Master thesis, MSc Supply Chain Management
“
Sustainable supply chain management: a dyadic
perspective on power asymmetry in buyer-supplier
relationships’’
By
Marcel Teunissen
Student number: 3525368
Email: m.s.teunissen@student.rug.nl
Supervisors/ University
Dr. C. Xiao
University of Groningen, Faculty of Economics and Business
Co-assessor/ University
Prof. Dr. J. Riezebos
University of Groningen, Faculty of Economics and Business
Date: June 22, 2020
Word Count: 11998
Acknowledgement: I would like to thank my supervisor Dr. C. Xiao and Prof. Dr. J. Riezebos
Abstract
Purpose - Buying organizations are under pressure from consumers and stakeholders to do
business more sustainably. Buyers’ sustainability performance and reputation depend heavily on the cooperation of their suppliers. This study contributes to literature on sustainable supply chain management by exploring the influence of power asymmetry in buyer-supplier relationships on the use of mediated and non-mediated power.
Design / Methodology / Approach - After extensive literature research, which showed that
little was available on the coexistence of mediated and non-mediated power in buyer-supplier relationships, an exploratory case study was conducted. Data was collected through interviews with 3 buying firms and 6 of their suppliers and analysed using an inductive coding approach.
Findings - The findings show that effectiveness of the use of mediated and non-mediated power
is influenced by power asymmetry. In unbalanced power distributions, buyer’s use of mediated power was found effective for short-term results, but ineffective for long-term cooperative buyer-supplier relationships. Mediated power combined with non-mediated power made suppliers more susceptible to collaboration and reduced the risk of opportunistic behaviour. Moreover, the use of power by the buyer depends on the dependence of the supplier. A highly dependent buyer should be reluctant to use coercive power.
Research limitation: Although the results of the cases are promising, due to the lack of
available organizations and the diversity of cases, we may not have reached theoretical saturation, which may affect the validity of the findings.
Originality– The study provides insight into the effectiveness of mediated and non-mediated
power sources used to involve suppliers in sustainable supply chain management in unbalanced and balanced power distributions. This study provides an unbiased view of the relationships between buyer and supplier as both perspectives are taken into account. This leads to insights into the effectiveness of individual power sources compared to the mediated and non-mediated power of the other parties.
Table of content
1 INTRODUCTION 1
2 THEORETICAL BACKGROUND 4
2.1 SUSTAINABLE SUPPLY CHAIN MANAGEMENT 4
2.2 POWER IN BUYER-SUPPLIER RELATIONSHIPS 5
2.3 MEDIATED AND NON-MEDIATED POWER IN SSCM 7
2.4 POWER ASYMMETRIES IN BUYER-SUPPLIER RELATIONSHIPS 8
2.5 RESEARCH FRAMEWORK 9 3 METHODOLOGY 10 3.1 RESEARCH DESIGN 10 3.2 CASE DESCRIPTION 11 3.3 DATA COLLECTION 13 3.3.1 Primary data 13 3.3.2 Secondary data 15 3.4 DATA ANALYSIS 16 4 FINDINGS 18 4.1 MEDIATED POWER 19 4.1.1 Coercive power 20 4.1.2 Reward power 21 4.2 NON-MEDIATED POWER 22 4.2.1 Expert power 24 4.2.2 Referent power 25 4.2.3 Legitimate power 26 5 DISCUSSION 28 5.1 PROPOSITIONS 28
5.1.1 Effectiveness of coercive power in a buying firms sustainable supply chain 28 5.1.2 Effectiveness of reward power in a buying firms sustainable supply chain 29 5.1.3 Effectiveness of the possession of non-mediated power in a buying firms sustainable supply chain
29
5.2 CONTRIBUTIONS TO THEORY 30
5.3 MANAGERIAL IMPLICATIONS 31
5.4 LIMITATIONS AND FUTURE RESEARCH 31
6 CONCLUSION 33
REFERENCES 34
APPENDIX 1 INTERVIEW GUIDE 40
APPENDIX 2 EXCERPT CODING TREE 46
1 Introduction
Power asymmetry is a major challenge for maintaining stable buyer-supplier relationships in the competitive landscape of the global market (Cox, 2004). Powerful organizations can leverage their power surplus at the expense of the less powerful organization, which could lead to opportunistic behaviour of the latter (Nyaga, Lynch, Marshall, & Ambrose., 2013). In the context of sustainable supply chain management (SSCM), unbalanced distribution of power amidst buyers and suppliers can be a serious barrier for buying organizations who want to extend sustainability standards into their supply chains (Pagell & Wu, 2009; Seuring & Muller, 2008). Suppliers are often reluctant to comply with sustainability standards set by buyers as the former needs to invest additional financial and technical resources (Wilhelm, Blome, Bhakoo, & Paulraj, 2016). This means that buying organizations need to devise strategies that can overcome the reluctance of suppliers. In case of power advantage of the buyer over the supplier, a buyer can force the supplier to comply with sustainability standards and monitoring practices. However, buying organizations do not always have the upper hand, they need to develop approaches that can be effective in managing both powerful suppliers and less powerful suppliers (Touboulic, Chicksand, & Walker, 2014).
