Consumer Behavior IV

BUYER POWER AND SUPPLIER RELATIONSHIP COMMITMENT: A COGNITIVE EVALUATION THEORY

PERSPECTIVE SANGHO CHAE X AND THOMAS Y. CHOI

Arizona State University

DAESIK HUR Yonsei University

Our study investigates how buyer power affects supplier relationship com- mitment. When a buyer exerts power on a supplier, the supplier response can be either simple compliance or commitment at a deeper level. Theo- retically, the latter pertains to a supplier’s intrinsic motivation. Building on cognitive evaluation theory, our model proposes the distinctive yet interactive nature of reward power and coercive power, commonly consid- ered together as mediated powers. It also posits that nonmediated powers (expert, referent, and legitimate) amplify the influences of reward and coercive powers. An empirical investigation, based on large-scale multina- tional survey data, provides support for our theoretical arguments. We dis- cuss the practical implications for how buyers can use reward and coercive powers to improve supplier relationship commitment.

Keywords: power bases; interorganizational relationship commitment; cognitive evaluation theory

INTRODUCTION Buyers exert reward and coercive powers to facilitate

desired actions from suppliers. Reward power—the ability to administer positive valence or decrease nega- tive valence (French & Raven, 1959)—is often used by buyers to induce desired behaviors from suppliers. Leading automakers including Toyota, Honda, and General Motors grant annual awards to suppliers that attain desired outcomes (General Motors, 2016; Honda, 2015; Toyota, 2016). Buyers also use coercive power—the ability to punish if the power recipient fails to respond (French & Raven, 1959)—to pressure suppliers to comply with the buyers’ requirements. For example, Wal-Mart made clear that it would con- tinue doing business only with the suppliers that complied with its greenhouse gas emissions require- ments (Rosenbloom, 2010). When using reward and coercive powers, buyers

need to consider their suppliers’ relationship

commitment (Brown, Lusch & Nicholson, 1995; Zhao, Huo, Flynn & Yeung, 2008). Suppliers would have preferred buyers that they prefer to work for because of the buyers’ superior knowledge and respectable business values, philosophies, and norms (Liker & Choi, 2004). In this regard, the supplier’s relationship commitment reflects its intrinsic motiva- tion to contribute to the relationship with the buyer, over and above economic calculus. Such relationship commitment facilitates suppliers’ collaborative behav- iors, investments in buyer-specific assets, and integra- tion with the buyer (Anderson & Weitz, 1992; Krause, 1999; Krause, Handfield & Tyler, 2007; Krause, Scan- nell & Calantone, 2000; Prahinski & Benton, 2004; Zhao et al., 2008). Then, how can buyers affect suppliers’ relationship

commitment? While the extant literature generally agrees that reward and coercive powers can effectuate supplier compliance (i.e., instrumental commitment), research findings regarding their influence on intrinsic commitment (i.e., normative commitment) have been less clear (e.g., Brown et al., 1995; Maloni & Benton, 2000; Zhao et al., 2008). Reward and coercive powers

Acknowledgments: Data collection, in Korea, for this work was

supported by the National Research Foundation of Korea Grant

funded by the Korean Government (NRF-2009-332-B00133).

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Journal of Supply Chain Management 2017, 53(2), 39–60 © 2017 Wiley Periodicals, Inc.

are viewed as extrinsic forms of reinforcement and, as such, they are thought to damage relational norms and cooperation between exchange partners (e.g., Ben- ton & Maloni, 2005; Brown et al., 1995; Dapiran & Hogarth-Scott, 2003; Handley & Benton, 2012a,b; Ke, Liu, Wei, Gu & Chen, 2009; Maloni & Benton, 2000; Terpend & Ashenbaum, 2012; Zhao et al., 2008). However, recent studies have started to recognize the distinctive effects of reward and coercive powers in buyer–supplier relationships, calling for further research (e.g., Nyaga, Lynch, Marshall & Ambrose, 2013; Pulles, Veldman, Schiele & Sierksma, 2014). Moreover, the extant research has not yet investigated how distinctive power sources interact each other to affect suppliers’ relationship commitment. Buyers can use reward power in conjunction with coercive power in practice, but it is unclear how this joint use of both powers affects supplier relationship commitment. In addition, the literature differentiates nonmediated powers (expert, referent, and legitimate) from medi- ated powers (reward and coercive). Such nonmediated powers can provide the contexts that may either amplify or hinder the effects of mediated powers on suppliers’ relationship commitment. While Gaski (1986) examined interrelationships among different power bases, interactions between buyer power bases and their effects on supplier relationship commitment have not yet been examined in the literature. We adopt cognitive evaluation theory (CET) as the

theoretical perspective to explain how reward and coer- cive powers of the buyer influence supplier relation- ship commitment. CET considers how social factors influence intrinsic motivation (Deci, 1975; Deci & Ryan, 1985; Ryan & Deci, 2000). It helps us

distinguish between reward and coercive powers and understand how they interact with each other and other types of powers that are nonmediated to influ- ence intrinsic relationship commitment (see Figure 1). By developing theoretical arguments based on CET and using a large-scale multinational dataset, we try to answer the following research questions. What are the distinctive effects of the buyer’s reward and coercive powers on supplier relationship commitment? How do reward and coercive powers interact with each other? How do nonmediated powers serve as the contexts that moderate the effects of reward and coercive powers? Our investigation offers a more comprehensive

understanding of the relationships between buyer power and supplier relationship commitment. The contribution of our study is threefold. First, our study contributes to the body of research on power by applying CET and revealing the distinctive effects of reward and coercive powers on relationship commit- ment. Second, our study investigates the interactions among different types of power. Third, by conducting a large-scale empirical study that encompasses Asia and the United States, we increase the external validity of our findings and attempt to resolve the previously inconclusive effects of reward and coercive powers.

