The effectiveness of power in managing supplier
sustainability: a cognitive capital perspective
by
Menno van Straten
Supply Chain Management
University of Groningen
Faculty of Economics and Business
June 2020
m.j.van.straten@student.rug.nl
Student number: 2556170
Supervisor: C. Xiao
Second assessor: J. Riezebos
ABSTRACT
Buying firms are pressured by stakeholders to conduct business in a more sustainable manner. The reputation of these buying firms is partly dependent on environmental and social developments of their suppliers, which implies that one challenge in developing sustainable supply chains lies in managing supplier sustainability. In the sustainable supply chain management (SSCM) literature little to no attention has been paid to explore how cognitive capital, in the form of shared goals and values, influences the effectiveness of both mediated (coercive and reward) and non-mediated (legitimate, referent and expert) power in managing supplier sustainability. To gain insight into the topic of interest a qualitative multiple case study within the manufacturing industry is conducted, including both the perspective of buyer and supplier. The findings of this research show that cognitive capital enhances the effectiveness of legitimate, referent and expert power in managing supplier sustainability, while it is not influencing the effectiveness of coercive and reward power. Thus, in buyer-supplier relationships where both parties share the same goals and values, non-mediated power sources can facilitate the transition into a truly sustainable supply chain. This research does not only contribute to the SSCM literature, but also provides valuable managerial insights and identifies directions for future research.
TABLE OF CONTENTS
1. INTRODUCTION ... 5
2. THEORETICAL BACKGROUND ... 8
2.1 Sustainable supply chain management ... 8
2.2 Mediated and non-mediated power in SSCM ... 9
2.3 Buyer-supplier relationship – a cognitive capital perspective ... 10
2.4 Conceptual framework ... 12 3. METHODOLOGY ... 14 3.1 Research design ... 14 3.2 Case selection ... 14 3.3 Data collection ... 17 3.4 Data analysis ... 20 4. FINDINGS ... 22 4.1 Mediated power ... 22 4.1.1 Coercive power ... 22 4.1.2 Reward power ... 23 4.2 Non-mediated power ... 24 4.2.1 Legitimate power ... 24 4.2.2 Referent power ... 25 4.2.3 Expert power ... 27 5. DISCUSSION ... 29 5.1 Propositions ... 29 5.1.1 Mediated power ... 29 5.1.2 Non-mediated power ... 30 5.2 Contributions to theory ... 31 5.3 Managerial implications ... 32
6. CONCLUSION ... 35
REFERENCES ... 36
APPENDICES ... 44
Appendix 1: Interview protocol ... 44
Appendix 2: Accompanying letter ... 52
1. INTRODUCTION
It is of increasing importance to conduct business in a sustainable manner in today’s society (McKinsey, 2014). Since buying firms are pressured to take responsibility for products produced by suppliers, managing supplier sustainability is paramount for buying firms, particular the ones orchestrating global supply chains (Boström, 2015). Buying firms, like FrieslandCampina and Philips, understand that their reputation is, among other things, dependent on environmental and social developments of suppliers and that collaborating with these suppliers is necessary for developing sustainable supply chains (FrieslandCampina, 2018; Philips, 2018). However, supplier’s cooperation may not be taken for granted, as not every supplier is willing to cooperate with buying firms in making supply chains more sustainable (Touboulic & Walker, 2015). This implies that one real challenge of developing sustainable supply chains lies in managing supplier sustainability (Foerstl et al., 2010), particularly the ones that may not be cooperative with buying firms’ sustainability initiatives.
Several studies (Reimann & Ketchen, 2017; Touboulic et al., 2014) have explored the role of power, particularly buyer’s power in SSCM. However, this literature has several limitations that warrant further research into this topic. First, power is explored as one aggregate concept (Caniëls & Gelderman, 2007; Chicksand, 2015; Cox et al., 2001; Touboulic et al., 2014) ignoring the multiple types of power as identified by French and Raven (1959). Second, prior power studies have mostly overlooked the relationship context between buyers and suppliers (Caniëls & Gelderman, 2007; Crook et al., 2017). Particularly, the level of shared goals and values between buyers and suppliers is yet to be explored (Krause et al., 2007). Third, most power studies focus on one side of the buyer-supplier relationship (Chae et al., 2017; Huo et al., 2019) and did not take into account the dyadic perspective, which provides an incomplete view on buyer-supplier relationships (Eisikovits & Koren, 2010). Considering the limitations, a better understanding of the roles of power and cognitive capital in buyer-supplier relationships is necessary in managing supplier sustainability.
situations where buyer and supplier share the same goals and values one of the parties may be more responsive to certain actions requested by the other party, whereas this might not be the case if buyer and supplier have different goals and values (Chen et al., 2014; Morgan & Hunt, 1994). This implies that cognitive capital embedded in buyer-supplier relationships can influence the way both buyer and supplier perceive power balance and power use (Nyaga et al., 2013). As such, cognitive capital may influence the application and effectiveness of both mediated and non-mediated types of power in managing supplier sustainability. This results in the following research question: How does cognitive capital within a buyer-supplier relationship influence the effectiveness of power in managing supplier sustainability?
