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Inter-organizational communication as a relational competency- Antecedents and performance outcomes in collaborative buyer–supplier relationships

Inter-organizational communication as a relational competency- Antecedents and performance outcomes in collaborative buyer–supplier relationships

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Journal of Operations Management 26 (2008) 45–64 www.elsevier.


Inter-organizational communication as a relational competency: Antecedents and performance outcomes in collaborative buyer–supplier relationships
Antony Paulraj a,*, Augustine A. Lado b,1, Injazz J. Chen c,2

Department of Management, Coggin College of Business, University of North Florida, Jacksonville, FL 32224, United States b Clarkson University, School of Business, 8 Clarkson Street, PO Box 5790, Potsdam, NY 13699, United States c Department of Operations Management and Business Statistics, College of Business Administration, Cleveland State University, Cleveland, OH 44115, United States Received 14 October 2005; received in revised form 26 November 2006; accepted 2 April 2007 Available online 12 April 2007

Abstract Inter-organizational communication has been documented as a critical factor in promoting strategic collaboration among firms. In this paper, we seek to extend the stream of research in supply chain management by systematically investigating the antecedents and performance outcomes of inter-organizational communication. Specifically, inter-organizational communication is proposed as a relational competency that may yield strategic advantages for supply chain partners. Using structural equation modeling, we empirically test a number of hypothesized relationships based on a sample of over 200 United States firms. Our results provide strong support for the notion of inter-organizational communication as a relational competency that enhances buyers’ and suppliers’ performance. Implications for future research and practice are offered. # 2007 Elsevier B.V. All rights reserved.
Keywords: Inter-organizational communication; Relational competency; Buyer–supplier relationships and performance; Knowledge sharing; Information exchange

1. Introduction That communication is the essence of organizational life has been well documented by communication and management scholars and practitioners (e.g., Fulk and Boyd, 1991; Reinsch, 2001; Yates and Orlikowski, 1992). Similarly, literature in relationship marketing has recognized how collaborative communication is

* Corresponding author. Tel.: +1 904 620 1166; fax: +1 904 620 2782. E-mail addresses: apaulraj@unf.edu (A. Paulraj), alado@clarkson.edu (A.A. Lado), i.chen@csuohio.edu (I.J. Chen). 1 Tel.: +1 315 268 6608; fax: +1 315 268 3810. 2 Tel.: +1 216 687 4776; fax: +1 216 687 9343. 0272-6963/$ – see front matter # 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.jom.2007.04.001

critical to fostering and maintaining value-enhancing inter-organizational relationships (e.g., Anderson et al., 1994; Mohr and Nevin, 1990; Mohr et al., 1996; Schultz and Evans, 2002). Reflecting its centrality to business performance, one business executive asserted, ‘‘communication is as fundamental to business as carbon is to physical life’’ (Reinsch, 2001, p. 20). Operations management researchers have also documented how inter-organizational communication enhances buyer–supplier performance (e.g., Carr and Pearson, 1999; Carter and Miller, 1989; Claycomb and Frankwick, 2004; Newman and Rhee, 1990; Prahinksi and Benton, 2004; Cousins and Menguc, 2006). However, such work has remained disjointed, largely anecdotal, and without a strong theoretical underpinning.


A. Paulraj et al. / Journal of Operations Management 26 (2008) 45–64

In empirical studies, researchers have typically considered communication as a facet of a broader construct, such as supply management (e.g., Chen et al., 2004), or examined the extent to which the use of select communication strategies by buyer firms enhances supplier firm operational performance (e.g., Prahinksi and Benton, 2004). What has not been systematically investigated is the extent to which communication between buyer and supplier firms mediates the links among key antecedents and outcome variables within a coherent theoretical framework. Such an investigation is needed in order to advance theory building and empirical testing in supply chain management. With this goal in mind, we develop a conceptual model linking key antecedents and outcomes of interorganizational communication within the context of collaborative buyer–supplier relationships. Drawing on the relational view of strategic management (Dyer and Singh, 1998), we conceptualize inter-organizational communication as a relational competency, which mediates the links between several antecedent and outcome variables for buyer and supplier firms. Using structural equation modeling, we provide a holistic test of the hypothesized relationships (Bagozzi et al., 1991), and document the extent to which the empirical evidence concerning the strategic role of interorganizational communication is cumulative. We believe the relational view of strategic management provides the relevant theoretical framework for the present investigation for at least three reasons. First, the relational view takes the inter-organizational level of analysis and addresses the extent to which relational capabilities form the basis of durable strategic advantages (Dyer and Singh, 1998; Kanter, 1994; Lado et al., 1997; Madhok and Tallman, 1998). This theoretical perspective extends the ‘‘resource-based view’’ (RBV), a firm-level theory of sustained competitive advantage (Barney, 1991; Wernerfelt, 1984). Taken together these perspectives provide a robust theoretical framework for explaining how strategic advantage is gained or lost based largely on endogenous strategic factors. Second, users of the relational view examine how relational competencies, enable firms to gain and sustain collaborative advantage (Kanter, 1994). In contrast, users of the RBV focus on explaining how firm-specific resources and capabilities characterized by value, rareness, imperfect imitability, and non-substitutability form the basis of sustained competitive advantage (e.g., Barney, 1991). Finally, the relational view places a premium on behavioral phenomena, such as inter-organizational communication as the drivers of firm performance.

Thus, by viewing inter-organizational communication as a relational competency and empirically investigating its mediating role in the links between key antecedents and outcomes, we seek to gain a better understanding of the strategic importance of this construct within the context of buyer–supplier relationships. In the following section, we briefly review literature in the relational view to provide a theoretical backdrop to our proposed model of the antecedents and outcomes of inter-organizational communication. Then, we develop the theoretical rationale of our proposed model, drawing on related research in strategic management, operations management, and marketing, among others. In Section 3, we explain our research methodology, including data collection procedure, construct operationalization and measurement, hypothesis testing and results. Section 4 presents discussion and implications of the study findings. In Section 5, we highlight some limitations of the study and offer suggestions for future research. 2. Theory and hypotheses 2.1. Relational competencies and supply chain management Given the increasing importance of strategic collaboration among supply chain partners (Contractor and Lorange, 1988; Kanter, 1994), the issue of how relational competencies generate sustainable strategic advantage has attracted a great deal of scholarly attention (Dyer and Singh, 1998; Kale et al., 2000; Lorenzoni and Lipparini, 1999). The development of relational competencies requires that firms adopt a collaborative managerial mindset for building strategic advantage (Ohmae, 1989). Leaders in such firms articulate a ‘‘strategic intent’’ by creating an imbalance between the firm’s strategic goals and their current stocks of resources and capabilities (Hamel and Prahalad, 1994). Such a strategic intent then drives firms to acquire, access, or develop additional resources through cooperation. Additionally, firms may form strategic partnerships to access or acquire unique and valuable resources that they lack, or leverage ‘‘social’’ resources, such as reputation, status, and legitimacy (Eisenhardt and Schoonhoven, 1996). Thus, firms that emphasize cooperation among supply chain partners may achieve greater economic benefits compared to those that espouse traditional, zero-sum-based notion of competition. For example, Toyota’s cooperation with its suppliers enhances its competitive position as well as