THEORETICAL BACKGROUND

Power and Relationship Commitment in Buyer– Supplier Relationships First introduced more than 50 years ago, French and

Raven’s (1959) classification of power bases—reward, coercive, legitimate, referent, and expert—has been widely used in general management and supply chain

Competence-enhancing factor

Buyer H1:+

H5:+

H2:-

H3:+

reward power

Buyer

Supplier relationship commitment

coercive power

Autonomy/competence-destroying factor

Autonomy-supporting factor

Intrinsic motivation

Buyer nonmediated power

H4:-

FIGURE 1 Conceptual Model Based on CET [Color figure can be viewed at wileyonlinelibrary.com]

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management research (Benton & Maloni, 2005; Rahim, Antonioni & Psenicka, 2001; Terpend & Ashenbaum, 2012). As listed in Table 1, the five power bases are often grouped as mediated and non- mediated powers (Brown et al., 1995; Ke et al., 2009; Maloni & Benton, 2000). Use of mediated powers involves deliberate attempts to reinforce specific actions from the target and relies on extrinsic forms of motivation (Benton & Maloni, 2005; Brown et al., 1995; Handley & Benton, 2012b). Nonmediated pow- ers, in contrast, are not intended to bring about speci- fic actions from the target. Rather, they rely on the intrinsic motivation of the target (Brown et al., 1995; Handley & Benton, 2012b; Kreps, 1997). The effectiveness of the buyer’s powers in facilitating

the desired supplier behaviors depends on the extent to which such powers can motivate the supplier to maintain its relationship with the buyer. The literature has focused on relationship commitment as a reflec- tion of a firm’s motivation to develop and sustain a long-term relationship with its supply chain partners (Anderson & Weitz, 1992; Brown et al., 1995; Moore, 1998; Zhao, Huo, Selen & Yeung, 2011). More specifi- cally, Caldwell, Chatman and O’Reilly (1990) suggest

two types of organizational commitment: instrumen- tal and normative. Instrumental commitment, focused on compliance, occurs when one accepts influence to achieve a favorable reaction from another (Kelman, 1958). Normative commitment occurs when one accepts influence to satisfy one’s own self-defining relationship, where the relationship itself is intrinsi- cally rewarding (Kelman, 1958). These conceptualizations of commitment were lar-

gely researched at the individual level until Brown et al. (1995) extended them to interorganizational set- tings. Describing an organization’s commitment to the relationship with another partnering organization (i.e., relationship commitment), they recognize that normative commitment is intrinsic, “as it is based on identification and involvement with the organization,” while instrumental commitment is “driven by the ex- trinsic objects (i.e., rewards and punishments) medi- ated” by the partner organization in the relationship (Brown et al., 1995: 366). Thus, normative commit- ment reflects the extent to which the organization pre- fers to work with the partner organization because of intrinsically rewarding relationship attributes. In other studies, normative commitment is also known as

TABLE 1

Bases of Social Power

Classification Power Base Definition

Mediated Reward “Reward power depends on the ability of the power holder to administer positive valences and to remove or decrease negative valence” (French & Raven, 1959: 156).

“Source retains ability to mediate rewards to target” (Maloni & Benton, 2000).

Coercive “Coercive power stems from the expectation on the part of the power recipient that he will be punished by the power holder if he fails to conform to the influence attempt” (French & Raven, 1959: 157).

“Source holds ability to mediate punishment to target” (Maloni & Benton, 2000).

Nonmediated Expert “The strength of expert power varies with the extent of the knowledge or perception which the power recipient attributes to the power holder within a given area” (French & Raven, 1959: 163).

“Source has access to knowledge and skills desired by target” (Maloni & Benton, 2000).

Referent “Referent power has its basis in the identification of the power recipient with the power holder” (French & Raven, 1959: 161).

“Target values identification with source” (Maloni & Benton, 2000). Legitimate “Legitimate power is defined as that power which stems from internalized

values in the power recipient which dictate that the power holder has a legitimate right to influence the power recipient and that the power recipient has an obligation to accept this influence” (French & Raven, 1959: 159).

“Target believes source retains natural right to influence” (Maloni & Benton, 2000).

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affective commitment, which represents an individual’s attachment to, identification with, and involvement in the organization (Cantor, Morrow & Montabon, 2012; Meyer & Allen, 1997; Wichmann, Carter, Kaufmann & Wilson, 2016). Considering mediated powers (both reward and

coercive powers) as an extrinsic factor that influences motivation, Brown et al. (1995) suggest that the use of mediated power is negatively associated with norma- tive relationship commitment but is positively associ- ated with instrumental relationship commitment. Subsequently, it has been suggested that normative relationship commitment improves firm performance (Anderson & Weitz, 1992; Krause, 1999; Krause et al., 2000, 2007; Prahinski & Benton, 2004; Zhao et al., 2008), while instrumental relationship commitment has no significant effect on supply chain integration (Zhao et al., 2008) or a negative effect on perfor- mance (Brown et al., 1995). In this stream of research, the findings surrounding instrumental rela- tionship commitment are comparatively more straightforward and intuitive. However, the findings around normative relationship commitment are more ambivalent. We question whether both types of medi- ated power (reward and coercive) would have a uni- laterally adverse effect on normative relationship commitment. In our study, we focus on normative relationship commitment as the dependent variable because it has been regarded as “genuine” (Maloni & Benton, 2000:55) relationship commitment in the field of supply chain management and integral in affecting performance (Krause et al., 2007; Maloni & Benton, 2000; Zhao et al., 2011).

