplier relationship: “After an audit you have a certain expectation
and a certain standard that, let’s say if you don’t communicate such a standard, the other party is also not aware of it. Now we communicated it, so now they can expect that we expect these things from them. And if they don’t comply then we have some serious issues to discuss” (C13). Role specification is also
evident in later stages, as accessibility of information which leads to transparency in the relationship, results in the shared expectation that all relevant information is shared: “Normally all information, from
both sides, is exchanged, except maybe budgets or cost price” (C11). Moreover, in the cases in which a
strategic relationship is established, shared expectations regarding the role specification will be more extensive, as the exchange of value adding information may create goodwill: “After exchanging
28 4.3.3 Planning horizon
In all cases, buyers were aiming for a long term relationship. Interestingly in all of the cases, the supplier agreed with the development of a long term relationship orientation. As such, this contributed to the development of a shared culture: “I mentioned it absolutely of in the first meeting that I was looking for
a long term relationship. They were too… Currently, our organizational cultures are fully aligned” (C2). So the planning horizon is not affected by any information quality or social contract variable. It is a fundamental expectation and requirement initiated by the buyer that contributes to the development of a shared culture.
4.3.4 Trustworthiness
When buyers perceive information to be accurate but are unsure about the objectivity, audits will be held during site visits to check whether the requirements are met, whether the certificates are adhered and to build an understanding. Contrastingly, in some cases (4, 5, 13, 14, 15, 17) when buyers perceive the information shared as unbiased, this will result in the expectation that their word is reliable. Especially when the supplier has a good reputation or if a previous experience with the supplier was positive, no audit will be performed: “We were referred to them via our headquarters. They explained
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5. Discussion
To the author’s knowledge, this is one of the first studies to investigate how the quality of information shared contributes to the social contract in buyer-supplier relationships. The outcomes of this study are presented in the causal model as shown in figure 2. The model shows the found relationships between the variables and is discussed below.
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5.1 Shared culture establishment through trustworthiness
In figure 2 is shown how buyer’s perception of the accuracy and objectivity of information can lead to trustworthiness, which in turn contributes to the establishment of a shared culture. Conformingly, research by Ayadi et al. (2013) regarding the effect of information sharing on trust levels in supply chains, shows that accuracy and believability (merged into perceived accuracy in this study) positively influence trust levels. Moreover, their research shows that in order to reach high trust levels, the buyer’s perception that supplier’s information is objective is paramount. As such, literature confirms that the correctness of information can lead to trustworthiness, however this study adds an understanding as to how accuracy and objectivity lead to trustworthiness. To elaborate, this study found that when information is perceived as accurate, an audit is performed to assure the accuracy of information. When information is perceived as objective through earlier experience or the supplier’s reputation, no audit is performed. In both situations trustworthiness is built, assuming that the audit confirmed the accuracy of information.
Furthermore, this study shows how the established trustworthiness may lead to increased commitment, resulting in a shared culture. In literature, Joseph & Winston (2005) do not confirm directly that trust may lead to an organizational culture in buyer-supplier relationships, as they take the perspective that organizations may have a ‘culture of trust’ and thus regard trust as a part of a shared organizational culture. More in line with the findings in this study, Robson, Katsikeas, & Bello (2008) propose that trusts initiates structuring and mobilizing forces such as identification of the partner’s values, that alter social properties such as commitment. They further argue that trust via these social properties may increase alliance outcomes which may include a shared culture depending on the relationship.
So existing literature shows separately that the correctness of information may lead to trustworthiness and that trustworthiness may lead to a shared culture. This study extends this, as not only the effect of the correctness of information on a shared culture is shown, but an understanding is gained as to how perceived accuracy and objectivity lead to trustworthiness, to increase commitment and cooperation and build a shared culture. Accordingly, the following is proposed:
P1: Buyer’s perception of the accuracy and objectivity through audits, previous experience or the reputation of the supplier will lead to trustworthiness, which in turn leads to a shared culture through enhanced commitment and cooperation.
31 They have found that when the buyer’s need for information and service is met by suppliers, loyalty for the long term is built, thanks to their customer intimacy strategy. Additionally, Zack, McKeen, & Singh (2009) have found that information knowledge management is related to customer intimacy. So besides these general links, a direct link between the clarity and timeliness of information and customer intimacy is not evident in literature, let alone to a shared culture. Consequently, as customer intimacy is defined in literature as “a multidimensional construct consisting of closeness, value perception and mutual understanding” (Tabrani, Amin, & Nizam, 1983, p. 828), one could argue that customer intimacy is an antecedent to a shared culture, due to their linkage in academic definition, which would confirm the findings of this study. As such, the following is proposed:
P2: In relationships driven by clear and timely information sharing, the buyer’s perception of a supplier’s customer orientation as shown in their reliability, adaptability and flexibility, is an antecedent of the establishment of a shared culture in social contracts.