the use of network governance might foster collaborative communication among supply chain partners (Mohr et al. 1997. 1988. 1996. thus. 2. 1998). Model and hypotheses Fig. Exchange partners with this orientation are likely to rely on norms of fair dealing.’’ referring to benefits that accrue through relationship-specific assets (Dyer and Singh. 1992). 1993). 1996. Dyer and Singh (1998) specifically identified network governance as a key source of relational rents. Accordingly. and Chrysler combined. which also builds on Macneil’s (1980) relational exchange theory. and maintaining value-enhancing relational exchanges (e. Kaufmann and Stern.. mutuality and information exchange that have been documented to yield positive-sum benefits (Macneil. With a market capitalization greater than that of General Motors. Powell. developing.A. 1.g.. 1989. Proposed model of inter-organizational communication (Model 1). Kogut and Zander. communication among supply chain members may foster inter-organizational learning that is crucially important to competitive success (Powell et al. Therefore. .. Open.. 1992). Such communication can facilitate knowledge development (Kotabe et al. Likewise. such as solidarity.g. 1990. Takeishi. 1991). 1994). 2. 1990). communication theorists have documented how network governance contributes to communication effectiveness within and between organizations (Fulk and Boyd.2. 1 provides the conceptual model linking three key antecedents (long-term relationship orientation. 1980. / Journal of Operations Management 26 (2008) 45–64 47 that of its suppliers in the global automobile industry (Dyer and Nobeoka. 1996). reduce dysfunctional conflict and. researchers have documented the extent to which network governance is critical to managing inter-organizational exchange relationships (e. and information technology) and outcomes of inter-organizational communication within the context of collaborative buyer–supplier relationships. Additionally. Mohr et al. Borys and Jemison. 2000). 1992). 2003. the frequent exchange of information on strategic and operational matters may foster greater confidence. Anderson and Weitz. Madhok and Tallman. Heide and John. Ford. 1998. 1992). The model is grounded in the logic of the relational view of strategic management (Dyer and Singh..3. 2001) and foster greater understanding of complex competitive issues related to supply chain success (Grant. 1992). 1998). Ganesan.. network governance. Toyota is also by far the world’s most profitable automaker (Liker. having a longterm orientation is a key factor in forming. as a relational competency. 2004). Thus. Zajac and Olsen. Organizations often learn by collaborating with other organizations and especially by sharing tacit. Specifically. Paulraj et al. Communication as a relational competence As a relational competency. inter-organizational communication may generate ‘‘relational rents. 1996). Kogut and Zander. generate relational rents (Anderson and Narus. build cooperation and trust. flexibility. 1992). Such inter-organizational communication also may lead to increased behavioral transparency and reduced information asymmetry (Heide and Miner. 1996. critical information and knowledge (Grant. frequent communication is essential to the maintenance of these value-enhancing relationships (Christopher. and facilitate Fig. thereby lowering transaction costs and enhancing transaction value (Dyer.

2003. 1996). with a long-term orientation.. Kotabe et al. 8). 1997). 1996. Dyer and Singh. In contrast. Fulk and Boyd.. 2006) and facilitating the development and exchange of strategically relevant information and knowledge among supply chain partners (Dyer and Singh.. lowers transaction costs and enhances transaction value through strategic collaboration. Macneil. Since some studies (e. and heighten opportunism. information technology may be the source of sustainable competitive advantage insofar as it is embedded in organizational routines and processes for developing and deploying relational capabilities (Bharadwaj. which ultimately dissipates relational rents (Ghoshal and Moran. 799). Powell et al. Mata et al. 1997). Mohr et al. information exchange. 1998). 1996). they may confer durable strategic advantages for the supply chain partners (Kale et al. p. such that any agreements between them are enforceable largely through internal processes rather than through external arbitration or the courts (Dyer and Singh. though conceptually distinct from relational norms. such an orientation enables the communication and exchange of information and knowledge. 1995. Macneil. frustrate collaborative communication. adversarial buyer– supplier relationship focused on transaction cost economizing can inhibit the development of relational competencies. Thus. 1980). 1994. Finally.’’ resulting from ongoing collaborative communication among exchange partners (Mohr et al. and not easily tradable in strategic factor markets (Dierickx and Cool. 1980).g. 1998). communication appears to mediate long-term relationship orientation and buyer and supplier performance. affecting current behavior patterns’’ (Parkhe. 1992. 1991). Additionally. 1998.8. 2000. 1997. flexibility.. That is. 1998). Insofar as these relational competencies are ‘‘socially created. Powell and Dent-Micallef.4 that communication is positively related to buyer and supplier performance. Such an orientation also enables the exchange parties to cultivate relational norms that promote cooperation for mutual gains (Morgan and Hunt. 2. This reasoning leads to the following hypothesis: Hypothesis 1. Kale et al. We elaborate on the links among the antecedents and outcomes of inter-organizational communication next. based on the logic of the relational view. 1989). which may generate durable strategic advantages for the supply chain partners.. Thus. and role integrity (e.1. Mohr et al. 1996).. 2.. ‘‘anticipated gains from mutual cooperation’’ are possible because ‘‘the future casts a [long] shadow back upon the present. Put differently. 1992. Kaufmann and Stern. mutuality. Thus. they tend to rely on ‘‘understandings and conventions involving fair play and good faith’’ (Okun.. Communication. Long-term relationship orientation A long-term relationship orientation may promote collaborative communication and enable supply chain partners to build stronger relational bonds (De Toni and Nassimbeni. Based on the above rationale that long-term relationship orientation can lead to effective communication and our discussion in Section 2. a short-term oriented. 2003) have suggested that long-term relationship can result in improved firm performance. network governance enables the exchange of information among supply chain partners. Heide and John. information technology plays a key role in reducing both internal and external coordination costs (Kim and Mahoney. Jones et al. 2000).g.. p. and facilitates the development and maintenance of value-enhancing . 1980. Long-term relationship orientation is positively related to effective communication between the buyer firms and their suppliers.3.g. a long-term relationship orientation on the part of buyer and supplier firms provides the strategic context necessary for fostering collaborative communication.. this study will also test for possible direct effect in the competing models in Section 3. 1996).. 1996).3. When supply chain partners adopt a long-term orientation. Vickery et al. Network governance Network governance refers to inter-firm coordination that is characterized by informal social systems in contrast to the use of hierarchical authority (Jones et al. information technology might promote greater communication and serve as a critical embedding mechanism. Furthermore. 2000. Thus. in contemporary supply chains. 1999. supply chain partners are able to focus on knowledge development and exchange and increase investment in relational competencies (Madhok and Tallman. Paulraj et al..2. These social systems.. Heide and John. or ‘‘relational norms’’ include solidarity. we propose that inter-organizational communication plays a mediating role in the links between the three antecedent variables and buyer and supplier firms’ performance. With such an orientation.. plays an important role in activating and translating these relational norms into valueenhancing relational assets (Mohr et al. 1998.48 A.3. 1993. the effects of these antecedent factors on supply chain performance are transmitted through inter-organizational communication (e.. 1988. / Journal of Operations Management 26 (2008) 45–64 the exchange of knowledge and ideas for mutual gains (Dyer and Singh.