Framing Reward and Coercive Powers Between mediated powers and nonmediated powers,

mediated powers are what the buyer manipulates to manage suppliers. In that regard, it is important to consider their impact on relational commitment. This then raises the question of whether we consider them together as one construct called mediated power or separately as two constructs (reward and coercive) that may have differential effects. Our choice is to consider them separately. The existing literature, in general, has considered

them together. As discussed above, Brown et al. (1995) conceptualize mediated powers as an extrinsic factor and argue that both reward and coercive powers of supply chain partners can negatively influence rela- tionship commitment. Others, building on their work, have generally focused on the negative effects of reward and coercive powers (e.g., Benton & Maloni, 2005; Dapiran & Hogarth-Scott, 2003; Handley & Benton, 2012b; Ke et al., 2009; Maloni & Benton, 2000; Terpend & Ashenbaum, 2012; Zhao et al., 2008). Overall, empirical findings about the roles of

reward and coercive powers in buyer–supplier rela- tionships have been mixed. On the one hand, there have been studies showing negative effects of medi- ated powers on buyer–supplier relationships (e.g., Brown et al., 1995; Dapiran & Hogarth-Scott, 2003; Handley & Benton, 2012b; Ke et al., 2009; Teimoury, Fesharaki & Bazyar, 2010). Conversely, other research- ers have found contrasting or insignificant effects of reward and coercive powers on buyer–supplier rela- tionships (e.g., Benton & Maloni, 2005; Maloni & Benton, 2000; Terpend & Ashenbaum, 2012; Zhao et al., 2008). Recent studies, therefore, have begun suggesting that

reward and coercive powers should be considered sep- arately. For instance, Nyaga et al. (2013) and Pulles et al. (2014) recognize the varied roles of reward and coercive powers in supply chain relationships. Depart- ing from the past literature, Nyaga et al. (2013) posit the positive effect of reward power. Pulles et al. (2014) investigate the effects of reward and coercive powers separately on supplier resource allocation and trust. Given these recent findings regarding reward and coercive powers, we also consider them separately in the framing of our model. Reward power influences others through positive feedback and coercive power does that through punishment (French & Raven, 1959). In the buyer–supplier context, the buyer would use these external factors to control supplier behavior. As we are interested in investigating how such external factors affect intrinsic motivation, we apply cognitive evaluation theory (CET).

Cognitive Evaluation Theory CET considers the social and environmental factors

that facilitate or undermine intrinsic motivation (Deci, 1975). In particular, the theory focuses on people’s fundamental needs for autonomy and competence as the two main conditions that promote intrinsic motiva- tion. First, the theory proposes that people’s funda- mental needs for autonomy are satisfied when they perceive that they can regulate their behaviors. This is often referred as “internal perceived locus of causality” (deCharms, 1968: 27). The external forces that pro- mote this internal perceived locus of causality enhance intrinsic motivation, whereas the external forces that promote “external perceived locus of causality” undermine intrinsic motivation (Deci & Ryan, 1980; Zuckerman, Porac, Lathin, Smith & Deci, 1978). Second, CET argues that the external forces that promote feelings of competence increase intrinsic motivation, while those that undermine feelings of competence decrease intrinsic motivation (Fisher, 1978; Ryan, 1982). Examples of competence-enhan- cing external forces are reward and recognition that confirm capability (Amabile, 1993) and positive feed- back (Deci, 1971). Deadlines (Amabile, DeJong &

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Lepper, 1976) and surveillance (Lepper & Greene, 1975) are considered autonomy-destroying aspects of external forces. Threats, coercion, and negative feed- back tend to be competence destroying (Amabile, 1993; Deci & Ryan, 1985; Ryan & Deci, 2000). Extending such tenets of CET to buyer–supplier rela-

tionships, we believe that suppliers are intrinsically motivated to maintain their relationships with the buyer as long as they perceive that they have auton- omy and competence in managing the relationship in the long term. CET also emphasizes that intrinsic motivation is crucial for improving task performance, as intrinsic motivation is associated with enhanced interest and confidence (Ryan & Deci, 2000), creativ- ity (Amabile, 1979; Deci & Ryan, 1991; Sheldon, Ryan, Rawsthorne & Ilardi, 1997), and self-esteem (Deci & Ryan, 1995). More specifically, CET implies that a buyer’s use of reward power acts as positive feedback and then enhances a supplier’s perceived competence, while its use of coercive power destroys the supplier’s perceived competence and perceived autonomy. CET also helps us frame the role of non- mediated powers. As nonmediated powers are based on the power target’s intrinsic motivation and self- determined choices (Brown et al., 1995; Handley & Benton, 2012b; Kreps, 1997), the buyer’s nonmedi- ated powers offer autonomy-supporting contexts that can provide a sense of autonomy to the supplier. A supplier can feel more autonomous when working with a buyer with high nonmediated powers because the supplier is committed to the relationship with the buyer on its volition. In contrast, the supplier may elect not to engage with a buyer with low nonmedi- ated power. While this inaction is also a result of the supplier’s autonomous decision, CET suggests that autonomy can be defined with respect to the agent’s actual functioning (Deci & Ryan, 1985). Table 2 sum- marizes our CET-based framework of buyer powers. We employ CET in more depth as we engage in the development of the study’s hypotheses. CET is an interpersonal-level theory (Deci & Ryan,

1985). We elevate the level of this theory to the interorganizational context. Such “vertical theory bor- rowing” (Whetten, Felin & King, 2009: 9) is viable when the organization can be regarded as a social actor (King, Felin & Whetten, 2010). The

organizational and individual level constructs exhibit similar functions even if they have dissimilar struc- tures, where functions are “the causal outputs or effects of a given construct” (Morgeson & Hofmann, 1999: 254). In our study, the supplier’s relationship commitment performs a function that is similar to an individual’s intrinsic motivation. An intrinsically moti- vated individual continues to engage in an activity or a relationship without being forced or controlled by external parties (Deci, 1971). Similarly, the supplier with a high level of normative relationship commit- ment is willing to keep a long-term relationship with the buyer and proactively accommodate its needs without being forced by the buyer (Brown et al., 1995; Zhao et al., 2008). Due to such functional simi- larity between normative commitment and intrinsic motivation, scholars have applied individual-level motivational processes to the organizational and interorganizational contexts (Brown et al., 1995; Cald- well et al., 1990; O’Reilly & Chatman, 1986). We fol- low this tradition and apply CET to investigate how the external factors (i.e., reward and coercive powers) influence the supplier’s relationship commitment.

HYPOTHESIS DEVELOPMENT

Effects of Buyer’s Reward and Coercive Powers on Supplier Relationship Commitment Using CET as our lens, we posit that the buyer’s

reward power enhances the supplier’s relationship commitment by providing a sense of competence and achievement. According to CET, social-contextual events such as positive feedback, communications, and rewards that contribute to the feelings of compe- tence can enhance intrinsic motivation (Deci, 1975; Ryan & Deci, 2000). In particular, rewards are regarded as symbols of success and superior perfor- mance and can increase intrinsic motivation toward the task (Morgan, 1984). Specifically, reward power is grounded in the supplier’s historical assessment of the buyer’s ability to provide rewards (Zhao et al., 2008). Rewards administered by the buyer convey its affirma- tion of the supplier’s competence in contributing to the buyer’s competitive advantage. Therefore, the buyer’s rewards are positive feedback that can elevate the supplier’s perceived competence. Different types of

TABLE 2

Different Views on Power Bases in Supply Chain Relationships

Power Bases Past Literature’s View Our Study’s View Based on CET

Reward power Manipulative/extrinsic Competence enhancing Coercive power Manipulative/extrinsic Autonomy and competence destroying Nonmediated power Nonmanipulative/intrinsic Autonomy supporting

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rewards such as supplier awards, greater spend vol- umes, and extended-term contracts constitute positive feedback, and suppliers can recognize these as the material evidence of their competence (Terpend & Krause, 2015). For example, upon receiving the sup- plier award from its buyers Airbus and Boeing, Universal Alloy Corporation explicitly communicated the award as confirmation of its exceptional perfor- mance (Universal Alloy Corporation, 2016). Leading automakers, including GM, Honda, and Toyota, recog- nize top-performing suppliers with annual supplier awards and the award-winning suppliers highly publi- cize the awards as the evidence of their performance competence (General Motors, 2016; Honda, 2015; Toyota, 2016). In sum, through the use of reward power, the buyer can enhance the supplier’s sense of competence and therefore self-motivate the supplier to engage in a continued relationship with the buyer.

H1: The use of reward power by the buyer is posi- tively associated with the supplier’s relationship commitment.

In contrast, we argue that the buyer’s coercive power can damage not only the supplier’s sense of compe- tence but also autonomy. CET maintains that threats, deadlines, punishments, and pressured evaluations can lead to the perception of an external locus of control (Amabile et al., 1976; Goudas, Biddle & Fox, 1994; Ryan & Deci, 2000). As coercive power is exhibited through threats and punishments so as to control the supplier to engage in desired behaviors (Zhao et al., 2008), the buyer’s frequent use of coercive power can shift the supplier’s perceived locus of control from internal to external. This, in turn, will damage the sup- plier’s sense of autonomy. Moreover, according to CET, negative feedback that “clearly signifies incompetence to the recipient will undermine intrinsic motivation” (Deci & Ryan, 1985: 61). Buyers often rely on coercive power to express dissatisfaction with their suppliers’ performance and demand behavioral changes from suppliers (Zhao et al., 2008). Thus, the buyer’s use of coercive power can be perceived by the supplier as neg- ative performance feedback. It can damage the sup- plier’s sense of competence and autonomy, which leads to lowered self-motivation to continue the relationship with the buyer.

H2: The use of coercive power by the buyer is neg- atively associated with the supplier’s relationship commitment.

Two-Way Interactions among Reward, Coercive, and Nonmediated Powers CET offers another possibility for revealing the previ-

ously overlooked complexity involving reward and

coercive powers: their interactions with nonmediated powers. The positive influence of nonmediated powers on supply chain relationships has been found consis- tently in the literature (e.g., Benton & Maloni, 2005; Brown et al., 1995; Nyaga et al., 2013; Zhao et al., 2008), and therefore, we focus on how nonmediated powers moderate the effects of reward and coercive powers on relationship commitment. While reward and coercive powers are used to rein-

force specific actions from the target, nonmediated powers (i.e., expert, referent, legitimate) are not based on the intention to bring about specific actions from the target (Benton & Maloni, 2005; Brown et al., 1995; Handley & Benton, 2012b). With nonmediated power, the power holder does not control the rein- forcements (Tedeschi, Schlenker & Lindskold, 1972) but relies on the intrinsic motivation of the target (Brown et al., 1995; Handley & Benton, 2012b; Kreps, 1997). The supplier under the influence of the buyer’s nonmediated powers commits to the relationship with the buyer not because the buyer intentionally made it do so. Rather, the supplier chooses to commit to the relationship by accepting the buyer’s values, norms, and nonmanipulative influence (Brown et al., 1995; Zhao et al., 2008). Nonmediated powers essentially serve as informational stimuli that make the power targets perceive that their actions are beyond the power holder’s control and therefore are autonomous (Dahlstrom & Boyle, 1994).

Enabling Interaction: Reward and Nonmediated Pow- ers. We argue that nonmediated powers can enable or unlock the potential benefits of reward power. Com- pared to mediated powers, nonmediated powers can provide more opportunities for choice and promote autonomy (Dahlstrom & Boyle, 1994). Laboratory experiment studies related to CET have found that feelings of competence increase intrinsic motivation much more strongly when the subjects also have a sense of autonomy (Fisher, 1978; Ryan, 1982). Ama- bile (1993) and Hennessey, Amabile and Martinage (1989) also suggest that certain types of extrinsic fac- tors (i.e., rewards) can interact synergistically with intrinsic motivation especially when intrinsic motiva- tion is high. Therefore, the supplier’s feelings of com- petence enhanced by the buyer’s reward power will positively interact with the sense of autonomy when augmented by the buyer’s nonmediated powers to fur- ther increase relationship commitment. Specifically, the buyer’s nonmediated powers facili-

tate the social environment in which the supplier accepts the buyer’s influence out of its own volition because the supplier perceives that the buyer’s values and knowledge are inherently rewarding. This auton- omy-supporting environment allows the supplier to make self-determined choices. Having options for

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making choices enhances intrinsic motivation (Zuck- erman et al., 1978). If the supplier autonomously chose to work with the buyer to learn from its exper- tise, the buyer’s positive feedback could further enhance the supplier’s motivation to learn from the buyer (Sujan, Weitz & Kumar, 1994). Keith, Jackson, and Crosby (1990) also find that expert power enhances the exchange counterpart’s perceptions of self-control. The supplier can identify with the buyer (i.e., accepting referent power) because it regards the two firms as having similar values and norms (Brown et al., 1995; Zhao et al., 2008). This can enhance the relationship between the firms and promote the per- ception that they are interested in each other’s success (Dahlstrom & Boyle, 1994; Mohr & Nevin, 1990), which further justifies the self-determined choice to keep the relationship with the partner. Also, when the supplier accepts the buyer’s legitimate power, it regards the buyer’s requests as a natural part of the buyer–supplier relationship (Zhao et al., 2008) and not as a controlling mechanism. As the supplier autonomously chooses to accept the influence, its commitment to the relationship with the buyer is self- determined. In this context, the buyer’s rewards can be recognized as a positive feedback (Amabile, 1993) and can further enhance the supplier’s relationship commitment. In contrast, when a supplier works with a buyer with low nonmediated powers, the supplier may not be motivated to strengthen the relationship with the buyer. While this inaction is also a result of the supplier’s autonomous decision, it does not induce any volitional actions from the supplier and therefore can be considered as being passive and pro- viding the supplier with only a limited sense of auton- omy. Deci and Ryan (1985) argue that self- determination can be only be defined with respect to the actual functioning of a person. Therefore, we sug- gest that nonmediated powers can strengthen the pos- itive effect of reward power on relationship commitment.

H3: The interaction between the buyer’s use of reward power and nonmediated powers is posi- tively associated with the supplier’s relationship commitment.

Disruptive Interaction: Coercive and Nonmediated Powers. The inherently controlling aspect of coercive power (Zhao et al., 2008) can lead to the power target perceiving that the power holder is choosing not to use other types of power. This autonomy-destroying aspect (Deci & Ryan, 1985) of coercive power can be even more damaging when the buyer has a high level of nonmediated powers because the use of coercive power can undermine the base of nonmediated pow- ers (Gaski, 1986). A supplier under the strong

influence of the buyer’s nonmediated powers would be intrinsically committed to the relationship with the buyer. When the buyer resorts to coercive power in this context, the supplier can feel unexpectedly con- trolled and constrained by external forces (i.e., a per- ceived external locus of control). Unlike reward power, coercive power cannot be used to promote feelings of competence. Therefore, from the supplier’s perspective, the buyer’s use of coercive power toward an already intrinsically committed supplier can be strictly controlling. In sum, the sense of autonomy that could be provided by the buyer’s nonmediated powers would be negated by its use of coercive power. In this case, the supplier may try to avoid the relation- ship (French & Raven, 1959) or behave opportunisti- cally (Handley & Benton, 2012a), further damaging the positive influence of the buyer’s nonmediated powers on the supplier’s relationship commitment. In contrast, if the buyer has a low level of nonmediated powers, then the supplier’s relationship commitment would already be low and, therefore, the disruptive interaction effect of coercive power would be limited. Moreover, the supplier may become dissatisfied with the relationship if it perceives the buyer is abusing coercive power (Molm, 1991). Therefore, we propose the following:

H4: The interaction between the buyer’s use of coercive power and nonmediated powers is nega- tively associated with the supplier’s relationship commitment.

