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Article
Does a Supplier's Operational Competence Translate into Financial Performance? An Empirical Analysis of Supplier-Customer Relationships
Decision Sciences Journal
  • Yoon Hee Kim, Georgia Southern University
  • Urban Wemmerlöv, University of Wisconsin
Document Type
Article
Publication Date
2-26-2015
DOI
10.1111/deci.12117
Abstract
We conduct an empirical investigation of how a supplier's operational competence, as reflected by outcomes in the areas of quality, cost, delivery, flexibility, and new product development, translates into financial gains from a key customer. In contrast to previous research directed at the firm level, this study focuses on the supplier–customer relationship level. Using survey data from 158 suppliers in the manufacturing industry, we perform structural equation modeling to map out the paths from operational competence to financial performance—via dependencies and cooperative behaviors between suppliers and their customers. This study is the first scholarly attempt to examine the link between suppliers’ operational competencies and financial performance in interorganizational relationships. It is also an early investigation into operational competence as a source of bi-lateral dependence. Our findings show that the supplier's operational competences increase its customer's dependence by enhancing the value of its products/services. However, the resulting increase in the supplier's power is not leveraged to shape relationship behaviors or capture value from its customer. In contrast, the customer's existing power as a major buyer plays an important role in shaping cooperative behaviors and affecting the supplier's financial performance from the customer relationship.
Citation Information
Yoon Hee Kim and Urban Wemmerlöv. "Does a Supplier's Operational Competence Translate into Financial Performance? An Empirical Analysis of Supplier-Customer Relationships" Decision Sciences Journal Vol. 46 Iss. 1 (2015) p. 101 - 134
Available at: http://works.bepress.com/yoon_h_kim/35/