Newman and Rhee. documenting network governance as an antecedent of inter-organizational communication. and relevant information. Dyer and Singh (1998) conclude that relational rents are possible when alliance partners combine or exchange idiosyncratic assets. those who subscribe to the ‘‘strategic necessity’’ hypothesis believe that IT. in turn. Chen and Paulraj. the sustainability of strategic advantage depends on how information technology is used to foster collaborative communication between supply chain partners. Brynjolfson’s (1993) notion of IT productivity paradox – the fact that increases in IT investments at the firm level do not seem to produce commensurate productivity (i. may contribute to collaborative advantage by fostering knowledge development and exchange.. time. Kale et al. When buyers and suppliers share important information relating to materials procurement and product design issues.A.. Walton and Marucheck.. / Journal of Operations Management 26 (2008) 45–64 49 relational exchanges among supply chain partners (Dyer and Chu.g. 2002. that it is not the mere investment in IT. Mata et al. 1990). which. 2.3.. Carr (2003) asserted: ‘‘IT does not matter. Inter-organizational communication and buyer–supplier performance Effective and efficient communication between supply chain partners reduces product and performance-related errors. leading to the development of complementary capabilities (e. 2003. efficiency) gains. and non-substitutability associated with rent-yielding resources and capabilities (Barney. Additionally. 2004. 1990). 1998). Network governance is positively related to effective communication between the buyer firms and their suppliers.. However. 2005). 2004). accurate. (2) reduce customer response time. 2000). such as face-to-face interactions among supply chain partners (Jones et al. network governance facilitates interfirm communication. Information technology is positively related to effective communication between the buyer firms and their suppliers. may be a source of competitive parity. Powell. Information technology Increasingly. it does not provide a sufficient basis for generating sustained competitive advantage (Clemens and Row. and employ effective governance mechanisms that lower transaction costs or permit the realization of rents through the synergistic combination of knowledge and capabilities. 1996). however. 1992). 1994. Further. 2006).3.4. 1997. which increases the flow of information across organizational functions or units (Kim and Mahoney. 1989. and resources/capabilities. (3) reduce the costs of protecting against opportunistic behavior.3. 1995). 1999. we forward the following hypothesis for empirical testing: Hypothesis 2. Accordingly. imperfect imitability. thereby enhancing quality. Mohr and Spekman. empirical research shows that strategic alliances in which partners exchange timely.’’ In contrast. 1997). knowledge.. 1990. 1997). even though such gains are evident at the macroeconomic level – is often invoked to support this view.g. sustainability of advantage is possible when IT resources facilitate collaborative communication. We should emphasize. and facilitate the development and use of complementary capabilities (Dyer and Singh. which is the source of competitive advantage. Rather. Paulraj et al. information technology (IT) has become a vital element in contemporary supply chain systems. at best. Turnbull et al. 1991. users of the relational view have documented how IT can generate sustainable competitive advantage by facilitating collaborative communication and fostering relational capabilities (e. Powell and Dent-Micallef. it is a necessary investment to avoid competitive disadvantage but.. Therefore. Dyer. 2. and (4) increase cost savings through greater product design and operational efficiencies (Carr and Pearson. In the context of buyer–supplier relationships. rareness. and promoting the use of ‘‘richer’’ communication media. Thus. 1995). 1997. Firms such as Dell and Wal-Mart have made significant IT investments in their supply chain management systems and derived substantial benefits from these investments (Subramani.. Furthermore. Epitomizing this position. Thus. Poppo and Zenger. 2004. and customer responsiveness (Chen and Paulraj. investments in IT may be associated with a flattening of organizational structure. they are more likely to (1) improve the quality of their products. transforming the way exchange-related activities are performed (Palmer and Griffith. Zaheer and Bell. by itself. per se. 1998. Mata et al. communication contributes to competitive advantage . Powell. we hypothesize that: Hypothesis 3. and share critical and ‘‘sensitive’’ information are more successful than alliances that do not exhibit those communication behaviors (Carter and Miller. 1991. little empirical work exists. resource-based theorists have argued that supply chain partners that rely on ‘‘off-the-shelf’’ information technology are unlikely to achieve competitive advantage because such IT does not fulfill the criteria of value. that is. Furthermore. Grover and Malhotra.e.

1991. we relied on key informants from the buyer side of the inter-organizational dyad to provide responses to the survey items. network governance. Thus. and information technology) and supplier performance. Lamming. Dyer and Singh (1998) identified several relational variables.. Inter-organizational communication is positively related to buyer firms’ performance.g. In an effort to increase the response rate. which may yield mutual benefits for the exchange partners.2. Hypothesis 5. individuals who occupy strategic positions in their organizations would be more knowledgeable about the strategic aspects of interorganizational exchange relationships.. we presume that ‘‘individual views on [supply chain management] issues will be a function of their organizational roles’’ (Ring and Van de Ven. and customer responsiveness. Fulk and Boyd. firms covered under the twodigit SIC codes between 34 and 39. we hypothesize that Hypothesis 6a... Shin et al. Paulraj et al. However. 1989. 1991. With this caveat in mind. and materials management of US manufacturing firms. that although communication may increase the created value within the partnership. And. in order to translate these behavioral constructs at the dyadic.g. 1987). The use of key informants as sources of data is standard practice in strategic management research (e.. we tapped responses to the questionnaire from ‘‘key informants. Organizations do not communicate. Data collection A cross-sectional mail survey was utilized for data collection. Venkatraman and Ramanujam.g.. few studies have specifically focused on supplier firm performance (Carter and Miller. As stated previously. The buyer and supplier performance were measured using 7point Likert scale with end points of ‘‘decreased significantly’’ and ‘‘increased significantly’’. network governance. and provides a medium that fosters a wide-range of value-enhancing organizational processes (e. 1999). it may function as a critical mediating construct by transmitting the effects of the three antecedent variables (long-term relationship orientation. such as communication are individual-level constructs. supply chain management. 1991. / Journal of Operations Management 26 (2008) 45–64 by enhancing operational efficiency. A 7-point Likert scale with end points of ‘‘strongly disagree’’ and ‘‘strongly agree’’ was used to measure the items. Unit of analysis To be sure. 95). Carr and Pearson. The relational view of strategic management supplies the rationale for this claim. Within this view. Insofar as communication enables the sharing of information and knowledge between exchange partners (e. quality. Fulk and Boyd. 2000). inter-organizational level. open and frequent communication facilitates the development of relational capabilities (Kale et al. people do.’’ including vice presidents of purchasing. Methodology 3. We should note.1. network governance. 1993).g. Reinsch. investigating the mediating role of inter-organizational communication in the current study is warranted. In this study.. Inter-organizational communication mediates the relationships between the antecedent variables (long-term relationship orientation. 3. which is the unit of analysis for this study.g. we investigate the effects of interorganizational communication on both buyer firms’ and supplier firms’ performance. and information technology) and buyer performance. Weick. Thus. 2003). 1999. 2000). Kotabe et al. Mohr et al.. Ghosh and John. we submit the following hypotheses: Hypothesis 4. and information technology) on buyer and supplier performance. a modified version . 1994. Thus. p. The target sample frame consisted of members of the Institute for Supply Management (ISM) drawn from U. including inter-firm knowledge-sharing routines and complementary resources and capabilities as critical to fostering collaborative advantages. communication is proposed as a mediator of the links between the antecedents and outcomes of the buyer–supplier relationships.. flexibility.g. most of the constructs used in this study. 2000. individual firm’s performance ultimately depends on how much of the additional value is captured by each partner (e. The approach of surveying the buying firms’ executives to study the buyer–supplier relationship has been widely adopted in the field of operations management (e. 1986).g. To the extent that communication is the ‘‘essence of organizational life’’ (e. 1996). 2001). 3. Although studies have documented the benefits of information sharing for buyer firms (e.S. Hypothesis 6b.50 A. Bowman and Ambrosini. Inter-organizational communication mediates the relationships between the antecedent variables (long-term relationship orientation... Clark and Fujimoto. Inter-organizational communication is positively related to supplier firms’ performance. however. Additionally.

