Does smart alliance
governance create smart
firms?
The influence of governance forms on the
absorptive capacity in a buyer-supplier
relationship
Agenda
•
Introduction
•
Literature review
•
Research design
•
Data analysis and results
Introduction
•
Globalization led to increased competition
•
Alliances one way to deal with this
•
Increase the levels of risk (performance risk and relational risk)
•
Trust and control counteract this risk
•
Relationship between the two disputed
•
Views: complementary, substitutional, and more complicated
•
Paper adopted the more complicated view
Literature review
•
Control
= more formal way of dealing with risk.Makes behavior more predictable by the institution of rules and standards.
“a (meta) action aimed at: a) ascertaining whether another action has been successfully executed or if a given state of the world has been realized or maintained (feedback, checking) and b) dealing with the possible deviations and unforeseen events in order to positively cope with them (intervention)”
(Castelfranchi and Falcone, 2000). So an active process.
•
Trust
= main reason so many alliances fail.A lot of different definitions, general accepted dimensions of trust: 1) expectations about the other party 2) willingness to become vulnerable.
Definition used in this paper: “Trust is behaving in a congruent way with the positive expectations and beliefs one has about the intentions or behaviour of another, and thereby accepting vulnerability to
possible opportunistic behaviour”. Adjusted from Rousseau et al (1998).
Characteristics of trust: Based in individuals, develops over time, and is cheaper than control
•
Relationship between control and trust
= Complementary, substitutional, depends on theLiterature review
•
Absorptive Capacity (ACAP)
= ability of a firm to manage knowledge.Definition ACAP used in this paper: “A set of organizational routines and procedures by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational
capability.” (1st two form PACAP 2nd two form RACAP).
PACAP linked with flexibility (trust) RACAP linked to more formalization (control)
•
Market Turbulence
= the amount of changes and variety on the market.Makes it harder to predict future state of the market.
As the market is more turbulent it is harder to control for all outcomes.
•
Learning Performance
= added to highlight importance for management.Hypotheses and conceptual model
H1: (a) Trust is positively related to the level of PACAP in an alliance, (b) with this positive effect
becoming weaker for higher levels of trust.
H2: Control is negatively related to the level of PACAP in an alliance.
H3: Control is positively related to the level of RACAP in an alliance.
H4: (a) Trust is positively related to the level of RACAP in an alliance, (b) with this positive effect
becoming weaker for higher levels of trust.
H5: Using control and trust in a complementary way will lead to a less positive influence on PACAP
than using control and trust substitutional.
H6: Using control and trust in a complementary way will lead to a less positive influence on RACAP
than using control and trust substitutional.
H7: Market turbulence negatively moderates the relationship between control and PACAP.
H8: Market turbulence negatively moderates the relationship between control and RACAP.
H9: Market turbulence positively moderates the relationship between trust and PACAP.
H10: Market turbulence positively moderates the relationship between trust and RACAP.
H11: PACAP is positively related to explorative learning performance.
Research design
•
Data collection:
Data used of research done by Berger (2015), which was dyadic data of 166buyer-supplier relationships from the automotive, chemicals, machinery, pharmaceuticals, semiconductors, and electronics industry.
•
Measures:
Control = Contracting/ Trust = Relational Norms/ PACAP = Acquisition andAssimilation/ RACAP = Transformation and Exploitation/ Market Turbulence = Market Diversity and Market Dynamism/ Explorative and Explorative Learning Performance = as Berger’s paper.
•
Statistical procedures:
Regression hard to estimate interaction effect (of which six are present inthe conceptual model), Structural Equation Modelling (SEM) better solution.
Two forms, CB-SEM and PLS-SEM, PLS-SEM allows for more complex model and data.
PLS-SEM chosen.
Bootstrapping, and path weighting coefficient algorithm.
Data analysis and results
• Modelling technique used: 1st step “reuse technique” 2nd step “latent variable two stage approach”
•
Data preparation:
Missing values, respondents with more than 15% missing answers, deleted.Uneven samples buyers (n=166) suppliers (n=163).