To explore the research question, a qualitative multiple case study is conducted. First, this research is of explorative nature since the aim is to get an in-depth understanding of the effectiveness of power in managing supplier sustainability through applying a cognitive capital perspective (Yin, 1981). Second, research into power in buyer-supplier relationships is still in its infancy (Reimann & Ketchen, 2017). Particularly, researchers have yet to take into account the differences between mediated and non-mediated power in the context of managing supplier sustainability. Third, the concepts of power and cognitive capital in buyer-supplier relationships seem to be interrelated, where the boundary conditions remain unclear. To gain insight into all this a total of 6 cases are selected within the manufacturing industry (Eisenhardt, 1989). More specifically the focus of this study is on the textile, food and automotive industries. Research into these industries is relevant because all three industries have to deal with sustainability issues, such as using large amounts of natural resources, global warming issues and difficulties in implementing sustainability practices (Desore & Narula, 2018; Freidberg, 2017; Orsato & Wells, 2007). In-depth understanding is gained through conducting several semi-structured interviews and studying archival documents.
perspective of buyer and supplier into account. Further, this study is also of use from a managerial point of view since it provides guidance to purchasing and sustainability managers on how to effectively manage the sustainability of a buying firm’s supply base.
2. THEORETICAL BACKGROUND
This section first introduces SSCM and the main management strategies and practices. Hereafter, the concepts of mediated and non-mediated power in SSCM and their link towards SSCM practices are discussed. Further, a cognitive capital perspective is taken to introduce the role of buyer-supplier relationships for managing supplier sustainability. Lastly, the conceptual framework of this study is introduced.
2.1 Sustainable supply chain management
Seuring and Müller (2008) defined SSCM as “the management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development, i.e., economic, environmental and social, into account which are derived from customer and stakeholder requirements” (p. 1700). The three dimensions of sustainability mentioned by Seuring and Müller (2008) were initially developed by Elkington (1998), who considered that there should be a balance between economic, environmental and social sustainability. These three dimensions are commonly referred to as the triple bottom line (Elkington, 1998).
Nowadays companies are increasingly aware of the pressure from stakeholders regarding sustainability and are trying to reshape their supply chains accordingly (Wu & Pagell, 2011), which shows that their focus is shifting from traditional supply chain management (SCM) towards SSCM. The transformation into sustainable supply chains is necessary because every supply chain member is affecting the sustainability performance of the supply chain as a whole (Kumar & Rahman, 2015). Several studies (Ashby et al., 2012; Linton et al., 2007) argue that including sustainability into SCM extends this concept from narrow optimizations into optimization in a broader scope (e.g. the entire production system), which requires changing current SCM practices to be more sustainable. Gimenez and Tachizawa (2012) classified these SSCM practices, which are aimed towards expanding sustainability to suppliers, into two categories: assessment and collaboration.
key-performance indicators (KPI). These approaches can be useful if buying firms have doubts about supplier sustainability and their commitment towards sustainability codes of conduct (SCC) (Foerstl et al., 2010; Gimenez & Tachizawa, 2012; Jiang, 2009; Tundys & Fernando, 2020).
Collaboration has received significant attention in SSCM literature and refers to parties working closely together with each other (Gimenez & Tachizawa, 2012). In essence, Vachon and Klassen (2008) highlight that collaboration within supply chains is a valuable asset, which stems from inter-organizational learning. An example of supply chain collaboration is supplier training. Through supplier training knowledge is transferred from one party to another with the aim of increasing the skills of the supplier and ultimately improve the suppliers’ performance (Carr et al., 2008; Modi & Mabert, 2007).
2.2 Mediated and non-mediated power in SSCM
Power is the ability to influence the other parties’ behavior in correspondence with desired outcomes (Stannack, 1996). French and Raven (1959) made a distinction between mediated and non-mediated types of power. According to Maloni and Benton (2000) mediated powers (coercive and reward) are used deliberately by the power source with the intention to guide the target. In general, coercive power “stems from the expectation on the part of the power recipient that he will be punished by the power holder if he fails to conform to the influence attempt” (French & Raven, 1959, p. 263). An example of coercive power use is a buying firm imposing financial punishment on a supplier if the supplier is not compliant with buying firm’s standards. When compliant suppliers receive, for instance, a financial bonus for their contribution, reward power is used, since this power type is “power whose basis is the ability to reward” (French & Raven, 1959, p. 263).
While expert power “varies with the extent of the knowledge or perception which the power recipient attributes to the power holder within a given area” (French & Raven, 1959, p. 267). The buying firm might, for example, have knowledge about a certain topic which is admired by the supplier or vice versa (Bastl et al., 2013).
Exerting mediated powers in supply chains can have mixed outcomes regarding supplier compliance. According to Chae et al. (2017), reward power can be seen as positive feedback towards suppliers which promotes collaboration between both parties, while coercive power is negative feedback which disrupts supplier’s motivation and should be avoided. This finding is supported by other researchers who identified that reward power is considered a strong motivator in supplier compliance, while applying coercive power showed counterproductive results (Harness et al., 2018). However, other researchers highlight that in some cases it is necessary that coercive power is employed to ensure supplier compliance (Jain et al., 2014). According to Zhao et al. (2008), non-mediated powers foster the willingness of the power recipient to accept the influence of the power holder. Moreover, these non-mediated powers are important sources in amplifying the influences of mediated powers (Chae et al., 2017). Particularly, expert power is considered a pivotal amplifier in realizing supplier compliance (Harness et al., 2018). Considering the above, it is necessary to differentiate between different types of power in the context of supplier sustainability management.
In supply chains, buying firms are often seen as pioneers in terms of enhancing sustainability, whether or not forced by third parties (Boström, 2015). Vurro et al. (2009) state that buying firms implement sustainability practices and leverage their power to influence supplier’s behavior towards these practices. Different SSCM practices are implemented with support of different types of power. SCC’s, for example, are implemented on the basis of expert power, since buyer’s expertise and knowledge is needed in forming these sustainability rules (Egels-Zandén, 2014). The same applies to supplier training which is organized based on the transfer of knowledge from buyers to suppliers (Carr et al., 2008). In auditing, however, legitimate and coercive power are required. Legitimate power creates the conditions to conduct the audit, while coercive power might be necessary if suppliers do not comply with buying firm’s standards (Egels-Zandén, 2017).