With respect to the annual sales volume. 2000). a second wave of mailing of surveys. 3. Carr and Pearson. / Journal of Operations Management 26 (2008) 45–64 51 of Dillman’s total design method was followed (Dillman. 1993) and annual sales volume (Cool and Schendel. 1999). A total of 11 were discarded due to incomplete information. Fynes and Voss. 2001). and (c) views the suppliers as an extension of the company (Krause and Ellram. 3. Paulraj et al. 2006. (b) informal social systems. 1997. resulting in an effective response rate of 23. (b) works closely with key suppliers to improve product quality. Because both of these variables were measured using categorical scales. Non-response bias was tested in two ways. 1977. cover letters.g. informally and/or in a timely manner. (d) speed and reliability of delivery. 1999. Common method variance Since we collected the information on the variables of interest from a single respondent within a single firm.. (b) technology enabled transaction processing. Medori and Steeple. (b) quality. and (d) closely monitor and stay abreast of events or changes that may affect both parties (Krause and Ellram. The respondents were also distributed evenly among the six SIC codes selected. they were included into the structural model as dummy variables. The final sample included 35 presidents/vice presidents (16%).4. and a postage-paid return envelope were sent via first-class mail. depending on the dates the responses were received.. and sales volume were compared to check for any significant difference. 1997. 232 responses were received. Cousins and Menguc. and postage-paid return envelopes were mailed approximately 28 days after the initial mailing.. 2000).. and 15 others (7%). The respondents worked primarily for medium to large firms with nearly 36% working for firms employing more than 1000 employees. Shin et al. (b) exchange such information frequently. Since firm size could significantly affect the scope of resource allocation (Ettlie. Measures The variable. ‘‘Network Governance’’ covers items that mirror (a) fewer management levels. 1997. 138 directors (62%). Of the 1000 surveys mailed. Additionally. 1978). we have included number of employees (Graves and Langowitz. Nearly 60% of the firms had a gross income of greater than $100 million. t-Tests performed on these two groups yielded no statistically significant differences (at 99% confidence interval). including a cover letter. 1999. Along with the 10 demographic variables. resulting in a response rate of 24.2% (221/ 954). 1983). the survey. the respondents were evenly distributed among the different groups. The earlywave group consisted of 123 responses while the late wave group consisted of 98 responses. Stock et al. and (d) non-powerbased relationships (Jones et al. The indicators of ‘‘Information Technology’’ measure the adoption of (a) computer-to-computer electronic links. For those who did not respond. ‘‘Long-term Relationship Orientation’’ is operationalized by items tapping the extent to which the buying firm (a) expects its relationships with key suppliers to last a long time. reminder postcards were sent to all potential respondents.. 46 were returned due to address discrepancies. and industry effects in structural equation models (e. 33 purchasing managers (15%). All mailings. . The t-tests yielded no statistically significant differences (at 99% confidence interval) between the sample and population. sensitive information related to operational and strategic issues.A. From the resulting sample size of 954.3%. Lambert and Harrington. the sample and the population means of demographic variables: namely. Operation management researchers have used these (admittedly crude) measures to control for size differences between small and large firms. First. Two weeks after the initial mailing. Annual sales volume was included in the model as a dummy variable with firms having annual sales volume less than $100 million coded as 0 and firms having annual sales volume greater than or equal to $100 million coded as 1. The final sample was spilt into two. 1990). 1999). Carr and Smeltzer. (c) maintain frequent face-to-face meetings. (c) volume and scheduling flexibility. and (c) advanced systems for tracking and managing the business process (Carr and Pearson. Number of employees was included in the model as a dummy variable with firms having less than or equal to 500 employees coded as 0 and firms having more than 500 employees coded as 1. and (e) rapid responsiveness (Jayaram et al.3. 1987) to control for any effects of firm size on supplier and buyer performance. 2000). number of employees. These results suggest that non-response may not be a problem. (c) permeable as well as flexible firm boundaries. ‘‘Inter-organizational Communication’’ is operationalized in terms of the extent to which the firm and its key suppliers (a) share critical. 30 randomly selected variables were included in this analysis. Finally ‘‘Supplier Performance’’ and ‘‘Buyer Performance’’ are measured by indicators tapping the dimensions of (a) cost. the responses of early and late waves of returned surveys were compared to provide additional support of non-response bias (Armstrong and Overton.

According to this test. the confidence interval for each pair of constructs was set to be equal to plus or minus two standard errors of the respective correlation coefficient . These numbers suggest the data could be reliably tested using factor analysis.76 with a significance level of p < 0. Construct validity and unidimensionality were established using exploratory factor analysis (EFA) and confirmatory factor analysis (CFA). Measurement models were constructed for all possible pairs of the theoretical constructs. Researchers as well as purchasing executives affiliated with the Institute for Supply Management (ISM) were involved in this process. The results of these analyses are provided in Appendix A. ambiguity. adjusted goodness of fit [AGFI] = 0.86.01). we conducted a second test. Before conducting factor analysis.05.90. the KMO score was 0. The Eigen values for these factors were above the 1. root mean square residual [RMSR] = 0.06. two different latent variable models – a measurement model including just the traits (multiple factors). hence.. 1978). Discriminant validity was established using CFA.30 (Hair et al. 1998). multi-item scales were developed to measure the theoretical constructs. or (2) one general factor accounting for most of the common variance existing in the data will emerge (Doty and Glick. CFA measurement model was used to further establish unidimensionality and construct validity. 2003.0. The potential for common method bias was assessed in two ways (Podsakoff et al. 1998) while the percentage of variation was around 64%. Podsakoff et al..5. Pre-testing the measurement instrument before the collection of data further validated it. As indicated earlier. For the theoretical constructs in this study. it accounted for only 10% of the total variance. the scales were tested for normality and outliers using the Kaiser– Meyer–Olkin (KMO) measure of sampling adequacy and the Bartlett test of sphericity. which is significantly less than the amount of method variance (25%) observed by Williams et al. These models were tested on each selected pair by allowing for correlation between the two constructs. A significant difference in x2 values for the fixed and free solutions indicates the distinctiveness of the two constructs (Bagozzi et al. Given that supplier and buyer performance (as shown in Appendix B) were operationalized using formative indicators (Diamantopoulos and Winklhofer. The final survey instrument incorporated minor changes to remove a few ambiguities that were discovered during this validation process. 2003) for which conventional techniques (such as LISREL) are not appropriate for assessing their reliability and validity. Also. The values for the model fit indices (goodness of fit [GFI] = 0.0 cut-off point (Hair et al. 1991). An un-rotated factor analysis using the eigen value-greater-than-one criterion revealed eight distinct factors that accounted for 67% of the variance. Although the results from these analyses indicated that the method factor marginally improved model fit (normed fit index [NFI] by 0.52 A.. The first factor captured only 26% of the variance in the data. In addition. we concluded that common method variance might not be an issue. The standardized coefficients and t-values for the individual paths show that all the indicators are significantly related to their underlying theoretical constructs and. Paulraj et al. root mean square error of approximation [RMSEA] = 0. In this approach. The factor loadings were also above the cut-off point of 0. / Journal of Operations Management 26 (2008) 45–64 common method bias may present a problem. most of the indicators loaded onto their underlying constructs during EFA using principal components method.0001. (1989). the path coefficients and their significance were not much different between the two models. readability. 1986). As anticipated. non-normed fit index [NNFI] by 0. we did not include them in the instrument development process in line with Heide’s (2003) suggestion. 2003). Based on the results of these analyses we could reasonably conclude that the results were not inflated due to the existence of common method variance in the data.62) show that the model fits the data well and hence establish unidimensionality. and completeness (Dillman. 3.95. 1998). First.96. the Harman’s (1967) single factor approach was used to test this potential problem. To reinforce this conclusion. Ketokivi and Schroeder. 2004). following the procedure recommended by Widaman (1985). and normed x2 [NC] = 1. Since a single factor did not emerge and the first factor did not account for most of the variance. Jarvis et al.. suggesting that they were robust in spite of the inclusion of a methods factor. 1989.01.85 and the Bartlett test of sphericity was 4613. NNFI = 0. the content validity of the instrument was established by grounding it in existing literature. These experts were asked to review the questionnaire for structure. comparative fit index [CFI] by 0. 2001. and fixing the correlation between the constructs at 1. if common method bias exists. Instrument development Prior to data collection. (1) a single factor will emerge from a factor analysis of all survey items (Podsakoff and Organ... exhibit convergent validity..02. and a measurement model including a method factor in addition to the traits – were tested (Williams et al. CFI = 0.

