Factors influencing a manufacturer’s opportunism towards small- and medium-sized suppliers

Abstract

It is extremely difficult for small- and medium-sized (SMS) suppliers to survive and secure a stable performance without effectively dealing with manufacturer opportunism. Given the strategic importance of safeguarding or reducing manufacturer opportunism for SMS suppliers, our understanding on the issue is very limited. This research develops and tests a conceptual model that describes the linkages of the antecedent variables, such as supplier capabilities (core capabilities, operations capabilities), transaction-specific investments and interpersonal networks to the outcome variable, manufacturer opportunism. The conceptual model proposes that the antecedent variables affect manufacturer opportunism through two important mediating variables, a manufacturer’s dependence on a buyer and a manufacturer’s trust of a buyer. Seven hypotheses are derived on the basis of our research model and theoretical background. Data were collected through a survey. Participating organizations are SMS suppliers which have had exchange relationships with large manufacturers in Korea. The list of suppliers was obtained from purchasing managers at three large manufacturers, which are each internationally well-recognized organizations in semiconductors,electronics, and automobile parts, respectively . Covariance structure analysis was performed to test the hypotheses of this research. The major findings can be summarized as follows. First, the path from a supplier’s core capability to a manufacturer’s dependence as hypothesized in H1a is not significant. The path from the operations capability to dependence as hypothesized in H1b is significant. Second, the path from a supplier’s TSIs (Transaction-specific investments) to a manufacturer’s dependence is not significant, whereas that from a supplier’s TSIs to a manufacturer’s trust is highly significant. Thus H2a is not supported, whereas H2b is supported. Third, the path from a supplier’s interpersonal networks to a manufacturer’s trust is significant, implying that H3 is supported, unlike H4 – a manufacturer’s opportunism is not significantly influenced by the manufacturer’s dependence. This is consistent with H5: the path from a manufacturer’s trust to the manufacturer’s opportunism is negative and highly significant. Implications and future research directions are discussed.