2.3 Buyer-supplier relationship – a cognitive capital perspective
sharing of information and the risks and rewards of the relationship” (Ellram & Hendrick, 1995, p. 41). To better understand buyer-supplier relationships, a cognitive capital perspective will be applied in this study. Granovetter (1992) states that social capital emerges from repeated social interactions in a buyer-supplier relationship and is therefore seen as a valuable asset. Moreover, social capital is a facilitator in creating and exchanging knowledge in buyer-supplier relationships (Nahapiet & Ghoshal, 1998).
Nahapiet and Ghoshal (1998) were the first to identify the three dimensions of social capital, namely: structural, cognitive and relational. The structural dimension of social capital is concerned with the advantages that result from social interactions, such as information sharing and close network ties between buyer and supplier (Chu et al., 2017; Tsai & Ghoshal, 1998). The cognitive dimension is related to shared goals and values between both parties (Krause et al., 2007), while the relational dimension refers to the type of personal relationships that evolve through social interactions, including aspects as trust, friendship and respect (Chu et al., 2017; Krause et al., 2007). Whereas most studies associate social capital with shared visions, less conflicts and enhanced cooperative behavior between both parties involved, some studies highlight that if taken to an extreme, social capital might have a negative impact on buying firm’s performance (Villena et al., 2011).
In buyer-supplier relationships, partner adaptation and collaboration is not only driven by the possession of power, but it also depends on the way that power is perceived and in what setting (Nyaga et al., 2013). Likewise, Nyaga et al. (2013) argue that both buyer and supplier may not agree on power perceptions and power use in the relationship, which can have a significant impact on their willingness to adapt and collaborate. In situations where buyer and supplier share the same goals and values one of the parties might be more responsive to certain actions requested by the other party, while this might not be the case if buyer and supplier are not sharing the same goals and values (Chen et al., 2014; Morgan & Hunt, 1994). This means that cognitive capital grounded in a relationship between a buyer and its supplier can influence the way both parties perceive power balance and power use (Nyaga et al., 2013).
sustainability. In addition, Hung et al., (2014) found that cognitive capital has a significant influence on knowledge sharing regarding sustainability practices. As such, cognitive capital can be considered an important contingency for understanding the effect of mediated and non-mediated power in managing supplier sustainability.
2.4 Conceptual framework
To summarize, this study aims to uncover the influence of cognitive capital on the effectiveness of power in managing supplier sustainability in buyer-supplier relationships. In managing supplier sustainability buying firms can employ different types of sustainability practices, which can be divided into assessment and collaboration practices (Gimenez & Tachizawa, 2012). Assessment practices include supplier monitoring, company visits, audits, KPI’s and SCC’s (Akamp & Müller, 2013; Foerstl et al., 2010; Gimenez & Tachizawa, 2012; Jiang, 2009; Tundys & Fernando, 2020). Collaboration practices involve inter-organizational learning (Vachon & Klassen, 2008) and supplier training (Carr et al., 2008; Modi & Mabert, 2007). Understanding both mediated and non-mediated types of power is a pivotal aspect in managing supply chains and sustainability practices (Reimann & Ketchen, 2017). Mediated powers (coercive and reward) are used deliberately by the power holder to influence the other party, while non-mediated powers (legitimate, referent and expert) are not intentionally exercised by the power holder to manipulate the target (Maloni & Benton, 2000). The different types of sustainability practices require different types of power. Auditing a supplier, for example, requires legitimate and coercive power, while SCC’s and supplier training require expert power (Carr et al., 2008; Egels-Zandén, 2014; Egels-Zandén, 2017).
3. METHODOLOGY
In this section the methodology of this research is discussed. First, the research design of this study is addressed. Hereafter, the case selection and data collection are discussed. Lastly, the data analysis phase is outlined.
3.1 Research design
A multiple case study is conducted to develop better insights into power and cognitive capital in managing supplier sustainability. This method suits this research best for several reasons. First, this research is of explorative nature because it aims to get an in-depth understanding of the effectiveness of power in managing supplier sustainability through adopting a cognitive capital perspective (Yin, 1981). Second, research into power in buyer-supplier relationships is still in the early stages (Reimann & Ketchen, 2017). Particularly, the distinction between mediated and non-mediated types of power deserves more attention in SSCM literature. Third, the boundary conditions between the seemingly interrelated concepts of power and cognitive capital remain unclear.
In order to answer the research question, a qualitative multiple case study is conducted. Compared to a single case study, a multiple case study provides a better foundation for theoretical generalization (Eisenhardt, 1989). In multiple case study research, various cases are researched to understand similarities and differences between the cases (Ketokivi & Choi, 2014). In this research the number of cases is 6, as suggested by Eisenhardt (1989). Since this study uses a dyadic perspective the unit of analysis is buyer-supplier relationships.
3.2 Case selection
Since the focus of this research is on cognitive capital and its influence on the effectiveness of power, cases were selected where buyer and supplier share the same goals and values and where both parties have different goals and values. This selection criterion enables cross-case comparison in this research. First, three buying firms that are actively involved in managing supplier sustainability had to be selected. By consulting and examining company websites, annual and sustainability reports three suitable buying firms were selected. Subsequently the buying firms were asked to select two suppliers with different characteristics. By choosing two different relationships the chance of having both relationships with shared goals and values and relationships with different goals and values increased.
during the interviews through asking the key-informants from both buyer and supplier if they share the same goals, values, norms and ambitions with the other party or not and by looking at other relational characteristics, such as culture identification and having the same interest as the other party. This resulted in two cases where buyer and supplier agree that they have the same goals and values, while in the other four cases the goals and values of both parties were different.