Research on power in buyer-supplier relationships shows that power symmetry is rather exceptional (Cox, 2004). Power holders often tend to use their power positions to impose their will on the other party, possibly leading to opportunistic behaviour towards or from the power-disadvantaged players (Maloni & Benton, 2000). Several studies (Nyaga et al., 2013; Pagell & Wu, 2009; Seuring & Muller, 2008) have pointed out that power asymmetry might negatively influence the implementation of sustainability in supply chains. The concept of power has previously been explored as a total concept (Touboulic et al., 2014), ignoring the various sources of power identified by French and Raven (1959). Power is a multi-dimensional concept and it is important to differentiate between the different sources of power. Use of different power sources in SSCM can, for example, result in different outcomes in supplier performance (Touboulic et al., 2014) and supplier collaboration (Melander, 2017; Pagell & Wu, 2009).
suppliers to comply with their sustainability standards (Touboulic et al., 2014; Wijethilake, Munir, & Appuhami, 2017). As such, prior studies have largely ignored power influences on SSCM from a dyadic perspective (Hoejmose & Adrien-Kirby, 2012; Li, Zhou, & Wu, 2017; Touboulic et al., 2014). A reason for the use of single source research designs by most researchers could be the serious challenge they face in collecting multiple source data of dyadic relationships (Roh, Whipple, & Boyer, 2013). To understand buyer-supplier relationships, data from both the buyer and supplier must be collected to gain insights in why and how perceptions might differ (Ketchen, Craighead, & Cheng, 2018). Therefore, this study takes a novel perspective to explore how different coexisting powers used by both buyer and supplier affect the implementation of SSCM.
largely ignored (Hoejmose & Adrien-Kirby, 2012; Li et al., 2017; Touboulic et al., 2014). Third, case study research enables to get an in-depth understanding of how power asymmetry influences buyer-supplier relationships in the context of SSCM, which is in line with the inductive nature of this study (Yin, 2003). In order to gain insight, a qualitative multiple case study research will be conducted within the textile, food and automotive industry. The data collection will be done via semi-structured interviews including both the buyer and supplier of a dyadic relationship. Documents related to the buyer-supplier dyad, such as supplier audit reports and documented correspondence, will be used to develop further in-depth understanding of the boundary conditions in power asymmetry in SSCM and to achieve internal data triangulation (Voss, Tsikriktsis, & Frohlich, 2002).
This research will contribute to current literature in two ways. First, research into power in buyer-supplier relationships is still in its infancy (Reimann & Ketchen, 2017). Most articles on power in SSCM focus on the power-advantaged buyer or supplier (Hoejmose & Adrien-Kirby, 2012; Li et al., 2017; Touboulic et al., 2014). This article offers an alternative perspective on power in the relationship between buyer and supplier by adopting a dyadic research approach. Second, collecting multiple source data from dyadic relationships is a serious challenge that often leads to the adoption of research designs from a single source (Roh et al., 2013). Adopting a dyadic approach prevents potential power scenarios from being overlooked. The sustainability performance and reputation of purchasing organizations strongly depend on the cooperation of their suppliers (Chen & Chen, 2019; Schnittfeld & Busch, 2016). Individual organizations cannot tackle sustainability issues alone, making sustainable supplier management increasingly important (Chen & Chen, 2019). From a management perspective, this thesis will broaden understanding of how power can be used to achieve a certain level of sustainability performance from suppliers over which they have limited control.
2 Theoretical Background
2.1 Sustainable supply chain management
Over the years the field of SSCM literature evolved from a standalone concept to a rich and rigorous field of research (Crum, Point, Carter, & Easton, 2011). This research adopts Carter and Rogers’ (2008, p. 368) widely cited definition of SSCM: ‘the strategic, transparent integration and achievement of an organization’s social, environmental, and economic goals in the systemic coordination of key interorganizational business processes for improving the long-term economic performance of the individual company and its supply chains’. Carter and Rogers (2008) based their definition on the triple bottom line approach proposed by Elkington (1998). In his view on sustainability, Elkington (1998) categorized sustainability according to three dimensions, namely: environmental sustainability, social sustainability and economic sustainability.
Some researchers have found that working with suppliers promotes supplier sustainability (Melander, 2017; Yang & Lien, 2018). Collaboration with suppliers, where both buyer and supplier gain more knowledge through cooperation, is considered one of the most effective ways to improve the sustainability performance of suppliers (Melander, 2017). Yang and Lien (2018) argue that suppliers without appropriate cooperation arrangements, such as supplier codes of conduct and supplier monitoring, could potentially act opportunistically and therefore not achieve SSCM. Buying organizations should therefore think carefully about how the cooperation is established, bearing in mind that the use of mediated and influence of non-mediated power on the supplier can affect the relationship between buyer and supplier (Melander, 2017; Pagell & Wu, 2009).
The result of the supplier monitoring process is generally the trigger for the supplier development process. Based on these evaluations, the buyer can decide to look for alternative suppliers or improve the performance of the existing supplier (Krause & Ellram, 1997). In the latter situation, development activities and improvement goals are set up (Zimmer et al., 2016).
Figure 2.1.
Proposed framework on SSCM practices (Zimmer et al., 2016)
Firm’s survival is not possible without some sort of collaboration with its buyers or suppliers, whether purely transactional or by building close relationships (Casciaro & Piskorski, 2005). Given the additional financial and technical resources required to meet sustainability standards, a purely transactional relationship is unlikely to work in SSCM (Parmigiani, Klassen, & Russo, 2011; Wilhelm et al., 2016). In order to overcome the investment costs needed to comply to sustainability standards, suppliers may ask for some form of incentive as proof of long-term commitment from the buyer. By committing to the relationship, the buyer and supplier must work together to establish the triple bottom line improvement (Elkington, 1998; Vachon & Klassen, 2008). In addition, Vachon & Klassen (2008) demonstrated evidence that cooperation in the field of environmental sustainability improved quality, delivery and flexibility.
2.2 Power in buyer-supplier relationships
influence or control the intentions and actions of the other party. According to French and Raven (1959) there are two types of power in buyer-supplier relationships, namely mediated and non-mediated power.
Mediated power in buyer-supplier relationships concerns the ability of a firm to reward or punish the other firm based on its power surplus (Maloni & Benton, 2000). The use of mediated power is found to negatively affect the relationship between buyer and supplier (Benton & Maloni, 2005; Handley & Benton, 2012). By using mediated power, the more powerful firm deliberately uses the following powerbases defined by French and Raven (1959), namely coercive power and reward power. Coercive power is defined by French and Raven (1959. p. 157) as ‘the expectation of the power recipient that he will be punished by the power holder if he fails to conform to the influence attempt’. Therefore, coercive power can best be described as the ability to give penalties for non-compliance (Terpend & Ashenbaum, 2012). Reward power is defined by French and Raven (1959, p. 156) as ‘power whose basis is the ability to reward’. Therefore, based on the definition of French and Raven (1959) it can be derived that reward power is based on incentives in exchange for desired behaviour. For example, rewarding a firm with favourable treatment or extra business (Terpend & Ashenbaum, 2012).
through a contractual obligation or internalized value (French and Raven, 1959). For instance, if customer’s demand changes, the buyer will ask the supplier to change to meet the changed specifications (Terpend & Ashenbaum, 2012).