Furthermore, in literature, a debate exists on how much information buyers and suppliers should share to relish the benefits of information sharing and negate the risk of opportunistic behavior (G. Q. Huang et al., 2003), to build a good social contract (Eckerd & Hill, 2012). The findings indicate that buyers tend to focus on the benefits of full information sharing rather than the risks. Yet in most cases, a shared culture is established. In literature, full information sharing is associated in literature with beneficial outcomes such as demand knowledge and higher efficiency (Teunter et al., 2018). But also with downsides such as opportunistic behavior (Ojha, Sahin, Shockley, & Sridharan, 2019). Moreover, many articles show the benefits of a shared culture for full transparency, but do not address that accessibility of information or full transparency may lead to a shared culture (Chow & Chan, 2008; Curry & Moore, 2003; Vaghely & Julien, 2010). This study shows that suppliers which made their information accessible to the buyer by freely sharing information on request, initiated a shared culture of honesty and transparency in the relationship. Furthermore, this shared culture, when initiated by accessibility of information, leads to the development of shared goals and reciprocity, as mutual trust and a mutual understanding are developed. This is in line with (Cropanzano & Mitchell, 2005). As such, opportunistic behavior is discouraged, as information accessibility, resulting in mutual investment and transparency contribute to a shared culture. Accordingly, the following is proposed:
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5.3 Contribution of value adding information to a shared strategy
The value added by shared information affects the nature of the buyer-supplier relationship in terms of depth. As a strategic partnership builds on the established transparency, quality and customer orientation, it may be concluded that a shared strategy builds on a shared culture, to go beyond and reach a partnership through a shared vision. Even though literature does not directly comment on this, (Blancero & Ellram, 1997) stress the importance of customer orientation and transparency in a social contract, when building a strategic relationship. As customer orientation and transparency are outcomes of the clarity, timeliness and accessibility of information and enable the development of a shared culture, the thesis that a shared strategy is built on a shared culture seems plausible.
As can be seen in figure 2, it is found that the exchange of value adding information is enabled by full transparency. This is confirmed by Frazier, Maltz, Antia, & Rindfleisch (2009), who also underline the importance of value adding information sharing by suppliers for relationship performance. Consequently, it is found that the exchange of value adding information allows for identification of opportunities, which through combined competences and/or a shared vision, build a shared strategy. The link between value adding information, the identification of opportunities and a shared strategy is in line with the findings of Cao et al. (2010). Consequently, Blancero & Ellram (1997) describe a similar process. They found that the identification of opportunities lead to supplier involvement, enabling close long term relationships and developing a shared strategy.
Furthermore, it was found that this shared strategy leads to reciprocity and goodwill, as interests of the buyer and supplier are aligned, enabling them to support each other. As such, these are critical elements of a shared strategy (Blancero & Ellram, 1997; Das & Teng, 2001). Accordingly, the following is proposed:
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6. Conclusion
This study has led to some interesting findings on how the quality of information shared can contribute to the social contract in a buyer-supplier relationship. The information quality variables have been shown to contribute to a social contract in different ways. Perceived accuracy and objectivity of information can build trustworthiness and lead to a shared culture. Usefulness of information can lead to both a shared culture and strategy. Clarity, timeliness and accessibility of information can lead to buyer’s perception of customer orientation and transparency, contributing to a shared culture. Finally, the exchange of value adding information can lead to identification of opportunities for mutual benefit, contributing to a shared strategy.
6.1 Managerial implications
The findings in this study provide insights for managers in relation to social contract development in buyer-supplier relationships. First of all, it is recommended that buyers should focus on the benefits of information sharing rather than the downsides. When taking this perspective, it is important that trust is built in the relationship, when information shared by the supplier is accurate and objective. To reach this trust, buyers can choose to rely on previous experience or the reputation of the supplier. Alternatively audits can be performed, to verify the shared information and build an understanding. This will allow for the development of more commitment and the establishment of a shared culture.
Secondly, it is recommended that suppliers share clear information in time. This will contribute to the buyer’s perception of the supplier’s customer orientation as reliability and adaptability is shown. Furthermore, making information fully accessible to buyers is recommended as it is likely to initiate full transparency in the relationship. This will allow for the development of a shared culture based on honesty.
Thirdly if a shared culture is established, or a strategic item is sourced, it is recommended to start exchanging value adding information. This may result in the identification of additional opportunities for mutual benefits. Consequently, competences may be combined and a shared vision may be created, leading to a shared strategy in which reciprocity and mutual goodwill are evident.