the AVE values for all constructs exceed 0.00 0. the constructs exhibit discriminant validity.56 NG IT 53 CO – First row: x2 differences between the fixed and free solution (significant at the 0.36 0.14 0.50.62 0. The use of summated scores reduces the model’s complexity.368 5. 1951.22 NG 1. If this confidence interval does not include the value of 1. the highest squared correlation of 0.00 0.70 or higher are considered adequate (Cronbach. 1981).38 between inter-organizational communication and long-term relationship orientation (with a correlation of 0.62) was much lower than the AVE for the two constructs (0.28 0. Reliability was assessed using internal consistency method via Cronbach’s alpha (Cronbach. According to this test. identification problems. following Bagozzi and Yi (1988).904 4.D. Given the satisfactory measurement results. all factors have CRs greater than 0.05–0.00 0.41–0. 1) was tested using LISREL (Joreskog and Sorbom. 1978). 3.26 0.21 1.45 0. 1951.20 0. we computed composite reliability (CR) scores to assess construct reliability. This result establishes the reliability of all the theoretical constructs.34 0. According to these authors.001 level [for 1 d. 1978). In addition.078 1. Hypothesis testing The hypothesized structural equations model (Fig.65 – 530.39 0.. all the differences between the fixed and free solutions (in x2) are significant.70 would imply that the variance captured by the factor is significantly more than the variance indicated by the error components.70. Taken together. Paulraj et al. the table shows that none of the confidence intervals include the value of 1.53 0.23 0. 1999). In the hypothesized LR 1. Therefore.00). In fact.934 1. and the variable-to-sample ratio (Calantone et al.18 0. All constructs had a Cronbach’s alpha greater than 0.21 IT CO SP BP 1. Second row: confidence interval f Æ se (none of them include 1. reliability coefficients of 0. Typically.40 0.100 4. 1996). a CR greater than 0. with variance–covariance matrices for the latent variables and residuals used as input. we compared the squared correlation between two latent constructs to their average variance extracted (AVE) estimates (Fornell and Larcker.37 246.443 1.690 5. we used summated scores to measure the model’s latent constructs. (Marcoulides.66).707 Nunnaly.754 0.58 1. Nunnaly. discriminant validity exists if the items share more common variance with their respective construct than any variance the construct shares with the other constructs. the squared correlation between each pair of constructs should be less than the AVE for each individual construct.28 1.12–0.53–0.70 (see Appendix A). / Journal of Operations Management 26 (2008) 45–64 Table 1 Assessment of discriminant validity Factors Long-term relationship orientation (LR) Network governance (NG) Information technology (IT) Inter-organizational communication (CO) LR – 208.715 S. Alternatively. Furthermore.83 0. Table 2 Correlation between theoretical constructs Factors Long-term relationship orientation (LR) Network governance (NG) Information technology (IT) Inter-organizational communication (CO) Supplier performance (SP) Buyer performance (BP) Mean 5.78 – 366.f.A. 0. Comparing the correlation coefficients given in Table 2 with the AVE values given in Appendix A.00 0. As an alternative test. we can conclude that none of the squared correlations is higher than the AVE for each individual construct. As reported in Appendix A. 1998).]).58–0.21 0.039 0. These results collectively provide strong evidence of discriminant validity among the theoretical constructs.73 466.061 4.45 0.6.40 220.32–0.00 .00 0. As can be seen in Table 1. the results from the instrument development process show that the theoretical constructs exhibit good psychometric properties.

49. AGFI = 0. p < .98. p < .48) 0. Though the overall fit of the partial mediation model (Model 3) was not satisfactory. Further. Further. 2005). p < . only the path between number of employees and supplier performance (b = .29.08. t = 5. Paulraj et al. and NC = 2. This result empirically documents that inter-organizational communication may function as a mediator in the links between the antecedent variables and buyer and supplier performance.00 0.04** (0.8) to closely examine the extent to which inter-organizational communication partially or fully mediates these hypothesized relationships (Donavan et al.00 0.03* (0.04) 0. and information technology on (a) supplier performance (b = . All the indirect and total effects were statistically significant at or above the 95% confidence level (see Table 3).19. network governance on (a) supplier performance (b = . and buyer performance (b = . RMSR = 0. Mediation analysis To test for the mediating effect of inter-organizational communication in our model (Hypotheses 6a and 6b). as indicated by . t = 8. The hypotheses linking the antecedents to communication were all statistically significant and in the expected directions. t = 2. NFI = 0.13.54 Table 3 Indirect and total effects Exogenous variables A.00 0. 2005).27.07) 0. t = 4.04** (0. and (c) exhibits greater statistical power (MacKinnon et al.01). following the suggestion of James et al.03* ( 0. Furthermore. t = 3.01).05) was found to be significant. the paths leading to communication from: (1) long-term relationship orientation (b = . the paths from the antecedents to inter-organizational communication were positive and statistically significant.90. / Journal of Operations Management 26 (2008) 45–64 Endogenous variables Inter-organizational communication Indirect Total 0. as a confirmatory approach. t = 3.7.01). significant parameter estimates were found for indirect effects of long-term relationship orientation on (a) supplier performance (b = . NNFI = 0.. 2002). 3.15..04) 0.58.13) 0.53** (0.10** (0. As hypothesized.26) Supplier performance Indirect 0. The second set of hypotheses (Hypotheses 4 and 5) positively links communication with buyer and supplier performance.93.19** (0. p < .08) Total 0.01). 2006). The parameter estimate for the paths between communication and buyer performance (b = .21. p < . and buyer performance (b = .15) 0. t = 2. p < . we compared the proposed model (Model 1) with a partial mediation model (Model 3 which is explained in Section 3. The result for the partial mediation model is presented in Table 4. p < .98. Thus.24. t = 4.01) were statistically significant. The model parameters were estimated using the method of maximum likelihood (Joreskog and Sorbom.07) Buyer performance Indirect 0.10** (0. in addition to having direct effects.01 level.01). The values for the model fit indices (GFI = 0.01.10** (0. SEM permits the simultaneous and holistic testing of the hypothesized relationships while accounting for all other effects of the variables.24.05).05. and buyer performance (b = .12. p < . p < .07.04** (0. p < . Total 0.05. Among the four paths linking the control variables and the performance constructs. t = 2. as were the paths from interorganizational communication to supplier performance and buyer performance. *t-Values significant at p structural model.48. Specifically. 1999). t = 3.45) show that the model fits the data very well. p < .93.01). the antecedents also have indirect effects on the performance measures through communication.08) Long-term relationships orientation (LR) Network governance (NG) Information technology (IT) Note: **t-Values significant at p 0.14** (0..14.03* (0.. (2) network governance (b = . t-Tests show that all five hypothesized relationships between the antecedents and communication and between communication and buyer performance and supplier performance (Hypotheses 1–5) were found to be significant at the 0.10. This approach is preferable to the commonly used Baron and Kenny (1986) method in that it: (a) allows for the testing of full as well as partial mediation (James et al.22.04** (0. Schneider et al.03* (0.08.14) 0.04) 0. and communication and supplier performance (b = .04. t = 2. p < .10** (0. 2004.01) were significant and in the expected direction.26. RMSEA = 0. CFI = 0..68. (2006).05).04) 0. we used structural equation modeling (SEM) approach. t = 3.14) 0. and (3) information technology (b = . (b) reduces the chances of type I error (Schneider et al.01).13. the measurement coefficients were constrained to one and the corresponding error coefficients were constrained to zero.41.

