Academic journal article Journal of Small Business Management

The Significance of Customer Base in the New Economy: Satisfaction and Perceptions of Success among Small Suppliers and Small Nonsuppliers

Academic journal article Journal of Small Business Management

The Significance of Customer Base in the New Economy: Satisfaction and Perceptions of Success among Small Suppliers and Small Nonsuppliers

Article excerpt

Outsourcing of operations from large businesses to small business suppliers has become a prominent feature of the new global economy. This paper compares the perceived success and work satisfaction of small businesses that supply goods and services to other businesses compared with other small businesses. Small business suppliers and their customers may be engaged in a mutually beneficial relationship, or small suppliers may be disadvantaged as a result of the relationship. Using data from interviews with 715 small business operators, partial support was provided for the disadvantaged position. Suppliers had lower perceived business success compared with other small businesses when other variables were controlled. However, there was no difference in job satisfaction.

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Depending on the perspective, small businesses are either the primary generators of jobs, flexibility, and innovation in the new economy (Sabel 1989; Birch 1988; Jarillo 1988), or, due to the power advantage of large corporations and the current popularity of outsourcing, the unwilling recipients of risks and costs externalized from large corporations (Smith 2003; Taylor 2000; Harrison 1994; Scully and Fawcett 1994; Amin 1993, 1989). In the first scenario, large hub firms coordinate a vast array of small business suppliers in the production and distribution of goods and services for the global market. Advocates of the global supply chain arrangement argue that the combination, of large business market power and coordination with small business innovativeness and flexibility creates a synergistic dependence between large businesses and small businesses that is mutually beneficial to all (Hult, Ketchen, and Nichols 2002; Kenney and Florida 1993; Jarillo 1988).

Conversely, critical analysts maintain that the global supply chain represents a new era characterized by "lean and mean" relationships between large businesses and their stakeholders, including their small business suppliers (Smith 2003; Harrison 1994; Amin 1993, 1989; Crewe and Davenport 1992). Harrison (1994) contends that in the new economy, many large corporations require exclusive "just in time" contractual arrangements with their small suppliers. In the process of specializing to meet the large corporation's demands, small suppliers become dependent upon the purchaser without reciprocated dependence of the hub firm on the small suppliers.

Given their key position in several theoretical explanations of the new economy, elaborating the situation of small businesses that supply other businesses with goods and services is an opportune research site (Merton 1987) to provide insight into economic restructuring. The purpose of this paper is to utilize quantitative data from a national probability sample of small businesses to contrast the perceived business success and job satisfaction of owners and managers of small suppliers to the perceived business success and job satisfaction of other small businesses. We contend that business operators' perceptions of success and satisfaction are a reflection of the environment faced by their business. Thus, comparing suppliers' perceptions of their business' success and their personal job satisfaction with those of nonsupplier small businesses will illuminate whether supplying other businesses advantages or disadvantages small businesses. Put differently, this paper examines whether suppliers perceive themselves to be better off than other small businesses. We begin by reviewing the literature and theoretical perspectives about the role of small business suppliers in the new economy and proceed to a description of the research design. Statistical analyses are presented to elaborate the factors associated with business success and satisfaction.

The Global Supply Chain

The role of small businesses that provide goods and services to other businesses can be viewed from two opposing perspectives varying in their predictions about the relative advantages realized by small suppliers in the arrangement. …

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