By using this cognitive capital selection criterion, this research uses both literal and theoretical replication, which improves the external validity of this study (Yin, 2014). The same results are expected in cases where buyer and supplier share the same goals and values (literal replication). Literal replication is also expected in cases where buyer and supplier have different goals and values, whereas more contrasting results are expected between these two extremes (theoretical replication). An overview of the replication logic can be found in Table 1 below.
Table 1
Replication logic based on cognitive capital
Case Shared goals and values Different goals and values
1 X 2 X 3 X 4 X 5 X 6 X
The 6 cases in this study were selected within the manufacturing industry. Nowadays manufacturing organizations are pressured to integrate sustainable practices into supply chains and thus need to manage the sustainability of their suppliers (Kumar & Rahman, 2016). Further, Gualandris and Kalchschmidt (2016) argue that sustainability is becoming more important in the manufacturing industry and that firms operating in this industry have a strong impact on society and the environment. More specifically the buying firms were selected within the textile, food and automotive industries.
(Baskaran et al., 2012). In addition, Amutha (2017) identified that these sustainability practices are aimed towards minimizing the use of natural resources. Standards and certificates are used in ensuring supplier compliance with sustainability initiatives.
The food industry can be a good empirical setting for this research since food companies are pressured to focus on sustainability issues, such as product safety and the impact on the environment (Pullman et al., 2009). Freidberg (2017) identified that food supply chains are often characterized as complex and nontransparent, which causes that even the largest buying firms experience difficulties in implementing sustainability practices over their suppliers. However, there is an on-going shift towards the implementation of sustainability practices in the food industry (León-Bravo et al., 2019), with the main sustainability practices aimed towards knowledge sharing and achieving certification standards (Beske et al., 2014).
Table 2 Overview of cases
Case Supplier Supplied good
Turnover (2019)
(million €) Buyer Industry
Turnover (2019) (million €) 1 SA1 Curtain Fabric 33.7 A Textile 9.9 2 SA2 Curtain Fabric 11.0 3 SB1 Milk 1.1 B Food 11,297 4 SB2 Milk 1.4 5 SC1 Interior Design 5.2 C Automotive 10,400 6 SC2 Plastic Provider 55.2 3.3 Data collection
In this study the main method of data collection was semi-structured interviews. This type of interviewing was suitable because open questions could be asked, which provides enough room for discussions around the topic of interest (Adams, 2015). Asking open questions was helpful in identifying if buyer and supplier share the same goals and values. Further, asking open questions regarding sustainability practices provided a foundation for uncovering the different types of power in each buyer-supplier relationship.
The author, together with two fellow researchers, developed an interview protocol to ensure comparability of answers, which improved the reliability of this study (Yin, 2014). Since this research uses a dyadic perspective the interview protocol contains a buyer and supplier version. By using an interview protocol, all interviews followed the same structure. The interviewees were also asked to fill in a consent form in order to resolve any ethical and/or confidential concerns. The interview protocol including the consent form can be found in Appendix 1.
relating to the interviewees’ function, background and the organization. Hereafter, the specific relationship between the buyer and supplier was discussed to understand the cognitive capital in the buyer-supplier relationship. Subsequently, questions were asked regarding sustainability practices to see how power is employed to influence these practices. The interview ended with giving the interviewee the chance to clarify things regarding the topics of interest.
The questions during the interview related to buyer-supplier relationships, sustainability, power and cognitive capital. To ensure that the interviewees were able to understand the questions, the constructs were made more tangible through operationalizing them (Table 3). The reasoning behind this is that “not every word has the same meaning to every respondent and not every respondent uses the same vocabulary” (Barriball & While, 1994, p. 330).
Table 3
Overview operationalization of constructs
Construct Operationalization
Buyer-supplier relationship
The relationship between the buying firm and the firm that supplies the products (Ellram & Hendrick, 1995).
Sustainability
Activities related to the triple bottom line (economic, environmental and social) (Seuring & Müller, 2008), which is divided into assessment and collaboration practices (Gimenez & Tachizawa, 2012).
Power
The ability to influence the other parties’ behavior in correspondence with desired outcomes (Stannack, 1996). Distinction is made between mediated and non-mediated power (French & Raven, 1959).
Cognitive capital Refers to shared goals, values, norms and ambitions (Krause et al., 2007; Roden & Lawson, 2014).
Before the actual interviews took place the interviewees were assured full anonymity to invite them to talk. Subsequently, the interviews were recorded after the interviewees’ permission. The recorded interviews were transcribed in Microsoft Word and mailed to the interviewees for approval, which increased the validity of this study (Mero-Jaffe, 2011). An overview of the interviewees can be found in Table 4.
Table 4
Overview interviewees
Case Company No. Role Interview
approach Interview duration (minutes) Transcript length (pages) 1 & 2
A 1 Purchasing Manager &
Product Development Phone call 54 13
SA1 2 Purchasing Agent Phone call 39 9
SA2 3 Purchasing Agent Phone call 54 13
3 & 4
B 4 Cooperative Affairs –
Quality & Innovation MS Teams 61 10
SB1 5 Organic Farmer MS Teams 52 9
SB2 6 Regular Farmer MS Teams 32 6
5 & 6
C 7 Strategy &
Sustainability Manager Skype 70 10
C 8 Senior Quality Advisor MS Teams 70 16
SC1 9 Sales Manager Skype 45 9
SC2 10 Sales Manager Skype 42 9
Table 5
Overview secondary data
Case Company Type of document
1 & 2 A
Company website Social compliance assessment
Suppliers manual
1 SA1 Company website
2 SA2 -
3 & 4 B Company website
Annual report
3 SB1 -
4 SB2 -
5 & 6 C
Company website Supplier Code of Conduct Minimum requirements overview
5 SC1 -
6 SC2 -
3.4 Data analysis
The data analysis phase started with raw data management. This implies that the recorded semi-structured interviews were transcribed, which was done within 5 days. After the completion of this step the process of coding began. Both interviews and archival documents were coded using Atlas.ti software and Microsoft Excel. Atlas.ti is useful software for analyzing qualitative data, such as interviews and archival documents. While Microsoft Excel made it easier to register all codes used and to provide a clear overview of these codes. Both semi-structured interviews and archival documents were coded, which means that a total of 19 documents were coded.