This result shows that while inter-organizational communication fully mediates the relationship between information technology and supplier performance.14 0.98 0.45** 0. and (2) buyer performance (b = .86 0.f.10).94 0.8.11 67.18 230.05.01 292.11 0.01.s. n. As discussed . Kelloway.03 À0.88.90 0.79 0.67.10).10 10.) were both found to be non-significant.26** 0.08. 1992. *t-Values significant at p 0. they were still found to be significant at the p < 0.10.10 0.62** 0.59 8 0.18* 55 Rival model Model 4 0. n.28 75.08 0.12 0.12 0.14 0.86 11 0. t = 1.10 0.26** 0.98 0.29** 0.15 0. In contrast.12 0.10 0. The direct link between network governance and (1) supplier performance (b = À. we compared the two models based on the significance of the paths between the antecedents and the performance variables.00.35 198.48** 0.08 0. p < .18* Direct model Model 2 Partial mediation model Model 3 0.22** 0.15 0. 3.56 0.18* 0.45 227.03 À0.00 0. The direct link between long-term relationship orientation and supplier performance was found to be marginally significant (b = .75 0. 1998). it only partially mediates the relationship between information technology and buyer performance.98 0. indicating that the effect of long-term relationship orientation on supplier performance is partially mediated by inter-organizational communication. This result shows that inter-organizational communication fully mediates the relationships between network governance and buyer and supplier performance.43. As shown in Table 4. t = 1.07 78.35 120.08 0.).).81 1 0. t = 0.50 0. t = À0.27** 0.03 0. p < .10 level.70 2 0.14 0. although the paths between inter-organizational communication and performance outcomes reduced in significance from Model 1 to Model 3. indicating that this relationship is fully mediated by inter-organizational communication.15** 0.14 0.03 0.15** 0. n.08 the NNFI and RMSEA values. the effect of long-term relationship orientation on buyer performance was found to be non-significant (b = .40** 19. CFI NNFI RMSEA PNFI AIC CAIC Variance explained (R2) Supplier performance Buyer performance Note: **t-Values significant at p 0. n.03. which are not within the recommended ranges.86 0. Competing models Following recommended practice in structural equations methodology (Bollen and Long.14. we compared our proposed model with alternative or rival models in order to ascertain which model fits the data the best.14 0.13 0.48** 0.s. / Journal of Operations Management 26 (2008) 45–64 Table 4 Results of structural equation modeling of competing models Proposed model (full mediation) Model 1 Structural paths Long-term relationship orientation ! inter-organizational communication Network governance ! inter-organizational communication Information technology ! inter-organizational communication Long-term relationship orientation ! supplier performance Long-term relationship orientation ! buyer performance Network governance ! supplier performance Network governance ! buyer performance Information technology ! supplier performance Information technology ! buyer performance Inter-organizational communication ! supplier performance Inter-organizational communication ! buyer performance Inter-organizational communication ! long-term relationship orientation Inter-organizational communication ! network governance Inter-organizational communication ! information technology Model fit statistics x2 d.03.40.03 139.s.93 0.s.14.16 0. Finally.37.A. t = 1. while the path leading to buyer performance was found to be marginally significant (b = .13 0.10 0. 0. t = 1. the path linking information technology and supplier performance was found to be non-significant (b = .09 82. Paulraj et al.).

. a ‘‘direct effects’’ only model might be posited in which communication along with the three antecedent variables are directly linked to the performance outcomes (Model 2). Thus. As evident from Table 4. All five hypothesized relationships were significant at the p < 0. Accordingly. Paulraj et al. Tabachnick and Fidell. Specifically. Our proposed model is actually a restricted version of Model 3. Alternatively. Chen et al. Model 3 treats inter-organizational communication as a partial mediator of the relationships between the antecedents and the performance outcomes.. this partial mediation model also adds direct paths from each antecedent to the performance constructs (Model 3). Among the 11 paths in this partial mediation model. 1998. in addition to the paths in the proposed model. These results collectively provide strong evidence for the superiority of the proposed model over the direct model. the proposed model also accomplished a great deal of improvement in parsimony. (3) the explained variance in the outcome variables. Additionally. In addition to these model fit indices. As discussed previously. / Journal of Operations Management 26 (2008) 45–64 previously. 1987. Only one out of eight paths are supported at the p < 0. the PNFI of the proposed model (0.. it was found to be inferior to the proposed model. The logic for this model is based on the view that communication and the other three antecedents constitute a set of supply management capabilities. NNFI. Though this model fared much better than the direct model (Model 2).28) exceeds that of the Model 2 (0. the fit indices including CFI.45) and CAIC . which are then linked to the outcome variables. In addition. Additionally. communication might serve as a ‘‘partial’’ rather than ‘‘full’’ mediator of the relationships between the antecedent and outcome variables. and RMSEA are well within acceptable ranges. 1995. The logic for this model is analogous to that in Chen et al. (2) percentage of models’ hypothesized parameters that are statistically significant. long-term relationship orientation. 2004). in addition to the model fit indices. Kale et al. So.g. which are directly associated with buyer–supplier performance (e. Though there are no specific cutoffs for AIC and CAIC. NNFI. Except for CFI. indicating that the proposed model is significantly better than the direct model. network governance.g. Moreover. as measured by the parsimonious normed fit index (PNFI) and RMSEA. both the RBV and relational view of strategic management suggest that the three antecedents may themselves be the sources of ‘‘relational rents. the model fit statistics generally suggest that the proposed model fits the data relatively well. inter-organizational communication is posited to fully mediate the links among the three antecedent variables and buyer– supplier performance.05 level. Similar to the approach taken by Morgan and Hunt (1994). AIC and CAIC clearly indicate that the proposed model is better than the other three competing models. the explanatory power of the outcome variables (supplier performance and buyer performance) in the proposed model was comparable to the other models. the use of information criteria such as AIC and CAIC is valuable when comparing structural equation models that differ with respect to restrictiveness (Rust et al. NNFI. The direct model (Model 2) performed significantly worse than the proposed model. the explanatory power of the outcome variables is not significantly different from the proposed model. providing support for the efficacy of the proposed model. 2001). Finally. 1987). Bozdogan.01) and CAIC (292. they might have ‘‘direct’’ effects (in addition to any ‘‘indirect’’ effects) on the outcome variables of interest (e. in our proposed model.94) for the non-nested direct model are much higher than the proposed model. (4) parsimony. all fit indices (CFI. the AIC (78. and RMSEA) are lower than the proposed model. the proposed and alternative models were further compared using the Akaike’s Information Criterion (AIC) and the Consistent Akaike’s Information Criterion (CAIC). the PNFI for the proposed model increased significantly. a smaller value for each of these indices represents a better fit (Akaike. Moreover.07). Moreover. the AIC (139. leading to performance outcomes. As shown in Table 4.. it could be argued that inter-organizational communication might function as the antecedent of the three variables above. (2004) who posited strategic purchasing to drive several supply management capabilities (including long-term orientation and communication). only four paths are supported at the p < 0. and RMSEA) for this model are significantly lower than the proposed model. the other fit indices in fact are not within the recommended ranges. as measured by their squared multiple correlations (SMCs).03). the proposed model is compared to three competing models along the following criteria: (1) overall model fit as measured by NNFI. Moreover. CFI. and RMSEA. 2000).56 A. Although there are no guidelines for determining a significant difference in PNFI values. Dyer and Singh.05 level. all fit indices (CFI. As shown in Table 4. Furthermore..’’ that is.28) is much higher than that of Model 3 (0. The PNFI of the proposed model (0. and information technology are treated as intervening variables coming between inter-organizational communication and buyer and supplier performance (Model 4).01 level.