Remaining missing values removed by mean replacement. Last step is looking for outliers, no anomaly index found >2
•
Outer model:
(Hair et al, 2011)Reflective constructs: Loadings, Cronbach’s alpha, Composite reliability, Average Variance Extracted
(AVE), and discriminant validity.
Loadings >0.7, or between 0.7 and 0.4 if composite reliability increases. Cronbach’s alpha and composite reliability >0.7.
AVE >0.5.
Several indicators got deleted but most importantly market turbulence became first order construct (Market diversity).
Data analysis and results
•
Outer model:
(Hair et al, 2011)Formative constructs: Indicator weights and loadings with p-values, VIF scores, and multi-group
analysis.
Only if both indicator weights and loadings are both insignificant a indicator is deleted 1 indicator for acquisition deleted.
All VIF scores well under the 3.3 cut-off point no indicators deleted.
•
Inner model:
(Hair et al, 2011)Independent t-test showed differences.
Inner model assessed by R², path coefficients, Stone-Geisser’s Q², and heterogeneity test. R²s of model indicate moderate to weak predictive accuracy.
Path coefficients mixed results.
Data analysis and results
• BUYER SUPPLIER
Path coefficient p-value Path coefficient p-value
CONTROL PACAP 0.227 0.002 0.027 0.725
CONTROL RACAP 0.177 0.005 0.042 0.597
TRUST PACAP 0.567 <0.001 0.386 <0.001
TRUST RACAP 0.630 <0.001 0.488 <0.001
MARKET TURBULENCE PACAP 0.066 0.392 0.030 0.727
MARKET TURBULENCE RACAP 0.097 0.213 0.010 0.898
PACAP EXPLORATIVE LEARNING
PERFORMANCE 0.338 <0.001 0.349 <0.001
RACAP EXPLOITATIVE LEARNING
PERFORMANCE 0.688 <0.001 0.500 <0.001
BUYER SUPPLIER
Path coefficient p-value Path coefficient p-value
CONTROL PACAP MOD: MARKET TURB
0.062 0.447 -0.049 0.618
CONTROL RACAP MOD: MARKET TURB
0.070 0.340 -0.079 0.392
TRUST PACAP MOD: MARKET TURB
0.076 0.297 0.022 0.835
TRUST RACAP
MOD: MARKET TURB 0.183 0.017
-0.008 0.939
TRUST PACAP
MOD: CONTROL (interaction)
-0.080 0.369 0.035 0.752
TRUST RACAP
MOD: CONTROL (interaction)
-0.078 0.343 0.099 0.368
Path coefficients and p-values
direct effects
Hypothesis testing
• Separate for buyers and suppliers. For H1b and H4b additional test was done:
BUYER SUPPLIER
Path coefficient p-value Path coefficient p-value
LOW TRUST PACAP 0.459 0.001 0.538 0.001
RACAP
0.577 <0.001 0.500 0.001
HIGH TRUST PACAP
0.352 <0.001 0.265 0.031
RACAP
0.306 0.007 0.358 <0.001
With end results based on path coefficients being
HYPOTHESIS BUYER SUPPLIER
Discussion and resommendations
Discussion:
- Influence of trust and control on absorptive capacity: Trust has a positive effects over both databases
Control has a positive effect for buyer. No effect for supplier No interaction effect.
- Influence of market turbulence:
One effect is significant for buyer relationship (Market turbulence moderates effect of trust on RACAP) - Differences between buyer and supplier:
Trust significant for both, control significant only for buyer Path coefficients higher for buyer than supplier.
- Influence of ACAP dimensions on learning performance:
ACAP dimensions indeed positive effect on learning performance
Managerial implications:
- Focus on enhancing trust
Discussion and resommendations
Limitations:
The cultures of the respondents in the dataset The way the shape of trust was calculated
The absence of the buyer supplier attractiveness (reputation)
Future research:
