Academic journal article Journal of Small Business Management

An Empirical Study of Buyer-Supplier Relationships within Small Business Organizations

Academic journal article Journal of Small Business Management

An Empirical Study of Buyer-Supplier Relationships within Small Business Organizations

Article excerpt

A paradox exists in small business organizations; although effective buyer-supplier relationships are essential to the success of small businesses, these organizations may not have the purchasing and selling power in terms of managerial resources to implement them. This provides us an opportunity for research to determine how well developed are buyer-supplier relationships within small business organizations. Grounded in transaction cost and resource dependence theory, this paper presents and empirically tests a model that examines the relationships between buyer and supplier specificity and long-term buyer-supplier relationships and the la tier's impact on organizational performance from the buyers' perspective. The results of this study provide insight into the development and impact of buyer-supplier relationships within small business organizations. Several managerial implications can be determined.

Introduction

Little information exists about buyer-supplier relationships within small business organizations. Practitioners and researchers often assume that purchasing practices that work in large organizations are also appropriate for use in smaller organizations (Gibb 2000). In many large organizations, such relationships are often well developed and long-standing. However, is this true for small businesses as well? It can be counterargued that buyer-supplier relationships may not be as developed as large organizations simply because they are small and lack specialized organizational resources (Quayle 1999; Ramsey 2001). For example, lack of purchasing power or ability to influence suppliers due to relatively small purchasing volumes, and scarcity of internal resources such as executive time that can be devoted to developing supplier relationships. Though there has been significant research on buyer-supplier relationships in large firms and on businesses in general (e.g., Ganesan 1994; Jap 1999), not much has been directed at small businesses. The results of this paper show that small buyers can also foster long-term relationships with their respective suppliers. Due to differences between large and small businesses (which we discuss in our Literature Review), one could reasonably question whether research results from studies of large businesses are applicable to small businesses. In particular, informal management structures and lack of formal strategy processes in small businesses could imply a relatively ad hoc approach to supplier relationships and related subjects such as supplier or buyer investments in the other party.

Research Model

Grounded in transaction cost and resource dependence theory, we develop a general model to test if in small businesses, buyer and supplier specificity encourages long-term buyer-supplier relationships and that supplier specificity-moderates the relationship between buyer specificity and long-term buyer-supplier relationships. Long-term relationships are further proposed to improve buyers' organization performance. The model is shown in Figure 1.

[FIGURE 1 OMITTED]

Research Objectives

The objective of this study is threefold: (1) to analyze buyer-supplier relationships in small businesses; (2) to examine the mediating role supplier specificity may play to help enhance long-term buyer-supplier relationships in small businesses; and (3) to better understand the long-term ramifications of buyer- and supplier-specific investments on buyer-supplier relationships in small businesses.

In the next section, we review relevant literature and theory and develop hypotheses. Furthermore, we discuss the research methodology, results, implications, and contribution this paper makes to existing literature.

Literature Review and Theory

To set the research context, in the next two subsections we define what we mean by small business, and to contrast small businesses with large businesses, we discuss particular advantages and disadvantages that are characteristic of small businesses. …

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