Of the nine paths in this rival model. The fit indices for this rival model are much lower than the proposed model. As a relational competency. Operations management researchers have documented how a long-term relationship orientation results in improved coordination of tasks or activities between buyer and supplier firms (De Toni and Nassimbeni. Heide and John.A. indicating that the proposed model is better than the rival model.. thus. flexibility and information sharing. These analyses also clearly document that the proposed model is the best-fitting model compared to the three competing models. the other fit indices are not within their satisfactory ranges. mutuality. 4. By empirically documenting the antecedents and outcomes of inter-organizational communication within the context of dyadic.. 1995). fosters ‘‘positive-sum’’ benefits for the supply chain partners.f. 1996). 2002). This study also empirically documents the role of network governance in fostering inter-organizational . It is possible for a buyer firm to engage in transactionbased. that a long-term orientation does not refer to calendar time. this study has sought to increase the explanatory power and predictive scope of emerging models of supply chain management. thereby supporting our claim that inter-organizational communication functions as a mediator rather than an antecedent within the nomological structure of the proposed model. Except for CFI. / Journal of Operations Management 26 (2008) 45–64 57 (227. supply chain partners who adopt a long-term orientation are able to synergistically combine their resources and capabilities in order to develop a stronger basis for strategic advantage (e. was compared with the proposed model. while a non-significant difference would suggest that the proposed model fits the data statistically as well as the partial mediation model. comparison of the model fit indices and information criteria like AIC and CAIC collectively provide strong support for the proposed model. Though the explained variance in the outcome variables is marginally higher.13) values are much higher than the proposed model. confirming that the proposed model fits the data at least as well as the less restricted partial mediation model.18) and CAIC (230. the results collectively provide strong evidence for the superiority of the proposed model. Although the rival model has achieved an improvement in parsimony when compared to the proposed model.. The x2 difference test requires a comparison of the x2 values and associated degrees of freedom of two models.g. These results collectively support the notion that inter-organizational communication is a full mediator of most of the relationships between the antecedents and the performance outcomes. 1999). Shan et al. 1994. display cooperative and trusting behaviors.10). the finding in support of hypothesis Hypothesis 1 suggests that having a long-term relationship orientation can increase collaborative communication between supply chain partners which is necessary for disseminating and sharing strategically important information and knowledge for mutual gains. without realizing the benefits of collaborative communication (Mohr et al. only five paths are supported at the p < 0. since the proposed model (Model 1) is nested within the partial mediation (Model 3) model. Madhok.g. 1992).98) for Model 3 are higher than those for the proposed model. network governance. Our findings in support of the hypotheses linking the antecedent variables with communication (Hypotheses 1–3) provide compelling evidence concerning the strategic importance of long-term relationship orientation.05 level. in fostering collaborative communication within buyer–supplier relationships. which are the hallmarks of relational contracting (e. Paulraj et al. the AIC (120. It is important to emphasize. and information technology. Macneil. buyer– supplier relationships. indicating that the proposed model is better than the partial mediation model. spot-market contracting with a supplier for a long period of time. Discussion and implications We have documented how inter-organizational communication constitutes a relational competency that generates sustainable strategic advantage for supply chain partners. The x2 difference obtained in comparing the partial and full mediation model was not statistically significant (Dx2 = 8. communication takes on the quality of a ‘‘quasi-public good’’ in that it tends to increase in value when used and shared and. which posits inter-organizational communication to be an antecedent rather than a mediator variable. Therefore. and increase investments in relationship-specific assets in order to accomplish mutual goals.. Model 4. we also compared the x2 values of the two models (Rust et al. long-term orientation reflects the strategic mindset needed for a supply chain partner to cultivate the norms of solidarity. d. Rather. however. 1980. Furthermore.. = 6. By facilitating such relational exchanges. Finally. Finding a significant difference in the x2 values would be interpreted as support for the less restricted of the two models (Model 3). In line with this work.89. respectively. Such an orientation enables exchange partners to develop greater confidence in one another. p > 0.

20) insofar as it enables buyer and supplier firms to accrue relational rents. Dyer. Uzzi. 1995). 1999.. On the other hand. Communication was also found to partially mediate the relationship between long-term relationship orientation and supplier performance. rather than as genuine attempts to cultivate long-term. Poppo and Zenger. 1998). and information technology – and outcome variables within the context of dyadic buyer–supplier relationships. For buyer firms. (1996). network governance.e.. Powell and DentMicallef. p. 1992.e. This industry has been characterized by a long history of adversarial relationships between management and labor unions. 1997. and Mohr et al. 1995. auto manufacturers) to employ collaborative forms of communication merely as manipulative tactics to extract short-term benefits from the suppliers. Lincoln et al.. Gerlach. Furthermore. which can integrate data. this study documents that inter-organizational communication may function as a mediator of the links between the key antecedents – long-term relationship orientation. IT may engender competitive advantage by easing the flow and exchange of knowledge and other idiosyncratic.. 1986) necessary for the development. Mohr and Spekman (1994).g. exchange. Dyer and Singh. clusters of interdependent buyer–supplier firms). This suggests that in addition to having significant direct effect. The proposed full mediation model was found to be superior to other competing models. Additionally. In contrast. Lorenzoni and Lipparini. communication appears to function as a partial mediator of the relationship between information technology and performance. and enhancing overall productivity (e. 1997. This finding is also in line with research on Japanese Keiretsu (i. 2001. our empirical finding is more in line with research by Mohr and Nevin (1990). The finding of a significant link between IT and inter-organizational communication (Hypothesis 3) indicates that IT can contribute to collaborative advantage through leveraging relational competencies. as well as the use of spot market contracts between automobile companies (buyers) and supplier firms (Mudambi and Helper. and engender greater performance benefits for the exchange partners. 1992. win–win relationships. and use of strategically valuable (tacit) knowledge between supply chain partners. The result of our empirical investigation also supports the claim about the strategic importance of IT in fostering and facilitating rent-yielding relational capabilities (Mata et al. Thus.. relationship-specific assets (Madhok and Tallman. Zaheer and Venkatraman. These researchers did not find support for their proposition that the use of collaborative communication by buyer firms enhanced the perceived performance of supplier firms. fostering trust and reciprocity. leading to sustainable competitive advantage for supply chain partners. Strategy researchers have investigated the direct effects of network governance on inter-firm performance (e. per se. facilitating communication. The mediating role of communication. . contrary to Carr (2003). 2002. 1998). which documents how such networks generate greater benefits for member firms (relative to non-members) by. the significant effect of IT on inter-organizational communication suggests that. Zhang and Lado. however. supplier firms might view any efforts on the part of buyer firms (i. voice and image. such as inter-organizational communication.. seems to vary for buyer and supplier firms. which documents that the use of collaborative communication strategies may deepen cooperation and trust. The finding of significant. Network governance may also contribute to firm performance through fostering relational behaviors and capabilities. The significant indirect effect of IT on performance suggests that by facilitating communication.. the documented mediation effects might support the claim of communication theorists and practitioners that ‘‘communication is as fundamental to business as carbon is to physical life’’ (Reinsch.g. More than just ‘‘cables and wires. 2000).58 A. Finally. / Journal of Operations Management 26 (2008) 45–64 communication. investments in information technology might contribute to buying firm’s performance through fostering effective communication between buyer and supplier firms. IT does matter insofar as it facilitates the use of collaborative communication between supply chain partners. 1998). and for the different antecedent variables. 2001).’’ contemporary ITs. are capable of simulating the attributes of the ‘‘rich media’’ (Daft and Lengel. positive linkage between inter-organizational communication and performance for both buyer and supplier firms (Hypotheses 6a and 6b) is contrary to a recent study by Prahinksi and Benton (2004).g. Our finding in support of Hypothesis 2 suggests that network governance may foster the collaborative communication necessary for the development and exchange of rent-yielding relational assets among supply chain partners (e. Paulraj et al. It is possible that this lack of empirical support was more an artifact of their survey sample (consisting of firms in the North American automobile industry) than an empirical disconfirmation of the substantive linkage between inter-organizational communication and supplier performance. among other things.