2.3 Mediated and non-mediated power in SSCM
Recently, scholars increasingly deviate from French and Ravens’ (1959) mediated power categorization as they propose to treat coercive and reward power as separate not interrelated power sources (Nyaga et al., 2013; Pulles, Veldman, Schiele, & Sierksma, 2014). The use of coercive and reward power can result in different outcomes in supplier’s performance (Terpend & Ashenbaum, 2012), supplier’s commitment (Zhao et al., 2008) and relationship cooperation (Benton & Maloni, 2005). Previous research states that coercive power could lead to disinterest of the weaker party in sharing new innovations and providing support to the other party in any other way than was agreed upon (Terpend & Ashenbaum, 2012). Therefore, coercive power is found to have great implications for buyer-supplier relationships as it reduces supplier’s commitment and collaboration (Benton & Maloni, 2005; Zhao et al., 2008). When it comes to reward power, increasing evidence shows that it has a positive influence on supplier commitment and collaboration (Chae et al., 2017).
2010). Since non-mediated power cannot be specifically exercised, the supplier perceives a feeling of independence and control beyond the buyer’s power (Chae, et al., 2017). Complying to audits while not being specifically pressured could lead to building trust and a successful collaborative relationship.
2.4 Power asymmetries in buyer-supplier relationships
In this research we adopt the perspective that power can be simultaneously used by both buyer and supplier to exert influence in the buyer-supplier relationship. This entails that this research is interested in how mediated power and non-mediated power coexist in a buyer-supplier relationship in the context of SSCM. After all, the power balance in buyer-supplier relationships is rarely one of symmetry (Cox, 2004). According to Touboulic et al. (2014, p. 581) power dependence is based on "the criticality of the resource (commercial and operational interest) and the availability of alternatives to obtain the same resource (scarcity). The party that holds key resources can exert power over those who depend on the resources. For example, the power of a buying organization over the supplier is equal to the supplier’s dependence on the buyer’s resources (Hajmohammed & Vachon, 2016). It is therefore not plausible to expect that the distribution of value is balanced evenly across buyers and suppliers (Brito & Miguel, 2017).
Recent literature on power asymmetry in buyer-supplier relationships focused on either the power-advantaged buyer or supplier (Touboulic et al., 2014). Adopting a dyadic research approach prevents potential power scenarios from being overlooked. This research, taking the dyadic buyer-supplier power perspective, will focus on the coexistence of mediated and non-mediated power of both the buyer and the supplier in their relationship. In order to extend sustainability standards, power-advantaged buying firms can use their power surplus to negotiate favourable contractual terms (Reimann & Ketchen, 2017). If the powerful buying firm exercises its mediated power the weaker supplier is left with no choice but to be compliant. However, low-power suppliers might counterbalance buyer’s mediated power through non-mediated power. The weaker supplier might for instance have an expert power advantage over the more powerful buyer. As such, different powers simultaneously used by different actors might lead to some kind of power balance (Li et al., 2017).
perception of the buyers non-mediated power (Terpend & Ashenbaum, 2012). As such, a buyer’s non-mediated power can make it easier to extend sustainability standards in their supply chain (Siemieniako & Mitrega, 2017). Additionally, a buying firm that exercises non-mediated power instead of mediated powers could strengthen the mutual trust in buyer-supplier relationships (Benton & Maloni, 2005). Suppliers are likely to rate a purchasing company that shares best practices as a company that cares about goodwill and mutual benefits, with dedication and willingness to invest time and money in the relationship. On the other side, non-mediated power held by suppliers could also hinder powerful buying firms from exercising mediated power.
2.5 Research Framework
In this research we want to explore how power of both buyer and supplier interact in the context of SSCM. By getting a more in-depth understanding about the coexistence of buyer’s and supplier’s mediated and non-mediated power, the basis for understanding the dyadic perspective is given. For example, it is unclear how a buying firm with a mediated power advantage leverages its power over a supplier with a non-mediated power advantaged Therefore, this study examines how buyers can effectively respond to supplier power in asymmetrical power distributions. The conceptual model is shown in figure 2.2.
Figure 2.2
3 Methodology
3.1 Research design
The aim of this research is to get an in-depth understanding of how power asymmetry influences the extension of sustainability standards in relationships between buyer and supplier. As mentioned earlier, previous research has taken the perspective of the power-advantaged buyer or supplier, ignoring the co-existing power of the disadvantaged counterpart (Touboulic et al., 2014). Moreover, power is still an underexplored concept in buyer-supplier relationships, meaning that the complexities surrounding power in buyer-supplier relationships are yet to be explored rigorously (Reimann & Ketchen, 2017). An inductive, multi-case study approach provides an in-depth understanding of how coexisting, buyer and supplier, mediated and non-mediated power, impacts buyer’s SSCM practices (Yin, 2003).
Because the willingness of firms to collaborate is uncertain due to Covid19, the limited time available and the challenge of collecting multiple source data from dyadic relationships, this study makes use of convenience sampling (Maruster & Gijsenberg, 2012; Roh et al., 2013). The convenience sampling strategy typically lacks a structured approach, but chooses cases based on the ease of access (Maruster & Gijsenberg, 2012). In this study, a modified version of convenience sampling is used to select three buying organizations from available cases, based on certain sampling criteria. First, after careful examination of annual and/or sustainability reports, buying organizations were chosen that showed evidence of any level of buyer-supplier collaboration towards SSCM. Second, to ensure that sustainability was extended throughout the supply chain, those buying organizations were selected that in one form or another actively monitored the supply chain. Subsequently, two suppliers were selected per buying organization on the basis of differences or similarities in the nature of the relationships, namely the expected power distribution and mutual dependency, based on financial and operational interests and scarcity of resources, to ensure generalizability of the results.