Compensating Interaction: Reward and Coercive Powers. We also argue that the negative influence of coercive power can be curbed by the use of reward power. Commonly referred to as the “carrot-and-stick approaches” to motivation (Dickinson, 2001; Stone, Deci & Ryan, 2009), simultaneous use of reward and punishment has been suggested by the operant condi- tioning literature as effective ways of stimulating behaviors (Honig, 1966; Skinner, 1963). Extant research on the effects of the carrot-and-stick approaches to motivation provides mixed findings. In experimental economics, the combination of reward and punishment has been found to promote coopera- tion and provision of public goods (Andreoni, Har- baugh & Vesterlund, 2003; Rockenbach & Milinski, 2006; Sefton, Shupp & Walker, 2007). Fehr and Sch- midt (2007), however, find that the carrot (voluntary bonuses) is more effective than the carrot-and-stick (a combination of voluntary bonuses and fines) in inducing more work effort. In contrast, Dari-Mattiacci and De Geest (2010) argue that the threats of punish- ment can be more effective than rewards because the threats can be used multiple times without incurring the cost of providing rewards. Van der Klaauw and

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Van Ours (2013) also suggest that financial sticks are more effective than financial carrots in motivating unemployment benefit recipients to work. While these studies compare the use of rewards and punishments, they do not test the interaction between reward and coercive powers. Then, how would the interplay between the carrot-and-stick affect intrinsic supplier commitment? Deci and Ryan (1985: 61) suggest that “negative feedback that facilitates one’s future compe- tence” may not be as deleterious as negative feedback with no future implications. Empirical studies report that negative feedback combined with rewards may not be as detrimental as negative feedback without rewards (Deci, Koestner & Ryan, 1999). When coercive power is used in conjunction with reward power, the supplier may perceive that the buyer is exercising its coercive power not just as a manipulation but also as a form of guidance to improve its competence. Finkelstein and Fishbach (2012), based on the dynamics of self-regula- tion, suggest that power targets tend to regard negative feedback as a signal for further improvement if they accumulate more knowledge about the tasks. The buyer’s coercive power may still reduce the sup-

plier’s sense of autonomy but it may not significantly decrease the sense of competence given the presence of the buyer’s rewards. Thus, from the perspective of CET, the negative influence of coercive power can be offset by reward power. In support of this, Lewin (1935) suggests that to achieve conformity, the power holder should not only rely on negative valence through the threat of punishment but also provide positive restraining forces to prevent the power target from completely leaving the power holder’s field of influence. Therefore, we suggest that the buying firm’s reward power can reduce the negative impact of its coercive power on the supplier’s relationship commit- ment by preventing the supplier from avoiding the relationship.

H5: The interaction between the buyer’s use of reward power and use of coercive power is posi- tively associated with the supplier’s relationship commitment.

METHODOLOGY

Sampling and Data Collection To test our hypotheses in a multicultural setting, we

participated in international data collection efforts involving China, Hong Kong, South Korea, Taiwan, and the United States. Previous studies on power in buyer–supplier relationships have been largely limited to a single cultural context. As power dynamics in buyer–supplier relationships could be significantly affected by national culture (Zhao et al., 2008), we

cross-validate prior power study results by collecting data from multiple countries. Data collection from four East Asian regions with high Confucian values (Brook & Luong, 1999) and the United States allows comparisons within similar cultures as well as between the countries with significant national cul- tural differences. The original questionnaire was writ- ten in English and then translated into Chinese (Mandarin, Cantonese, and Taiwanese) and Korean. To assure accuracy in translation, each translated ver- sion of the questionnaire was then back-translated into English and compared with the original English version to identify any possible discrepancies by country coordinators. This process was repeated until the questionnaires in different languages became consistent. Each responding manufacturer was asked about its

relationship with a major customer, which is defined as the one that accounts for the largest sales share of the responding manufacturer. Country coordinators agreed upon the standard guidelines regarding sam- pling and data collection. To begin with, target manu- facturing companies were randomly selected from a sampling pool using directories of manufacturer asso- ciations and the yellow pages in each country/region. Each of the target manufacturers was subsequently contacted to identify the key informants who were knowledgeable about their company’s processes and relationships with a major customer. They had the titles of supply chain managers, CEOs/presidents, plant managers, sales/marketing managers, and other senior directors/managers. The key informants were first asked about their willingness to participate in the survey. Then, a questionnaire was mailed with a cover letter explaining the objectives and the potential con- tributions of the study. Follow-up calls were also made to improve the response rate and clarify missing data. The combined response rate across the countries was 11.5% based on 1,229 valid responses received out of 10,712 manufacturers that were sent question- naires. The number of respondents, response rate by country, and respondent company profiles are shown in Table 3.

Measurement Instrument All constructs in our study were adopted from the

existing literature. The measures for the five bases of power (reward, coercive, expert, referent, and legiti- mate) were adapted from Zhao et al. (2008) and Brown et al. (1995). We then operationalized non- mediated powers as a second-order construct which consists of expert, referent, and legitimate powers. As we investigate reward and coercive powers separately in our study, we did not operationalize a second- order construct for mediated power. The measures for

Volume 53, Number 2

Journal of Supply Chain Management

46

T A B L E 3

R e sp

o n se

R a te s a n d C o m p a n y P ro fi le s b y C o u n tr y

R e sp

o n se

R a te s

T o ta l

C h in a

H o n g K o n g

S o u th

K o re a

T a iw

a n

U .S .