we urge future researchers to adopt the ‘‘strategic network’’ (Gulati et al. Thus. Although this study sample covered a wide range of firms in the ISM database in terms of industry membership and demographic variables. 5. (b) network governance and supplier performance.. this finding suggests that merely adopting a long-term relationship orientation is necessary but not sufficient for achieving strategic advantage.A. Thus. as well as domestic and international companies in order to increase the scope of generalizability of the results. From a practical viewpoint. it might also sacrifice breath and richness of explanation. in testing the hypothesized relationships using covariance-based SEM we assumed. establishing a network form of governance may not be sufficient for achieving strategic advantage.. Another limitation of this research relates to the sample population. such as partial least squares (PLS) that are better suited for investigating formative constructs (Diamantopoulos and Winklhofer. Although our model of communication has the advantage of parsimony. and assumed the buying firm’s perspective. in the future. (c) network governance and buyer performance. Having drawn from a list of ISM members. For the buyer firms. Additionally.. Conclusion and directions for future research In this study. Paulraj et al. In conclusion. and (d) information technology and supplier performance. this study focused on the dyadic relationship as the unit of analysis. there is a need to examine the exchange relationship from the supplier’s perspective as well. Therefore. the role of trust and commitment in directly facilitating inter-organizational communication and enhancing transaction value should be explicitly assessed. 2001). Chen et al. in line with prior research in operations management (e. 2004. Finally. Prahinksi and Benton. positive effects on the bottom lines of the supply chain partners. Furthermore. managers of supplier firms would need to hone skills for effective communication in order to fully reap the benefits of long-term relationships with buyer firms. 1994) that could influence communication among supply chain partners. 2004). we should acknowledge some limitations of our study that would provide opportunities for further research. Since the supplier also plays a significant role in affecting the quality of the dyad. 1997). Thus. a nuanced understanding of the roles of these factors in shaping an inter-organizational exchange context that is conducive to collaborative communication is key to effectively managing buyer–supplier relationships for mutual benefits. this investigation documents that inter-organizational communication plays a complex mediating role in the links between the antecedent and outcome variables.. researchers should include other factors such as geographic dispersion (Jones et al. and cultural compatibility (Teece et al. the results of this research are generalizable only to the firms included in the ISM database. such a governance form may only engender strategic advantage through providing an inter-organizational context that is conducive to collaborative communication. / Journal of Operations Management 26 (2008) 45–64 59 communication seems to fully mediate the relationships between (a) long-term relationship orientation and buyer performance. we suggest that future research include a mixed population of respondents from multiple sources. we believe that this study makes a compelling case for viewing interorganizational communication as a critically important relational competency that can be leveraged for mutual gains within collaborative buyer–supplier relationships. researchers might consider testing the hypothesized relationships using other SEM approaches. Furthermore. Despite these limitations. that all the measures used to tap the selected variables were ‘‘reflective’’ rather than ‘‘formative.g. managers and researchers need to appreciate the nuances involved in building strategic advantage through collaborative communication. we have sought to advance theory and research in supply chain management by developing a parsimonious model of antecedents and outcomes of inter-organizational communication. Also. At this juncture. this study shows that building collaborative communication skills or competencies can have direct..’’ In the future. The empirical findings in support of the hypothesized relationships corroborate our main theoretical assertion that interorganizational communication can be viewed as a relational competency that yields strategic advantage for the collaborating firms. . 2000) as a unit of analysis and investigate the antecedents and outcomes of communication from multiple viewpoints. interorganizational communication functions as an important mediating construct that has different effects on outcomes for supplier and buyer firms. Acknowledgement We would like to thank the Institute for Supply Management (ISM) for its administrative and financial support of this research. including service firms. and its effect varies for buyer and supplier firms. For supplier firms.

92. invoices and/or funds We use advanced information systems to track and/or expedite shipments Inter-organizational communication (a = 0.75 0. and/or competition) Suppliers are provided with any information that might help them Exchange of information takes place frequently.67 – 9.74 0.90). adjusted goodness of fit index = 0. coefficient t-Valuez 0.77 0.10).85 0.69 0. / Journal of Operations Management 26 (2008) 45–64 Appendix A Indicator (Cronbach’s alpha.77 0. zAll t-values are significant at p < 0.27 7.50 0.77 0. eigen value = 2. eigen value.05 ( 0.84.10). eigen value = 3.30 Model fit indices: normed x2 = 1.19 0.86.80 0.85.61 – 9. AVE = 0.88.75) There are direct computer-to-computer links with key suppliers Inter-organizational coordination is achieved using electronic links We use information technology enabled transaction processing We have electronic mailing capabilities with our key suppliers We use electronic transfer of purchase orders.83 0.90).14 8.65) We have a permeable organizational boundary that facilitates better communication and/or relationship with our key suppliers Our relation with the suppliers is based on interdependence rather than power Our organizational structure can be characterized as a flexible value-adding network Our organizational/supply structure does not involve power-based relationships The decision making process in our organization is decentralized* We have few management levels in our relationship with suppliers** Information technology (a = 0. Note: *Items dropped after EFA.80 0.99 9.90.77 0.65.66) We share sensitive information (financial.66 0.84. goodness of fit index = 0.67 0.70 0. informally and/or in a timely manner We keep each other informed about events or changes that may affect the other party We have frequent face-to-face planning/communication We exchange performance feedback Principal component Measurement model factor loading Std. CR = 0.60 0.73 0.01 10.81 0.70 0.62 0.81 0.95 (!0.67 0.00 7.55 0.48 10.95.85 – 9.04 – 8.41 9.74 0.90).26 12.88 0.72 0.80). CR = 0.86 (!0.0). research.67 0. design. AVE = 0.66) We expect our relationship with key suppliers to last a long time We work with key suppliers to improve their quality in the long run The suppliers see our relationship as a long-term alliance We view our suppliers as an extension of our company We give a fair profit share to key suppliers* The relationship we have with key suppliers is essentially evergreen** Network governance (a = 0. **Items dropped after CFA.96 (!0. CR = 0.79 0.70 0.57 0.26 7.73 0. Appendix B Performance measure Supplier performance Quality Cost Volume flexibility Scheduling flexibility On-time delivery Delivery reliability/consistency Prompt response Buyer performance Product conformance to specifications Production costs Volume flexibility Delivery speed Delivery reliability/dependability Rapid confirmation of customer orders Rapid handling of customer complaints .75 0. comparative fit index = 0. average variance extracted) Long-term relationship orientation (a = 0.05 level.81.48 8.32 9.88.69 0.85 0. eigen value = 3.60 A.06 ( 0.62 0. eigen value = 2. production. AVE = 0. non-normed fit index = 0. AVE = 0. CR = 0.62 ( 2.45.73 0.90 (!0.80 0.50 0. root mean square residual = 0. Paulraj et al. root mean square error of approximation = 0.67 8. composite reliability.

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