3.2 Case description
The selected buying firms are in respectively the textile, food and automotive industry. An overview of the cases is presented in table 3.1.
Table 3.1 Overview of cases
Case Supplier Type of Supplier Turnover (2019) (in millions €) Focal Firm Industry Turnover (2019) (in millions €)
1 SA1 Curtain fabric 33,7 A Textile 9,9
2 SA2 Curtain fabric 12
3 SB1 Raw materials 1.1 B Food 11.300
4 SB2 Raw materials 1.4
5 SC1 Interior design 5.16 C Automotive 10.400
6 SC2 Plastics providers
55.2
Recent studies have shown that retailers within the textile industry have sought and are still pursuing cost savings by outsourcing production to developing countries (Bostrom & Micheletti, 2016). Retailers have managed to operate abroad at a low cost, as governments of developing countries prioritize economic growth over stronger environmental and social regulations (Bostrom & Micheletti, 2016). The high consumption of clean water and the high level of toxins in wastewater for dyeing cotton has made the textile industry a major contributor to environmental pollution (Bostrom & Micheletti, 2016; Khatri, Peerzada, Moshin, & White, 2015). Efforts through European legislation have led to the use of codes of conduct, but the effect of this seems marginal and ineffective in addressing and structurally solving economic, environmental and social sustainability issues (Bostrom, Jonsson, Lockie, Mol, & Oosterveer, 2015).
the food industry is under pressure to reduce its environmental impact and become more environmentally friendly by, for instance, reducing its energy consumption (Glover, Champion, Daniels, & Dainty, 2014). At the same time, the food industry is also expected to increase the yield without damaging the soil for future generations (Pullman et al., 2009).
The automotive industry is known for the design, development and manufacturing of vehicles. Research on sustainability in the automotive industry is interesting because firms are increasingly forced to comply with strict sustainability legislation. According to Mayyas, Qattawi, Omar and Shan (2012), life cycle assessment, end-of-life disposal and the selection of materials has recently gained increased attention. Sturgeon, van Biesebroeck and Gereffi (2008) identified the complex geography of the automotive industry, where bulky and heavy model specific parts are produced close to the final assembly plant and more generic lighter parts are produced at distance to take advantage of low production costs. The automotive industry faces a serious challenge in extending sustainability standards throughout a complex supply base.
Table 3.2 Replication logic
Case Mediated Power (+ buyer favoured, +/- balanced, - supplier favoured) Non-mediated power (+ buyer favoured, +/- balanced, - supplier favoured) Buyer dependency on supplier Supplier dependency on buyer 1 + + Medium High 2 + + High Medium 3 + +/- Medium Medium 4 + + Medium Medium 5 + +/- High High 6 +/- +/- Low Low 3.3 Data collection 3.3.1 Primary data
The main source of data is based on semi-structured interviews, with key-informants from both the buyer and supplier in the buyer-supplier dyad, collected between April 2020 and June 2020. Semi-structured interviews were chosen since it provides the researcher the ability to ask structured questions covering the main subjects, while still being able to ask additional questions revealing underlying motives and mechanisms (Blumberg, Cooper, & Schindler, 2014). Since the literature review revealed that the use and distribution of power in buyer-supplier dyads, in the context of SSCM, had not been thoroughly discussed, a semi-structured interview was developed to adequately elaborate on how buyers involve suppliers in sustainability practices and the extent to which this is done by using a particular type of power. Additionally, archival documents were gathered as secondary data to achieve internal data triangulation (Voss et al., 2002).
identified, after which the perception of the mediated and non-mediated power of the other organization is discussed, followed by questions regarding extending sustainability standards in the supply chain. The interview protocol was tested with a professional in the field before data collection started. The feedback was then discussed by the three researchers and with a professor from the University of Groningen to ensure validity. As a result, some questions were adapted or rephrased. The interview protocols for the buyer and supplier differ slightly, both can be found in Appendix 1.
Interviewees were beforehand notified by mail on the research purpose, general topic and confidentiality of their answers. The interviews took approximately one hour on average, were conducted via MS Teams or Skype and are recorded with permission of the interviewee. This allows to gain richer qualitative data as the researcher can interpret non-verbal data such as body language and facial expressions (Irvine, Drew, & Sainsbury, 2012). Representatives were chosen based on their expertise and level of interaction with the other party. Interviewees from the purchasing company were involved in functions such as supply chain management, purchasing or sustainability, while the interviewees from the supplier side were involved in supply chain management or sales. To prevent misunderstandings in terminology, Dutch representatives were interviewed in their native language. The transcript of the interview was subsequently sent to the interviewee for approval to increase the reliability of the data (Mero-Jaffe, 2011). An overview of the interviewees is presented in table 3.3.
Table 3.3
Overview of interviews
Case Firm Function Interview
approach Interview duration (minutes) Transcript length (pages) 1 & 2 BFA Purchase manager
and production development
Phone call 54 13
3 & 4 BFB Cooperative affairs – quality and innovation
MS Teams 61 10
Supplier 3 Biological milk farmer
MS-Teams 52 9
Supplier 4 Regular milk Farmer
MS-Teams 32 6
5 & 6 BFC1 Strategy and sustainability manager
Skype 70 10
BFC2 Quality advisor Skype 70 16
Supplier 5 Sales Skype 45 9
Supplier 6 Sales Skype 42 9
3.3.2 Secondary data
In addition to the interviews, archival documents have been collected as an additional source of information to reach data triangulation (Voss et al., 2002). Sustainability and annual reports were examined prior to the interviews to gather valuable information on topics such as sustainability programs and supplier sustainability. This allowed the researcher to acquire more detailed information by asking case specific questions. During and after the interview the interviewees were asked to share additional documents related to the buyer-supplier dyad, such as supplier audit reports and supplier code of conducts. An overview of secondary data can be found in table 3.4.