N u m b e r o f q u e st io n n a ir e s

se n t

1 0 ,7 1 2

2 ,8 7 8

2 ,0 5 6

1 ,2 7 8

2 ,0 0 0

2 ,5 0 0

N u m b e r o f va lid

re sp

o n se s

1 ,2 2 9

4 1 0

2 0 2

2 0 3

2 1 2

2 0 2

R e sp

o n se

ra te

1 1 .4 7 %

1 4 .2 5 %

9 .8 2 %

1 5 .8 8 %

1 0 .6 0 %

8 .0 8 %

In d u st ry

T o ta l (n

= 1 2 2 9 )

(% )

C h in a (n

= 4 1 0 )

(% )

H o n g K o n g

(n = 2 0 2 ) (%

) S o u th

K o re a

(n = 2 0 3 ) (%

) T a iw

a n

(n = 2 1 2 ) (%

) U .S . (n

= 2 0 2 )

(% )

A rt s a n d cr a ft s

6 (. 5 )

4 (1 .0 )

1 (. 5 )

0 (. 0 )

0 (. 0 )

1 (. 5 )

B u ild

in g m a te ri a ls

5 3 (4 .3 )

2 9 (7 .1 )

3 (1 .5 )

4 (2 .0 )

4 (1 .9 )

1 3 (6 .4 )

C h e m ic a ls

a n d p e tr o ch

e m ic a ls

8 5 (6 .9 )

3 8 (9 .3 )

3 (1 .5 )

1 9 (9 .4 )

1 5 (7 .1 )

1 0 (5 .0 )

E le ct ro n ic s a n d e le ct ri ca l

2 2 2 (1 8 .1 )

5 9 (1 4 .4 )

3 3 (1 6 .3 )

4 6 (2 2 .7 )

6 6 (3 1 .1 )

1 8 (8 .9 )

F o o d , b e ve

ra g e , a lc o h o l,

a n d ci g a re tt e s

5 9 (4 .8 )

1 9 (4 .6 )

7 (3 .5 )

1 5 (7 .4 )

1 (. 5 )

1 7 (8 .4 )

Je w e lr y

6 1 (5 .0 )

1 (. 2 )

4 (2 .0 )

1 (. 5 )

0 (. 0 )

0 (. 0 )

M e ta l, m e ch

a n ic a l, a n d

e n g in e e ri n g

2 6 1 (2 1 .2 )

1 4 6 (3 5 .6 )

2 7 (1 3 .4 )

4 1 (2 0 .2 )

4 7 (2 2 .2 )

5 5 (2 7 .2 )

P h a rm

a ce

u ti ca l a n d m e d ic a ls

3 1 (2 .5 )

4 (1 )

1 (. 5 )

7 (3 .4 )

1 1 (5 .2 )

8 (4 .0 )

P u b lis h in g a n d p ri n ti n g

4 9 (4 .0 )

2 2 (5 .4 )

2 (1 .0 )

7 (3 .4 )

2 (. 9 )

1 6 (7 .9 )

R u b b e r a n d p la st ic s

8 7 (7 .1 )

2 7 (6 .6 )

1 3 (6 .4 )

7 (3 .4 )

2 7 (1 2 .7 )

1 3 (6 .4 )

T e x ti le s a n d a p p a re l

1 4 0 (1 1 .4 )

3 4 (8 .3 )

7 9 (3 9 .1 )

1 8 (8 .9 )

6 (2 .8 )

3 (1 .5 )

T o ys

1 6 (1 .3 )

0 (. 0 )

1 1 (5 .4 )

0 (. 0 )

4 (1 .9 )

1 (. 5 )

W o o d a n d fu rn it u re

3 2 (2 .6 )

1 8 (4 .4 )

2 (1 .0 )

3 (1 .5 )

3 (1 .4 )

6 (3 .0 )

O th e rs

1 2 7 (1 0 .3 )

9 (2 .2 )

1 6 (7 .9 )

3 5 (1 7 .2 )

2 6 (1 2 .3 )

4 1 (2 0 .3 )

S a le s

T o ta l (n

= 1 2 1 1 )

(% )

C h in a

(n = 4 1 0 ) (%

) H o n g K o n g

(n = 1 9 9 ) (%

) S o u th

K o re a

(n = 2 0 3 ) (%

) T a iw

a n (n

= 2 1 2 )

(% )

U .S . (n

= 1 8 7 )

(% )

< U S $ 5 m ill io n

2 5 6 (2 1 .1 )

1 6 8 (4 1 .0 )

2 5 (1 2 .4 )

9 (4 .4 )

3 4 (1 6 .0 )

2 0 (9 .9 )

U S $ 5 m

to < U S $ 1 0 m

1 6 9 (1 4 .0 )

7 1 (1 7 .3 )

3 9 (1 9 .3 )

2 2 (1 0 .8 )

1 8 (8 .5 )

1 9 (9 .4 )

U S $ 1 0 m

to < U S $ 2 0 m

1 6 1 (1 3 .3 )

4 6 (1 1 .2 )

3 8 (1 8 .8 )

3 4 (1 6 .7 )

2 1 (9 .9 )

2 2 (1 0 .9 )

U S $ 2 0 m

to < U S $ 5 0 m

1 7 8 (1 4 .7 )

4 9 (1 2 .0 )

2 8 (1 3 .9 )

5 4 (2 6 .6 )

2 5 (1 1 .8 )

2 2 (1 0 .9 )

U S $ 5 0 m

to < U S $ 1 0 0 m

1 5 4 (1 2 .7 )

2 9 (7 .1 )

2 6 (1 2 .9 )

4 4 (2 1 .7 )

3 0 (1 4 .2 )

2 5 (1 2 .4 )

U S $ 1 0 0 m ill io n o r m o re

2 9 3 (2 4 .2 )

4 7 (1 1 .5 )

4 3 (2 1 .3 )

4 0 (1 9 .7 )

8 4 (3 9 .6 )

7 9 (3 9 .1 )

April 2017

Buyer Power and Supplier Relationship Commitment

47

relationship commitment were adopted from Zhao et al. (2008), who developed the scales based on Mor- gan and Hunt (1994) and Brown et al. (1995). The items measuring the bases of power and relationship commitment asked respondents to assess the use of power by their major buyer and their commitment to that buyer, using a 7-point Likert scale. As the questionnaire was answered by a single

respondent in each company, we checked for single respondent bias using Harman’s one-factor test (Pod- sakoff, MacKenzie, Lee & Podsakoff, 2003). The results of the test showed that there were six distinct factors with eigenvalues above 1.0, explaining 68.5% of the total variance. The first factor explained 29.0% of the variance, which was less than 50% and did not account for the majority of the total variance.

