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Competition or Cooperation? Promoting Supplier Performance with Incentives Under Varying Conditions of Dependence

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  • Regis Terpend
  • Daniel R. Krause

Abstract

type="main" xml:id="jscm12080-abs-0001"> In this study, we use the lens of social exchange theory to investigate the influence of incentives on supplier performance under various conditions of buyer–supplier dependence. We propose that incentives generally fall into two main categories: competitive, market-based incentives that reward suppliers based on how well they perform relative to other suppliers, and cooperative incentives, where both buyer and supplier share benefits based on their joint performance. Using empirical data collected from 230 buyers in a sample of U.S. industrial firms, we measure the effects of these two types of incentives on various measures of performance, as well as the moderating effects of buyer–supplier dependence. Our results suggest that competitive incentives can be an effective approach to improving delivery, quality, innovation and flexibility, for purchases where the buyer–supplier relationship is characterized by balanced and moderate amounts of mutual dependence. However, competitive incentives are ineffective at generating improved cost performance. Cooperation appears to be the only way to improve cost but is only fruitful under conditions of high mutual dependence. In general, we find that high mutual dependence provides a good basis for cooperative incentives to successfully improve each of the types of performance included in our study. Finally, we find evidence that cooperation and competition can coexist without significant risk of decreased performance.

Suggested Citation

  • Regis Terpend & Daniel R. Krause, 2015. "Competition or Cooperation? Promoting Supplier Performance with Incentives Under Varying Conditions of Dependence," Journal of Supply Chain Management, Institute for Supply Management, vol. 51(4), pages 29-53, October.
    • Handle: RePEc:bla:jscmgt:v:51:y:2015:i:4:p:29-53
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    Cited by:

    1. Verghese, Anto John & Koufteros, Xenophon & Polyviou, Mikaella & Jia, Xingzhi, 2022. "In pursuit of supplier resilience: The explanatory role of customer leadership style," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 159(C).
    2. Sheraz Alam Malik & Martin K. Hingley, 2021. "Consumer demand information as a re-balancing tool for power asymmetry between food retailers and suppliers," Economia agro-alimentare, FrancoAngeli Editore, vol. 23(2), pages 1-20.
    3. Imranul Hoque & Mohammad B. Rana, 2020. "Buyer–supplier relationships from the perspective of working environment and organisational performance: review and research agenda," Management Review Quarterly, Springer, vol. 70(1), pages 1-50, February.
    4. Soomin Shin & Meehee Cho, 2022. "Green Supply Chain Management Implemented by Suppliers as Drivers for SMEs Environmental Growth with a Focus on the Restaurant Industry," Sustainability, MDPI, vol. 14(6), pages 1-17, March.
    5. Massari, Giovanni Francesco & Giannoccaro, Ilaria, 2021. "Investigating the effect of horizontal coopetition on supply chain resilience in complex and turbulent environments," International Journal of Production Economics, Elsevier, vol. 237(C).
    6. Malik, Sheraz Alam & Hingley, Martin K., 2021. "Consumer demand information as a re-balancing tool for power asymmetry between food retailers and suppliers," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 23(2), July.
    7. Xuesong Zhao & Jieyi Pan & Yongtao Song, 2018. "Dependence on Supplier, Supplier Trust and Green Supplier Integration: The Moderating Role of Contract Management Difficulty," Sustainability, MDPI, vol. 10(5), pages 1-14, May.
    8. Isaac Elking & John-Patrick Paraskevas & Curtis Grimm & Thomas Corsi & Adams Steven, 2017. "Financial Dependence, Lean Inventory Strategy, and Firm Performance," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(2), pages 22-38, April.
    9. Maestrini, Vieri & Luzzini, Davide & Caniato, Federico & Ronchi, Stefano, 2018. "Effects of monitoring and incentives on supplier performance: An agency theory perspective," International Journal of Production Economics, Elsevier, vol. 203(C), pages 322-332.
    10. Huo, Baofeng & Liu, Ruolei & Tian, Min, 2022. "The bright side of dependence asymmetry: Mitigating power use and facilitating relational ties," International Journal of Production Economics, Elsevier, vol. 251(C).
    11. Zhu, Minghao & Yeung, Andy C.L. & Zhou, Honggeng, 2021. "Diversify or concentrate: The impact of customer concentration on corporate social responsibility," International Journal of Production Economics, Elsevier, vol. 240(C).
    12. Marika Makkonen & Anna Aminoff & Katri Valkokari, 2018. "Stimulating Supplier Innovation In A Complex And Regulated Business Environment — A Dyadic Case Study," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-34, April.
    13. Abdurrezzak Sener & Mehmet Barut & Ali Dag & Mehmet Bayram Yildirim, 2021. "Impact of commitment, information sharing, and information usage on supplier performance: a Bayesian belief network approach," Annals of Operations Research, Springer, vol. 303(1), pages 125-158, August.
    14. Renata P. Brito & Priscila L. S. Miguel, 2017. "Power, Governance, and Value in Collaboration: Differences between Buyer and Supplier Perspectives," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(2), pages 61-87, April.
    15. Shuailei Yuan & Aijun Liu & Zengxian Li & Yun Yang & Jing Liu & Yue Su, 2022. "Supplier Evaluation Considering Green Production Based on Probabilistic Linguistic Information," Energies, MDPI, vol. 15(19), pages 1-20, October.
    16. Sangho Chae & Thomas Y. Choi & Daesik Hur, 2017. "Buyer Power and Supplier Relationship Commitment: A Cognitive Evaluation Theory Perspective," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(2), pages 39-60, April.
    17. Sara Hajmohammad & Stephan Vachon, 2016. "Mitigation, Avoidance, or Acceptance? Managing Supplier Sustainability Risk," Journal of Supply Chain Management, Institute for Supply Management, vol. 52(2), pages 48-65, April.
    18. Antonios Karatzas & Mark Johnson & Marko Bastl, 2016. "Relationship Determinants of Performance in Service Triads: A Configurational Approach," Journal of Supply Chain Management, Institute for Supply Management, vol. 52(3), pages 28-47, July.
    19. T. Russell Crook & Christopher W. Craighead & Chad W. Autry, 2017. "Hold Back or Held Back? The Roles of Constraint Mitigation and Exchange Diffusion on Power “Nonuse” in Buyer–Supplier Exchanges," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(2), pages 10-21, April.
    20. Felix Reimann & David J. Ketchen Jr., 2017. "Power in Supply Chain Management," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(2), pages 3-9, April.
    21. Federica Ciccullo & Margherita Pero & Jonathan Gosling & Maria Caridi & Laura Purvis, 2020. "When Sustainability Becomes an Order Winner: Linking Supply Uncertainty and Sustainable Supply Chain Strategies," Sustainability, MDPI, vol. 12(15), pages 1-26, July.
    22. Patrucco, Andrea S. & Moretto, Antonella & Luzzini, Davide & Glas, Andreas H., 2020. "Obtaining supplier commitment: antecedents and performance outcomes," International Journal of Production Economics, Elsevier, vol. 220(C).

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