Table 3.4 Secondary data
Company Document Number of pages
FFA Notes from website X
Supplier Sustainability Self-Assessment 4
FFB Annual and sustainability report 2019 211
FFC Annual and sustainability report 2019 142
Supplier code of conduct 6
Supplier Sustainability Self-Assessment 7
3.4 Data analysis
The interview recordings were transcribed on the same day or within a couple of days following Eisenhardt’s rule (1989). The transcripts of the interviews were analysed via the three steps suggested by Gioia, Corley and Hamilton (2014). This was done separately for each interview. Since the research context is new and relatively unknown, choosing an a priori theory as the perspective of the research question, could lead to a bias (Ketokivi & Choi, 2014).
In the first phase of analysis, qualitative data was reduced by selecting quotes of information relevant for the research. In order to structure these quotes the researcher made use of the program Atlas.ti. Codes were used to capture the essence of the quote. For example, the quote: ‘In the meantime, we have even gone so far as to stop working together if a supplier cannot supply the articles sustainably’ was coded as ‘supplier selection’. This process of data reduction and ordering resulted in a large amount of first order codes.
In the second phase of analysis, first order codes were categorized based on similarities. This process reduced the number of first order codes drastically to a more manageable number. This allowed an initial indication of the different types of first-order codes and how they correspond to the concepts derived from the theoretical background. In this phase of second order coding, the research is in a more theoretical realm looking for themes which help explain the concepts of power in SSCM. The final step of coding was to merge second-order themes into aggregated dimensions. This made it possible to critically review the literature and look for similarities with the categorized aggregated dimensions or themes or new literature that was not initially thought of.
Table 3.5 Excerpt coding tree
Example Second order
theme Aggregate theme
If you don't meet these requirements, we give time to
improve, but if you can't meet them, we say goodbye to each other. Coercive power in BS collaboration Mediated buyer power If regular suppliers deliver something that is not in
accordance with the agreement, then there is a penalty. We will return the product, or a penalty must be paid.
Coercive power in supplier monitoring To ensure that suppliers meet the requirements, it is
necessary to develop together and develop your suppliers. Reward power in BS collaboration We encourage suppliers to become more sustainable
through this program. They earn points with that and with that they earn a bonus.
Reward power in supplier monitoring The supplier code of conduct is part of the contractual
agreement with the supplier. legitimate power in BS collaboration
Non-mediated buyer power We ask them to do the self-assessment questionnaire every
year and sometimes visit them. These types of suppliers, we aim to do audit every two year.
Legitimate power in supplier monitoring But we also have a sustainability day each year where we
invite representatives of around 80-100 suppliers. During that day we explain how we are dealing with sustainability.
Referent power in BS
collaboration Together with organization X, we look at how we can support
a specific group of farmers in the reduction of greenhouse gases
Referent power in supplier monitoring If the supplier is unable to find a solution, we provide
guidance on how to tackle it in order to help them on their way and achieve the desired result.
Expert power in BS
collaboration We have a supplier assessment in which various aspects are
assessed, including delivery reliability but also sustainability. Expert power in supplier monitoring I think we are both interdependent. I think that is good
because love must come from two sides, if it comes from one side it is very difficult.
Buyer supplier
dependency Power asymmetry I think confidence has declined recently. And that's a bad
thing. What you see is that we lost each other a bit. Members
feel less involved. Communication Cultural
background If something goes wrong with the supplier, we don't hear it.
4 Findings
The buying organization’s biggest concern is to make suppliers comply to their SSCM practices: ‘It is a great challenge for us to convince the suppliers we work with throughout the chain, that sustainable entrepreneurship is really necessary to preserve this world for the next generation’ (case 1-2). An example of the challenge faced by purchasing organizations is the expected or assumed costs for suppliers to become, to be or to remain sustainable: ‘When money is made, a lot can be done. It is the balance, what consumers and our customers want to pay for sustainability. If there is enough compensation for that, then I like to do a little more for it and I think most suppliers do. Only, at this moment it often costs money, so there must be a good earnings model behind it’ (case 4). This quote illustrates the tension between cost and sustainability (Wilhelm et al., 2016; Xiao et al., 2019).
In addition, there also is the lack of sustainability awareness of suppliers in low-wage or less developed countries: ‘But certainly in the early years I was often laughed at when I talked about sustainability’ (case 1-2). However, since two or three years, due to the increased attention and new governmental legislation this has changed in for instance China: ‘Sentiment must also grow in China. If you have no experience with it, you don't know. We have now sent the first test samples to the buying organization (case 1-2) with recycled polyesters. It is a realization and it takes a while’ (case 1). Even though, suppliers from low-wage countries are not leading the sustainability transformation, they increasingly see the necessity and even the possible competitive advantage: ‘because at the end, a company paying attention to the environment, social issues and sustainability as a whole, has an added-value to the brand name’ (case 1).
4.1 Mediated power
It became clear from our cases that buying organizations use multiple methods based on mediated power to involve suppliers in SSCM. Before considering the role of power distribution for the application of these methods, the methods are introduced. For coercive power these are: supplier selection based on code of conduct, miss an order if existing supplier does not keep to agreements and penalty for non-compliance with agreed standard for an existing order. For reward power these are: convince the supplier with a long-term focus on relationships and a bonus based on compliance with sustainability standard. Not all methods were observed in every case, nor were the same methods used within cases. Some strategies used in buyer-supplier relationship are more influenced by power asymmetry than others. This appears to depend on the criticality of the resource in commercial and operational interest and the availability of alternatives. In table 4.1, the methods used per case are presented.