instance, the following quote from Case 6: “Besides the audits and self-assessment we also have KPI’s from Buyer C that we have to send them every week. They investigate this and if there are large deviations then they will contact us” was coded “Deliver KPI’s to buying firm”. A Microsoft Excel file, which contained all interviews and the useful archival documents, was created to keep track of the highlighted quotes and corresponding first-order concepts. The second step was to search for second-order themes. This drastically reduced the amount of codes because similarities and differences between the first-order concepts resulted in 15 second-order themes (Gioia et al., 2013). For example, the first-order concepts “Company visits by representatives of buying firms”, “The use of audits by buying firms”, “Supplier monitoring through program”, “Self-assessment is done by suppliers”, “Evaluating supplier performance” and “Deliver KPI’s to buying firm” were assigned the second-order theme “Assessment practices based on legitimate right”. Introducing the second-order themes followed an inductive approach (Ketokivi & Choi, 2014). Once the second-order themes were identified the third and final step was to search for pattern codes. This means that the second-order themes were distilled into 6 third-second-order aggregate dimensions (Gioia et al., 2013). To give an example, the second-order themes “Authority”, “Contractual obligation” and “Assessment practices based on legitimate right” were given the third-order aggregate dimension “Legitimate power”. Since previous research was used during this step a deductive approach was followed (Ketokivi & Choi, 2014). Research related to both mediated and non-mediated power (French & Raven, 1959) and cognitive capital (Krause et al., 2007) was used to identify the third-order aggregate dimensions. An overview of the coding tree can be found in Appendix 3.
4. FINDINGS
In this section the findings of this research are discussed. In two cases (Case 1 and 5) buyer and supplier share the same goals and values, while in the other four cases (Case 2, 3, 4 and 6) buyer and supplier have different goals and values. Through discussing each power type and comparing these two extremes insight is provided into the influence of cognitive capital on the effectiveness of power in managing supplier sustainability. First, the mediated power sources are discussed, followed by the non-mediated power sources.
4.1 Mediated power
In this research mediated power is employed only by the buying firms. The cases show that suppliers are not actively trying to influence the buying firms, neither through not complying with sustainability standards nor through demanding certain rewards in exchange for desired behavior. Below, the findings of both coercive and reward power are further outlined.
4.1.1 Coercive power
In the Cases 1, 2, 5 and 6 coercive power is used through cutting the amount of orders if suppliers are not compliant with buying firm’s sustainability standards. The interviewee from Buyer A commented: “If things are not up to our standards the supplier is not getting the order” (Case 1). In these four cases coercive power is rarely, if ever, employed. As the interviewee of Supplier SC1 said: “Euhm…I think Buyer C has certain consequences for non-compliant suppliers, but luckily we never experienced this. But these have to be consequences like less or no production, but I think this is not going to happen at ours, because we are too important for Buyer C (…) But like I said, this has never happened” (Case 5). This is an interesting quote since Supplier SC1 is not impressed by Buyer C’s coercive power. However, Supplier SC1 sees the importance of working sustainable and thus complies with Buyer C’s standards, which means that coercive power does not has to be employed in this relationship. In the Cases 1, 2 and 6 the suppliers also are convinced that they have to work sustainable and deliver the products as agreed upon. Therefore these suppliers just comply with buying firm’s standards, which means that actively employing coercive power is not necessary.
suppliers feel that this point system is an honest way to assess their performance and try to comply with the sustainability standards as much as possible. In case Supplier SB1 and SB2 are scoring insufficient in numerous occasions, the next step is to terminate the contract with the supplier, which is similar to the other cases. While in the Cases 3, 4, 5 and 6 the buying firm requests the supplier to come up with a recovery plan and is actively helping the supplier to get back on the right track, such collaborative efforts were not observed in Case 1 and 2. The cause of this may lie in the lack of financial resources of Buyer A compared to Buyer B and C who are both multinationals in their field.
Taking a closer look at Case 1 and 5 where buyer and supplier share the same goals and values and comparing them with the other four cases there are no large differences in the way coercive power is perceived by the suppliers. Although in Case 5 the supplier feels that they are too important for the buying firm and are thus not impressed by the use of coercive power, they are intrinsically motivated to work sustainable and comply with buying firm’s standards. The other cases yield similar results since the suppliers are just complying with the sustainability standards of the buying firm. It is also rather difficult to understand the perception of the suppliers regarding coercive power since relatively little use is made of coercive power in the cases. Altogether, this indicates that cognitive capital is not influencing the effectiveness of coercive power in this research.
4.1.2 Reward power
Buyer B (Case 3 and 4), who is making use of a point system, is the only buying firm that is financially rewarding their suppliers if they are compliant with buying firm’s sustainability standards. As the interviewee from Buyer B commented: “(…) And on the other hand we encourage dairy farmers to become even more sustainable through this program. They can earn points with that and with that they can earn a bonus or a surcharge” (Case 3 and 4). Although the suppliers see this financial reward as an extra and it serves partly as a motivation to work sustainable, there is not a lot of money involved.
for the supplier”(Case 2). In Case 1 and 2 both suppliers understand that it is a possibility that they might receive extra production. In reality, giving suppliers extra orders is of course hard to measure since a buying firm is not letting its suppliers produce more than necessary, which makes this type of reward power an ineffective motivation tactic.
