Asymmetric investments in exchange relationships, perceived supplier shirking and cross-functional information sharing as a moderator

Abstract

PurposeWith asymmetric investments in exchange (i.e. sourcing) relationships, both sourcing firms and suppliers invest but one party invests more than the other. This paper aims to examine the associations between asymmetric (i.e. unequal) investments in exchange relationships and the tendency of the strategic supplier base to shirk as perceived by the sourcing firm, as well as the moderation effects of cross-functional information sharing within a sourcing firm on these associations.Design/methodology/approachThe authors analyzed survey data from 500 US middle-market manufacturers via ordinary least squares (OLS) estimation. Besides appropriate controls, the authors also employed the heteroskedasticity-based instrumental variable approach to ensure that analytical inferences are not influenced by endogeneity.FindingsOn average, when a sourcing firm invests more than its strategic supplier base into their exchange relationships, the perceived tendency of the strategic supplier base to shirk decreases. This negative association is more pronounced when a sourcing firm facilitates cross-functional information sharing. Conversely, when the strategic supplier base invests more than the sourcing firm into their exchange relationships, the perceived tendency of the strategic supply base to shirk is not detected unless the sourcing firm facilitates cross-functional information sharing.Originality/valuePrior research reveals that investments by a sourcing firm or by suppliers influence supplier shirking. This paper provides new evidence as to how and why asymmetric investments in exchange relationships relate to the perceived tendency of the strategic supplier base to shirk and new evidence as to how and why cross-functional information sharing safeguards against this tendency when investments in exchange relationships are unequal.