Table 4.1
Summary use of mediated power sources
Case Supplier Coercive power Reward power
Buyer dependency on supplier Supplier dependency on buyer 1-2 1
Supplier selection Long-term relationship focus
Medium High
Miss out on order Bonus based on compliance Penalty based on
non-compliance
2
Supplier selection Long-term relationship focus
High Medium
Miss out on order Bonus based on compliance Penalty based on
non-compliance
3-4 3
Supplier selection Long-term relationship focus
Medium Medium
Miss out on order Bonus based on compliance Penalty based on
non-compliance
4
Supplier selection Long-term relationship focus
Medium Medium
Miss out on order Bonus based on compliance Penalty based on
non-compliance
5-6
5 Supplier selection Long-term relationship focus High High Miss out on order
6
Supplier selection
Long-term relationship focus Low Low Miss out on order
4.1.1 Coercive power
Data analysis shows that in almost all cases the buying company has a mediated power advantage over the supplier. For coercive power, this was evident from the use of the following methods described below. At the front of the purchasing process, this is visible in the strict selection of suppliers: ‘At the moment we are even so far that we no longer collaborate if a supplier cannot supply sustainable items’ (case 1-2). If the supplier was already involved in the supply chain, buying organizations minimized or refused the supplier new orders until compliance with the code of conduct was guaranteed. Possibly leading to termination of the contract: ‘If you don't meet requirements, you have time to improve, but if you can't make the improvements, we say goodbye to the supplier’ (case 3-4). If existing suppliers do not meet sustainability standards, they can be punished for this: ‘You have a base price, which is reduced or increased based on your sustainability performance’ (case 3-4).
Strict use of supplier selection cuts out suppliers who cannot meet the demands, therefore not starting a buyer-supplier relationship. The following refers to existing relationships where two other coercive methods are found: minimize or refuse new orders and penalty based on non-compliance. These coercive powers were not actively exercised in all cases. According to case 5, the buying firm (case 5-6) is in no position to exercise coercive power over them as supplier: ‘They use measures such as less production or no production, but I don't think they go this far with us, because we are important to their production. And if we no longer supply buyer (case 5-6), they have a major problem. So maybe they invest a little extra in us so we can meet standard requirements again’. Although the size of the buying organization (case 5-6) and available financial and technical resources are much larger than that of the supplier (case 5), due to interdependence the buyer cannot use this power effectively. The buying organization (case 5-6) explains this as follows: ‘For a strategic supplier, or a supplier that is really important to us, we might decide to invest more in them with regard to sustainability’.
distribution was found in case 3-4: ‘If you don't meet basic requirements, you have 4 weeks to fix it. If this does not happen, we will refuse the product until the necessary improvements have been made’. It should be noted that all purchasing organizations have set up collaboration programs to bring the supplier back to the desired sustainability level through knowledge sharing or supplier training.
Power distribution and mutual dependencies in case 1-2 are to a high degree comparable to case 5. However, it was found that this organization does use penalties for non-compliance. Main difference between these cases is the origin of the suppliers. The suppliers in case 1-2 are Chinese and Turkish, in case 5 it is a Dutch supplier. In all cases the buying company is Dutch. This difference shows mainly in communication and sustainability awareness: ‘Dutch suppliers are generally quite reliable and aware of sustainability, which is why confidence is high’ (case 5-6). This is different in the communication with the foreign suppliers: ‘If we don't get in touch, we won't hear from the supplier. For example, if something goes wrong with the supplier, we will only hear it if we ask for it’ (case 1). It can also be seen in the sustainability awareness: ‘But it remains a Chinese supplier and that makes it difficult to really have the same vision on sustainability. It is difficult to influence that cultural difference between us and the supplier’ (case 1-2). As such, in case 1-2 the coercive power is actively used as a supplier monitoring tool to prevent potential opportunism. This might influence the buyer-supplier relationship as it can be seen as a lack of trust towards the suppliers.
4.1.2 Reward power
The long-term relationship focus was actively exercised in all cases. Buying organizations are willing to invest in the relationships by sharing knowledge or by providing supplier training. However, investments that led to close cooperation, such as sharing resources and investing buyer's own capital to find more sustainable materials or activities, were only found in case 5: ‘Sometimes you have a supplier that passed the basic requirements and the SEQ and so on, but for some reason you want to invest a little bit more in them from a sustainable point of view. It might be a strategic supplier, or a supplier that is really important for us, then we might decide to invest more in them regarding sustainability’ (case 5-6). The former is an indication that when the power distribution between buyer and supplier is more balanced, due to a buyer's dependence on the supplier, the buyer is keener to cooperate more or even invest in the supplier. In the other cases, less evenly balanced, the buyer expects investments from supplier side, which could eventually be rewarded in extra business (case 1-2) or bonus via the point system (case 3-4).
The bonus based on compliance method was, opposed to case 1-2 and 3-4, not exercised in case 5-6: ‘we do not reward our suppliers if they meet our standards, because therefore they are our standards. So, this is the minimum level they have to achieve’. Lack of incentives could potentially make the buyer more susceptive for opportunistic behaviour of the supplier: ‘No, we are not rewarded if we meet the requirements. Buyer (case 5-6) has many requirements, but we as a company should really see this as standard and unfortunately we are not rewarded when we do something extra’ (case 5). Interestingly, while the buyer reduces the risk of opportunism through close cooperation in case 5, the buyer does not attempt to reduce the risk of opportunistic behaviour in case 6. This is an indication that, if dependency on the supplier is low and other suppliers are available, the buyer will take the risk to limit buyer-supplier collaboration and enforce supply chain monitoring practices. A different sentiment can be found in case 1-2 and 3-4: ‘By setting those goals and working towards them, we can score points on basis of which we receive financial compensation. That way you will be rewarded for your efforts’ (case 4). This approach is likely to reduce opportunism: ‘We always see it as an opportunity to improve. So, that is why we have a positive relationship with each other’ (case 1).
4.2 Non-mediated power
cannot be actively used to influence a buyer or supplier, methods have been identified that indicate the influence of non-mediated power on buyer or supplier. For expert power these are: sharing knowledge to support or guide in sustainability initiatives, supplier training to raise sustainability awareness and sustainability standards or codes of conduct. In referent power there is the source of inspiration that an organization is for another organization and the organizations motivation and investments to become sustainable. The use of legitimate power is found in the form of contractual obligations, the setting of targets within these obligations and supplier audits or company visits. Not all methods are observed in every case, nor are the same methods noticed or found useful within or between cases. In table 4.2, the methods used per case are presented.