The three buying firms thus employ reward power in different ways, which obviously leads to different perceptions by the suppliers. However, these perceptions are not dependent on the cognitive capital in the relationship, but on the type of reward power that is used by the buying firm. For instance, in Case 5 and 6 there is no difference in how these suppliers perceive Buyer C’s reward power. Since there is again no difference between cases with shared and different goals and values there is no evidence that cognitive capital influences the effectiveness of reward power.
4.2 Non-mediated power
In all 6 cases the buying firms possess non-mediated power regarding sustainability. However, this does not mean that the suppliers are not in the possession to influence the behavior of the buying firms. In this research both buyer and supplier thus possess non-mediated power sources. Particularly, referent and expert power are not only possessed by buying firms but also by suppliers. Below, the findings of legitimate, referent and expert power are further discussed.
4.2.1 Legitimate power
In all 6 cases the buying firms feel that they have the right to influence the sustainability of their suppliers, which is mainly based on authority and contractually agreed obligations. Based on this legitimate right Buyers A, B and C make use of several assessment practices, like audits, company visits and KPI’s, in ensuring suppliers’ compliance with sustainability standards. An example of these assessment practices based on this legitimate right is as follows: “Besides the audits and self-assessment we also have KPI’s from Buyer C that we have to send them every week. They investigate this and if there are large deviations then they will contact us” (Case 6). This quote highlights that Buyer C has the right to demand these KPI figures from Supplier SC2 and that the supplier is obliged to deliver them.
more sustainable and more environmental friendly production then you need to change your system towards this. And it also makes you a better company on the perception of being sustainable” (Case 1). Supplier SA2 on the other hand sees this way of working just as business to generate a higher turnover, which indicates that their perception differs from Supplier SA1.
Similar to Case 1 the supplier in Case 5 appreciates that Buyer C’s legitimate right to influence them has positive effects on their sustainability and position as a company. This is also driven by the fact that Buyer C has employees at the R&D department of this supplier, which makes future transitions a lot easier. Further, it is interesting to see that in Case 5 the buying firm is conducting less to no audits compared to Case 6. The reason for this is that in Case 5 both parties are working closely together and are on the same page regarding sustainability, which makes assessment practices less necessary. The Cases 3 and 4 yield similar results as the Cases 2 and 6. Both suppliers in Case 3 and 4 are regularly assessed on their sustainability practices where this mainly serves as a control measure and is not motivating them to work more sustainable.
All in all, cognitive capital seems to influence the effectiveness of legitimate power in managing supplier sustainability. Suppliers that share the same goals and values with the buying firm perceive the buyer’s legitimate right as something positive, which might help the supplier in becoming more sustainable and better as a company. While suppliers that have different goals and values as the buying firm see the buyer’s legitimate right just as something necessary that is part of the buyer-supplier relationship. In addition, carrying out assessment practices by the buying firm seems to be less strictly organized when cognitive capital is shared in the buyer-supplier relationship.
4.2.2 Referent power
become more sustainable. Based on these examples it can be assumed that Supplier SA1 and Supplier SC1 can really identify with their buying firm.
However, in Case 1 and 5 it is not only the supplier that values the buying firm but also the other way around. Buyer A, for instance, really values Supplier SA1’s attitude and organization, while Buyer C values Supplier SC1 since they develop and manufacture a customized product for Buyer C. These examples show that in cases where buyer and supplier share the same goals and values, both parties truly value each other and can identify with the other party. This implies that the referent power in these cases corresponds with the shared goals and values between both parties.
Taking a closer look at referent power in the other cases it is obvious that this power type is perceived very differently. In Case 3 and 4 the suppliers are sympathetic towards Buyer B, but this is mainly based on the price these suppliers receive for the supplied milk. This price is significantly higher than what a competitor of Buyer B is willing to pay for the milk. Supplier SB1 commented: “It is not without reason that they [Buyer B] managed to achieve the highest milk price for years. We are free to go, but we are reluctant to do so. In fact, I do not think we will be leaving Buyer B for the time being” (Case 3). This quote highlights that it is not so much the sustainability reputation that drives the identification with Buyer B rather it is the financial aspect involved that can be considered the main driver.
In Case 2 there is a cultural difference between Buyer A and Supplier SA2, which is the major reason that both parties do not share the same goals and values. However, Supplier SA2 acknowledges that working together with Buyer A might bring them future benefits. This indicates that the motivation of this supplier is also based on the financial aspect. Therefore this supplier has the feeling that being able to identify with Buyer A might help them in doing business with other customers as well. As Supplier SA2 stated: “Yes, then they [Supplier SA2] have a bit of experience and have an advantage over suppliers who do not have that experience” (Case 2).
All things considered, it is evident that referent power can be perceived in different ways by suppliers. In Case 1 and 5 the suppliers really appreciated and valued buying firms’ attitude towards sustainability. In the other cases referent power was not clearly present since the suppliers were mainly motivated by the financial aspects involved. As such, cognitive capital influences the effectiveness of referent power in managing supplier sustainability.
