The Effect of Customers’ Unethical Practices on Suppliers’ Intention to Continue Their Relationships

Abstract

AbstractThis study examines inter-firm buyer–supplier relationships through an ethical lens. Drawing on the concept of reciprocity in social exchange theory as well as resource dependence theory, we examine the effect of customers’ unethical practices on their suppliers’ intention to continue their business relationships with their customers. Specifically, we distinguish two types of unethical practices: unfair business practices, which directly target suppliers and socially irresponsible practices, which have an impact on wider society. Integrating social exchange theory and resource dependence theory, we investigate the effects of two moderating factors: suppliers’ dependence on their customers and the benefits derived from the supplier–customer relationship. Using data obtained from 506 managers from small-to-medium-sized firms, our findings show that both customers’ unfair business practices and socially irresponsible practices have negative relationships with their suppliers’ intention to continue the relationships. These effects are moderated by supplier dependence and benefits derived from their customers. Overall, our study shows that intention to continue in these relationships, in response to unethical practices by customers, is bounded by supplier self-interest and resource dependence. Our study is one of the few to examine suppliers’ responses to unethical practices and our findings are consistent with the notion of weak reciprocity, rather than strong reciprocity that predominates in the literature.