Table 4.2
Summary observed non-mediated power sources
Case Supplier Expert power Referent power Legitimate power Buyer dependency on supplier Supplier dependency on buyer 1-2 1 Sharing
knowledge Role model
Contractual obligation
Medium High
Supplier
training Motivation Setting target
Supplier audits
2
Sharing
knowledge Role model
Contractual obligation
High Medium
Supplier
training Motivation Setting target
Supplier audits
3-4 3
Sharing
knowledge Role model
Contractual obligation
Medium Medium
Motivation Setting target
Supplier audits
4
Sharing
knowledge Role model
Contractual
obligation Medium Medium
Supplier audits
5-6 5
Sharing
knowledge Role model
Contractual obligation
Low Low
Supplier
training Motivation Setting target
6
Sharing
knowledge Role model
Contractual obligation
High High
Supplier
4.2.1 Expert power
The data analysis shows that suppliers find the expert power of buyers most useful when they share their knowledge to help the supplier remain or become sustainable in line with sustainability standards: ‘Yes, especially at the beginning they gave us a lot of information about sustainability and the environment, but also how you interact with your staff and other important sustainability topics’ (case 5). In some cases, it was also noted that suppliers felt motivated and supported by sustainability training and programs: ‘Every now and then we are invited for training courses focused on business operations or sustainability. In addition, they occasionally come by to watch and talk’ (case 6).
In all cases, a form of knowledge sharing has been found, regardless of the usefulness of that information, which varies from case to case. In cases 1 and 2, with a lower sustainability knowledge, and case 3 with a strong interest in sustainably, such initiatives were highly appreciated: ‘There are more things you want to do as an entrepreneur, but if you work on a plan to go in that direction and they organise a master class on such a topic, then it is interesting to participate’ (case 3). Interestingly, in case 4, as opposed to case 3, the supplier did not value the expert power of the buyer as they did not want to invest more time and resources in sustainability than required by the sustainability standards: ‘They (biological farmers) get serious compensation for it. The regular milk price is 35 cents, an organic farmer gets 48 cents. There is quite a gap between them. If we score very well in program Y, we only receive a surcharge of less than ½ cent’ (case 4).
Furthermore, it is found that supplier training was mostly valued at those suppliers (case 1-2) who have low expert power: ‘For example, we assisted the supplier in reusing cartridges, which was not the case at first. This saves costs for the supplier and is also more sustainable for them. It shows that more sustainability does not always have to be more expensive’ (case 1-2). Based on the analysis, it was not found that the buyer had an expert power advantage over case 3-4 and 5-6. Each supplier was clearly aware of and informed about sustainability approaches, alone or in closer collaboration with the buyer. The buyer’s expert power advantage in case 1-2 seems to be caused, among other things, by the cultural background of the suppliers and the more recent interest in sustainability there.
4.2.2 Referent power
Data analysis shows that most suppliers are inspired by the buyer for being a role model for sustainability in their industry: ‘Buyer (case 1-2) was one of the first customers that started to ask for sustainable production. But now more and more buyers are asking the same’ (case 1). To some degree this also motivated suppliers to engage in sustainability programmes themselves: ‘There are still entrepreneurs who find sustainability a bit of a hassle and extra work. But there are also plenty of firms that want to lead the way in their efforts to become a little more sustainable. When we have the financial resources and the opportunity arises, we always look at how we can evolve towards more sustainable alternatives, for example by replacing old or broken equipment with more sustainable equipment’ (case 1).
It should be noted that by reporting on their sustainability performance, buyers and suppliers not only motivated other organizations in their supply chain to expand their sustainability initiatives, but also gained competitive advantage: Sustainability has become very important in our relationship. It certainly contributed to the success in our relationship, but it also helped us grow as a company ourselves’ (case 5). In cases 1-2 the referent power is less evenly balanced in comparison to case 3-4 and 5-6: ‘The public debate has only recently focused attention on topics such as sustainability’ (case 1). As a result the referent power disadvantaged suppliers in case 1 and 2, with other cultural background than the buyers and suppliers in case 3-4 and 5-6, value the referent power more: ‘Yes, because at the end a company that pays attention to the environment, to issues and paying attention to sustainability that also is an added-value to their brand name’ (case 1).
4.2.3 Legitimate power
From data analysis we found that the supplier’s perception of the legitimate power of the buyer stems largely from the contractual obligation: ‘We see commitment from most of our suppliers, but most suppliers see sustainability as something they have to do to meet our requirements, some suppliers see also the value of working with sustainability’ (case 5-6). Buying organizations have the opportunity to carry out audits on the basis of contractual agreements containing the code of conduct: ‘You must demonstrate that you comply with this. If there is a company that is not satisfactory in many areas, they must make a plan of action. We will then check whether you adhere to that plan of action, if you show that things are going well over a longer period of time, you return to the regular audit frequency’ (case 3-4). Moreover, the buyers ask from the suppliers to constantly evolve with the changing sustainability standards: ‘Our contract with buyer A also states that we must improve our sustainability performance every year. This is something beside the code of conduct that is there. For example, the contact person states that we have to emit so much less CO2 every year and that we have to reduce our ecological footprint every year’ (case 5).
contractual obligation, the parties rely on the overall mediated and non-mediated power distribution to get a favourable contract. While after signing a contract neither the buyer nor supplier has a power advantage over the other as both agreed with the terms. In practice, however, this did not apply in case 3-4, in contrast to cases 1-2 and 5-6.
5 Discussion
This research mainly focuses on the reaction of the buyer to the balance or unbalance in the power distribution in a dyadic relationship between buyer and supplier. Specifically, the study has explored how buying organizations, actively involved in SSCM, responded to the coexisting power of the supplier in buyer-supplier relationships. Previous literature emphasized the lack of research on this topic from a dyadic perspective (Hoejmose & Adrien-Kirby, 2012; Li et al., 2017; Touboulic et al., 2014). The findings provide interesting insights, which contribute theoretically and in practice to the literature, by presenting the different responses of buyers to the supplier’s coexisting power. In the next sections we posit some propositions we consider generalizable, because evidence is found in multiple cases (Karlsson, 2016).