4.2.3 Expert power
In all 6 cases the buying firms have implemented a code of conduct based on their expertise regarding sustainability. Buyer A and B make use of a written code of conduct, while Buyer C has integrated their code of conduct with a quality program. Nevertheless, there is a considerable difference in what kind of collaboration practices each buying firm employs in managing supplier sustainability. Buyer A (Case 1 and 2) is making no distinction between both suppliers and is also not training their suppliers to become more sustainable. The interviewee of Buyer A said: “We do not participate in supplier training, but we do share our knowledge with this supplier” (Case 1). Besides, this knowledge sharing in Case 1 and 2 takes place at a less deeper level than in the other cases. Buyer A is mostly highlighting areas for improvement and is not involved in knowledge sharing through a certain program. Although Supplier SA1 is more eager to follow Buyer A’s footsteps and thus in implementing these improvements, there are no large differences between Case 1 and 2 regarding Buyer A’s expert power.
In Case 3 and 4 the buying firm is actively involved in knowledge sharing and supplier training. Buyer B organizes masterclasses, trainings and workshops for which suppliers can sign up. In addition, this buying firm is providing its suppliers insight into results and trade prospects to support them in becoming aware of sustainability and other business related issues. All these initiatives taken by the buying firm, however, are not actively used by Supplier SB1 and Supplier SB2. The interviewee from Supplier SB1 commented: “You can sign up for that, I think they [masterclasses and workshops] are available. (…) As an entrepreneur there are of course more things that you want to do” (Case 3). This indicates that the interest of suppliers is mainly on their own business and keeping this business running and not so much on Buyer B’s collaboration practices. As such, Buyer B’s expert power is considered as not useful by these suppliers.
“So, we try to share our sustainable knowledge with this supplier [Supplier SC2]. We actually see that knowledge sharing and giving sustainable training happens more often with our smaller suppliers like Supplier SC2 than for instance Supplier SC1” (Case 6). This implies that in relations where Buyer C is actively involved with a supplier and is convinced about the supplier’s willingness to work sustainably, the need to actively employ collaboration practices is less present. Thus, to what extent Buyer C employs collaboration practices is dependent on the shared goals and values in the relationship. Supplier SC1 and Supplier SC2 respond very differently to Buyer C’s collaboration practices. Supplier SC2 feels that they possess enough knowledge regarding sustainability and sees these collaboration practices mainly as interference, while Supplier SC1 really appreciates Buyer C’s time and effort in helping them to become even more sustainable. Supplier SC1 commented: “We think that they (Buyer C) are really helping [through supplier training and knowledge sharing] us with things like sustainability. And I also think that it is a good thing that buying firms also look at their supply chain as a whole instead of just focusing on their own contribution, because it is something that you have to do together” (Case 5).
In this research the buying firms can be considered experts regarding sustainability. However, the suppliers are also in the possession of expert power since they can be considered experts in their work field. In several cases it occurred that the supplier has certain knowledge that is highly valued by the buying firm. For instance, in Case 5 the supplier is a true expert in their business and thus also holds expert power, Buyer C commented: “Yes! Because they [Supplier SC1] are an expert on their own processes” (Case 5).
5. DISCUSSION
In this section the discussion of this research is addressed. First, the propositions that follow from the Findings are discussed. Thereafter, the contributions to theory and managerial implications are addressed. Lastly, the limitations of this research and future research directions are discussed.
5.1 Propositions
This study has explored how cognitive capital within a buyer-supplier relationship influences the effectiveness of power in managing supplier sustainability. In this multiple case study 6 buyer-supplier relationships have been analyzed, which provides valuable insights in how buying firms can manage the sustainability of its supplier base. First, the proposition regarding mediated power is discussed, followed by the propositions developed for non-mediated power.
5.1.1 Mediated power
In this research no evidence was found that cognitive capital influences the effectiveness of both coercive and reward power in managing supplier sustainability. This is in line with Benton and Maloni (2005) who argued that mediated power sources are not associated with relational aspects of buyer-supplier relationships, such as having shared goals and values, but are commonly associated with competitiveness and negativity. Within this research the buying firms employed coercive power through imposing financial punishment or cutting the amount of orders if suppliers are not compliant (Siemieniako & Mitręga, 2018), while examples of reward power include financial bonuses or extra orders for compliant suppliers. These influence attempts are thus not related to any relational aspects between buyer and supplier but mainly serve as a mechanism to deliberately control the behavior of the supplier (Handley & Benton, 2012), which is managing the sustainability of the supplier base in this study.
Proposition 1: In buyer-supplier relationships, cognitive capital is not influencing the
effectiveness of both coercive and reward power in managing supplier sustainability.
5.1.2 Non-mediated power
Within this research it was found that in relationships where buyer and supplier share the same goals and values non-mediated power seems to be more effective than in relationships where buyer and supplier have different goals and values. This is in accordance with Nyaga et al. (2013) who argued that it not only depends on the possession of power but also on other factors, such as the supplier’s perception and the context in which the power is used. Likewise, Liker and Choi (2004) found that both buyer and supplier have preferred partners with whom they do business, whereby having shared goals and values are pivotal aspects.
As shown in the textile industry and automotive industry cases, legitimate power is more effective when buyer and supplier share the same goals and values because in these situations the supplier is more open and positive towards the buyer’s attempt to influence the supplier’s business. While in relationships where buyer and supplier do not share the same goals and values, the supplier only does the necessary in order to comply with the buyer’s legitimate right. This evidence contradicts with research of Zhao et al. (2008) who found that legitimate power is in some countries, like China, universally accepted and is therefore not relating to certain characteristics possessed by the buying firm. Further, this research shows that having shared goals and values with a supplier reduces the need to regularly conduct assessment practices based on buyer’s legitimate right, which is in accordance with Klassen and Vereecke (2012). The reason for this is that the supplier is just as the buyer intrinsically motivated to produce in a sustainable manner, thereby making regularly assessments less necessary. This results in the following proposition:
Proposition 2a: In buyer-supplier relationships, shared goals and values can enhance the
effectiveness of legitimate power in managing supplier sustainability, which reduces the need for regular assessment practices.
at developing specific products for the buying firm (Siemieniako & Mitręga, 2018). In buyer-supplier relationships where both parties have different goals and values, the identification with the buying firm was mainly driven by financial motives, while the suppliers did hardly possess referent power. Thus making referent power less effective in these buyer-supplier relationships. This leads to the proposition below:
Proposition 2b: In buyer-supplier relationships, shared goals and values can enhance the
effectiveness of referent power in managing supplier sustainability since both parties can truly identify with each other, which facilitates sustainability adaptations.
