Strategic alignment between supply chain partners and cost stickiness of suppliers

Abstract

AbstractWe investigate the relationship between strategic alignment between suppliers and their major customers and the asymmetric behavior of costs, specifically cost of goods sold (COGS) and selling, general, and administrative (SG&A) costs. Utilizing mandated disclosures regarding major customers from 1978 to 2018, we construct supplier–customer dyads to examine this connection. Our results indicate a positive association between strategic alignment in supply chain partnerships and the stickiness of COGS and SG&A costs for suppliers. This positive association is more pronounced for suppliers in the early stages of their relationships than those with long-term partnerships. Additionally, strategic alignment increases the stickiness of suppliers’ research and development (R&D) costs. Furthermore, we observe that strategic alignment correlates with an extended duration of supplier–customer relationships and improved supplier performance. Our findings hold across alternative constructs of strategic alignment, various supplier strategy types, and when accounting for characteristics of the supply-chain relationship.