5.1 Propositions
5.1.1 Effectiveness of coercive power in a buying firms sustainable supply chain
In line with previous research (Pagell & Wu, 2009; Melander, 2017), our multiple case study confirms that buying organizations should carefully consider the use of coercive power, especially if it is not or insufficiently compensated with reward or non-mediated power. As a result of such unbalanced power distribution, we saw a lack of willingness among suppliers to meet or exceed sustainability standards (Terpend & Ashenbaum, 2012; Zhao et al., 2008). This is an indication that, while power favoured buyers can meet their sustainability standards in the short term by only using coercive power, this would reduce the commitment and cooperation of suppliers required for stable long-term relationships (Cox, 2004; Nyaga et al., 2013). This leads to our first proposition:
Proposition 1a: When mediated and non-mediated power favoured buyers use coercive power to make suppliers comply to sustainability standards, there is less cooperation between customer and supplier at the expense of sustainability, and more supplier monitoring is needed to reduce opportunistic behaviour.
Proposition 1b: When mediated and non-mediated power is more balanced between buyer and supplier, buying organizations are reluctant to use coercive power and willing to intensify collaboration, including more extensive investments in financial and operational resources to reduce the risk of opportunistic behaviour of the supplier.
5.1.2 Effectiveness of reward power in a buying firms sustainable supply chain
We agree with the suggested deviation from the mediated power category (Pulles et al., 2014; Nyaga et al., 2013), because in several instances opposing responses were found to the use of coercive and reward power. In line with the proposed relationship by Chae et al. (2017), we found evidence that rewards in the form of long-term relationships and compliance-based bonuses, positively impacts a supplier's willingness to collaborate and meet sustainability standards. In contrast to coercive power, the incentives via reward power motivated suppliers financially and intrinsically to achieve sustainability. This leads to the following proposition:
Proposition 2a: When mediated and non-mediated power favoured buyers use reward power to make suppliers comply to SSCM standards, there is more cooperation between buyer and supplier, to the advantage of sustainability, and less supplier monitoring is needed to reduce opportunistic behaviour.
The use of reward power methods has proven successful in multiple cases of different power distributions. This is seen as an indication that the use of reward power has a positive effect on compliance towards and collaboration in SSCM, despite the power distribution. Therefore, we also state the following proposition:
Proposition 2b: When buyers use reward power, there is more cooperation between buyer and supplier, to the advantage of sustainability, and less supplier monitoring is needed to reduce opportunistic behaviour.
5.1.3 Effectiveness of the possession of non-mediated power in a buying firms sustainable supply chain
et al., 2014). Most cases showed evidence that the buyer’s possession of non-mediated power, either in the form of expert, referent or legitimate power, balanced out the negative consequences of the use of coercive power. Suppliers who struggled to improve on sustainability, found buyers' knowledge and willingness to share resources or invest in suppliers, to be a sign of goodwill and reason to improve cooperation (Terpend & Ashenbaum, 2012). It further helped to increase supplier’s own expert power and referent power, as they also became more sustainable and attractive to other potential buyers (Terpend & Ashenbaum, 2012). This has led to the following proposition:
Proposition 3a: Coercive power in conjunction with non-mediated power can lead to cooperation between buyer and supplier, to the advantage of sustainability, and less supplier monitoring to reduce opportunistic behaviour.
The influence of non-mediated power was found in differing types of cases with differing power distributions. In the cases where reward power instead of or in combination with coercive power was actively used, there seemed to be a greater effect. Therefore, we also state the following proposition:
Proposition 3b: Reward power in conjunction with non-mediated power can lead to more intrinsically motivated suppliers and greater cooperation between buyer and supplier, to the advantage of sustainability, and less supplier monitoring to reduce opportunistic behaviour.
5.2 Contributions to theory
sources are more effective if the buying organizations has a non-mediated power advantage over the supplier. This ties in with Siemieniako & Mitrega (2017), who stated that a supplier's appreciation for the non-mediated power of buying organizations could make it easier to achieve a sustainable supply chain.
Second, this study offers a dyadic perspective on power, which responds to researchers' calls for an alternative perspective (Chae et al., 2017; Reimann & Ketchen, 2017). Most articles on power in SSCM focus on the power favoured buyer or supplier, therefore overlooking potential power scenarios (Hoejmose & Adrien-Kirby, 2012; Li et al., 2017; Touboulic et al., 2014). This study provides a more unbiased view of the relationship between buyer and supplier as both perspectives are taken into account. This leads to additional insights into the effectiveness of individual power sources compared to the mediated and non-mediated power of the other parties.
5.3 Managerial implications
This research not only contributes to the theory, but also has two managerial implications. First, buying organizations cannot tackle sustainability issues on their own (Chen & Chen, 2019). An implication important for purchasing organizations to recognize, is that the use of coercive power and, to a lesser extent, reward power in itself, has proved less effective in maintaining a stable long-term relationship. Buying organizations using mediated power should only use it in conjunction with the non-mediated power methods found in this study, to ensure collaboration with suppliers. Second, educating and training suppliers in SSCM has shown to be of great importance. There is evidence that buying organizations with a high level of non-mediated power made suppliers willing to participate in sustainability initiatives beyond the buyer’s perspective. The supplier's perception of a buyer's non-mediated power can inspire the supplier to become more involved in sustainability practices and help further extend these practices throughout the supply chain.
5.4 Limitations and future research
of cases. Although the results of the cases were promising, this may affect the validity of the findings. Future research should be conducted by selecting a wider variety of cases with similar power distribution, so that results can be more easily and reliably compared and thus provide more insightful results.
Second, the collection of multiple source data from dyadic relationships is a serious challenge. Although firms were assured of the confidentially of the research, we noticed that firms were not always willing to share detailed descriptions of events. Even though we tried to convince the interviewees of the confidentially, there seemed to be a lack of trust or unwillingness to share strategical case related data. To overcome these issues in the future we would propose to conduct a longitudinal study. This might help to overcome trust issues and allows for an approach in which the researcher could spend multiple days on site to directly observe the relationship and communication.
6 Conclusion
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