Although the suppliers possess expert power about the production of their own product the buying firms are in the possession of expert power regarding sustainability in this study. Buyer’s expert power is facilitated when having shared goals and values with suppliers, since a supplier is more willing to learn from a buyer with whom they share the same goals and values. This is in line with earlier studies (Alghababsheh & Gallear, 2020; Hung et al., 2014; Lioliou & Zimmermann, 2015) that found that in managing supplier sustainability collaboration practices are more successful when buyer and supplier share cognitive capital. Moreover, this research shows that buying firms tend to employ collaboration practices less often when they are sharing the same goals and values with a supplier. It seems that when the relationship between buyer and supplier, who share the same goals and values, becomes more mature the buying firm trusts the supplier to produce in a more sustainable manner. Thus, reducing the need to employ collaboration practices on a regular basis. In buyer-supplier relationships with different goals and values buying firms try to make use of these collaboration practices on a more regular basis. However, these collaboration practices are seen as interference by suppliers and suppliers lack the willingness to make use of these practices. This results in the following proposition:
Proposition 2c: In buyer-supplier relationships, shared goals and values can enhance the
effectiveness of expert power in managing supplier sustainability, which reduces the need for regular collaboration practices when the relationship reaches a certain level of maturity and trust.
5.2 Contributions to theory
sources in managing supplier sustainability. Through making a distinction between the five different types of power, we provided detailed insights into the effectiveness of each power type on its own. This research revealed that legitimate, referent and expert power are more effective in managing supplier sustainability than coercive and reward power. This is in line with earlier research of Benton and Maloni (2005), who identified that mediated power sources (coercive and reward) have negative consequences while non-mediated power sources (legitimate, referent and expert) have positive effects on buyer-supplier relationships.
Second, this study is among the first to research how cognitive capital in buyer-supplier relationships is influencing the effectiveness of power in managing supplier sustainability. In relationships where buyer and supplier share the same goals and values, non-mediated powers are more effective in managing supplier sustainability, while cognitive capital is not influencing the effectiveness of mediated powers. Earlier studies (Alghababsheh & Gallear, 2020; Hung et al., 2014; Klassen & Vereecke, 2012; Lioliou & Zimmermann, 2015) showed that managing supplier sustainability is more successful when buyer and supplier are on the same page, these insights are extended through identifying that non-mediated power sources further enhance this process.
Third, this research heeds the call for more dyadic research into power in buyer-supplier relationships (Chae et al., 2017; Huo et al., 2019; Reimann & Ketchen, 2017). Previous research mainly focused on either the buyer or supplier, which gives limited insights into the motives of the other party and may lead to bias (Eisikovits & Koren, 2010). Therefore, this research takes both the perspective of buyer and supplier into account, which in turn leads to an unprejudiced and more nuanced view on buyer-supplier relationships (Busse et al., 2016). Moreover, the dyadic perspective helped in developing additional insights, which would not have been achieved by focusing on only one of the parties. Understanding the opinions and actions of both parties, for instance, seems rather difficult when adopting a single sided perspective.
5.3 Managerial implications
able to actively use mediated power they should make efforts to increase their non-mediated power held by suppliers. This might ease supplier’s willingness to actually get involved into sustainability and cooperate with buying firms’ sustainability practices.
Second, in buyer-supplier relationships where buyer and supplier share the same goals and values non-mediated power proved to be more effective. As such, purchasing and sustainability managers should select suppliers based on their cognitive capital and see if this matches with the goals and values of the buying firm. This implies that in identifying and selecting suppliers buying firms should be discriminating (Kannan & Tan, 2006) and choose suppliers that truly match their vision towards sustainability since this may ease the transformation towards a sustainable supply chain.
5.4 Limitations and future research
This research has two main limitations that warrant further research into this topic. First, even though this research followed Eisenhardt’s (1989) guideline and thus involves 6 cases, the generalizability of the results might be limited. This implies that theoretical saturation has not been reached, which has a negative impact on the validity of this study. The lack of theoretical saturation can mainly be attributed to the fact that in only two cases buyer and supplier shared the same goals and values. Although the results of these cases were promising, a larger variety of cases could provide a more extensive view on managing supplier sustainability and in discovering what types of power prove to be effective. Therefore, future researchers should include a larger number of cases to really grasp cognitive capital and its influence.
Second, in almost all cases only one interviewee per company was interviewed. Although these interviewees were considered to be key-informants regarding sustainability and the relationship with the other party, conducting more interviews within each company would probably provide more insights into each buyer-supplier relationship. In order to limit the consequences of this limitation, archival documents were studied to verify the semi-structured interviews. Even though this proved to be a successful data collection method, future researchers should conduct more interviews per case and make use of observations to gain deeper insights into the topic of interest. Future researchers may, for example, conduct a longitudinal field study to really go in-depth and generate theory relating to cognitive capital and the effectiveness of power in managing supplier sustainability (Karlsson, 2016).
6. CONCLUSION
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