Transaction-specific investments in a supplier-distributor-supplier triad in China: opportunism and cooperation

Abstract

Purpose Rather than focussing on dyadic distributor–supplier relationships, this study aims to examine whether the difference in transaction-specific investments (TSIs) between rival suppliers in a supplier–distributor–supplier triad influences whether distributors expropriate or maintain their supplier’s TSIs. Design/methodology/approach Drawing on triadic data from 276 questionnaires that address both the supplier–distributor relationship and the rival supplier–distributor relationship, a moderated regression analysis is used to test the hypotheses. Findings Five out of six hypotheses are supported by the empirical test. The results show that the supplier’s TSIs increase the distributor’s opportunistic behaviour and reduce cooperation when the distributor perceives that the supplier’s TSIs are lower than those of a rival supplier. In contrast, when the distributor perceives that the supplier’s TSIs are higher than those of a competitor, the supplier’s TSIs do not improve cooperation and can shift the link between the supplier’s TSIs and the distributor’s opportunism from being positive to negative. Practical implications The findings have implications for the top managers of supplier firms embedded in distribution networks. This study suggests that the competitor’s TSIs can be regarded as an indicator of the supplier’s relationship with the distributor. By keeping an eye on their competitors’ TSIs, the top managers of suppliers can predict the likelihood of distributors’ opportunistic and cooperative behaviour and make efforts to improve their position by adjusting their own firm’s TSIs. Furthermore, this information can help suppliers decide on their investment strategies and maintain stable and healthy relationships. Originality/value This study 1) examines the effect of TSIs using a triadic framework and triadic data and demonstrates that how a distributor responds to a supplier’s TSIs, with either opportunism or cooperation, depends on the relative level of those TSIs in focal and competitive relationships; and 2) reveals the expropriation effects and restraint effects of TSIs by drawing on prospect theory. This finding indicates the dynamics of TSIs in a triadic relationship.

The Influence of Economic and Non-Economic Satisfaction on Formalization, Specific Investments, and Dependence in B2B Relationships

“…Considering that specific investments expose firms to opportunism (Liu et al, 2019) it is in the best interest of those making such investments to find ways of protecting themselves. The fact that a firm may be dealing with a business partner that they are non-economically satisfied, may not provide adequate protection against exposure of specific investments to opportunistic behavior.…”

A seller perspective on economic and non-economic satisfaction as precursors to formalisation, specific investments and dependence in business relationships

“…The fact that specific investments expose the investing partner to a high opportunism risk (Liu et al, 2019;V azquez-Casielles et al, 2017) means that a business would want to make sure that adequate protective mechanisms are in place before making any moves in this direction. One important way in which businesses can protect themselves from opportunistic behaviour by business partners is through having rules that prescribe acceptable and unacceptable behaviours and clearly define the roles and responsibilities of each partyi.e.…”

The configuration and evolution of Korean automotive supply network: an empirical study based on k-core network analysis

“…Durach et al ( 2020 ) formulated a tetradic relationship, going one step further from the triadic relationship, and empirically confirmed that co-opetition between 1 st tier suppliers has a positive effect on the capability to discover and respond to risks occurring from 2 nd tier suppliers. Liu et al ( 2019 ) demonstrated that in the triadic relationship of buyer–supplier 1–supplier 2 downstream of the supply chain, the transaction-specific investment (TSI) of supplier 1 triggers the buyer’s opportunistic behavior, and if the TSI level of supplier 2 is higher, the opportunistic behavior expands further.…”