Reliability and Validity Cronbach’s alpha and composite reliability (CR) for

each factor were computed to assess the internal relia- bility of the constructs. The extracted factors were con- sistent with the suggested measurement model, and the Cronbach’s alpha and CR values were all above .70 (Kline, 2000). Appendix A displays the factor loadings of each measurement item and the Cron- bach’s alpha of each construct (see Table 4 for CR val- ues). To assess convergent validity, we conducted a confirmatory factor analysis (CFA). The CFA model with the five power bases and relationship commit- ment constructs (normed v2 (265) = 3.67, RMSEA = .05, TLI = .95, CFI = .96, standardized RMR = .05) showed an acceptable model fit (Kline, 2000). In addition, the composite reliability (CR) of each con- struct was greater than the average variance extracted (AVE) value for the construct, providing evidence for convergent validity (see Table 4). Regarding discrimi- nant validity, the squared correlation between each construct and other constructs was smaller than the average variance extracted (AVE) for the construct

(Fornell & Larcker, 1981). Moreover, both the maxi- mum shared variance (MSV) and average shared vari- ance (ASV) of each construct were smaller than the AVE of the construct (see Table 4), further rendering support for discriminant validity.

Assessing the Second-Order Factor of Nonmediated Powers and the Single Factor of Mediated Power For parsimony and to better focus on reward and

coercive powers, we combined expert, referent, and legitimate powers into the second-order nonmediated powers construct. To validate the use of a second- order factor of nonmediated power, we followed the four-step procedure suggested by Mishra and Shah (2009). We compared the CFA model fits of the fol- lowing four models: (1) the single-factor model with 11 items for expert, referent, and legitimate powers; (2) the three-factor model with no correlation between each pair of the factors; (3) the three-factor model with pairwise correlation allowed; and (4) the second-order model with three reflective factors of expert, referent, and coercive powers. As Table 5 shows, both models 3 and 4 have the best model fit indices. Hence, we selected Model 4, which is parsi- monious and better suits the purpose of our study. Also, we checked the CFA model fit of (5) the single

factor that combines the eight items for reward and coercive powers and compared it with the model fit of (6) the two-factor model with correlations allowed between the factors. Because there are only two-first- order factors (i.e., reward and coercive powers), the two-factor model with no correlation and the second- order model could not be identified (Raubenheimer, 2004). Table 5 shows that Model 6 has an acceptable model fit, while the model fit of Model 5 is unaccept- able. This result also strengthens our argument for clearly distinguishing between reward and coercive powers.

Country Effect and Control Variables As the data were collected from multiple countries,

there can exist unobserved heterogeneity across the countries. In this case, correlated observations within countries can bias ordinary least-squares (OLS) esti- mates (Raudenbush & Bryk, 2002). To effectively con- trol for the unobserved heterogeneity, we tested our hypotheses using multilevel moderated regression. We also included industry dummy variables to account for industry differences (Carey, Lawson & Krause, 2011; Villena, Revilla & Choi, 2011). Besides country and industry, other variables that can affect either relationship commitment, including supplier’s firm size (yearly sales), supplier’s dependency on the buyer (% of sales ratio), and duration of the buyer–supplier relationship (years), are included as control variables

TABLE 4

Measures of Reliability and Validity

CR AVE MSV ASV

Reward power .785 .478 .444 .219 Coercive power .890 .669 .372 .093 Expert power .848 .584 .394 .213 Referent power .903 .757 .387 .224 Legitimate power .801 .502 .444 .244 Relationship commitment

.828 .424 .394 .210

CR, Composite Reliability; AVE, Average Variance Extracted; MSV, Maximum Shared Variance; ASV, Average Shared Variance.

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in our multilevel regression models. The supplier’s firm size may influence relationship commitment because larger firms can have more resources that affect relative power (Casciaro & Piskorski, 2005; Pfef- fer & Salancik, 2003). A supplier’s dependency on the buyer has been suggested to increase the supplier’s relationship commitment (Krause et al., 2007). The duration of the relationship could also influence rela- tionship commitment (Carey et al., 2011).

ANALYSIS AND RESULTS We employed multilevel regression using Stata 14.1

(“mixed” command) to test the hypotheses. Countries are defined as groups in our models. Full information maximum-likelihood estimator was used to run the models (Singer & Willett, 2003). To minimize the effects of multicollinearity, we grand-mean-centered the power variables to create interaction terms, follow- ing the procedure for testing interaction effects sug- gested by Aiken and West (1991) (Table 6).

Before we tested our hypotheses, we first ran uncon- ditional models with relationship commitment as the dependent variable and country as the group variable (Model 1 in Table 7). The interclass correlation (ICC) values indicated that 14% of the variability in rela- tionship commitment are attributed to the country effect, showing significant between-group variability. Next, we ran random intercept models, which are explained in the following sections.

Main Effects of Reward and Coercive Powers Table 7 reports the results of multilevel regression

analyses with random intercept models and heteroskedasticity robust standard errors (models 2– 4). We regressed the supplier’s relationship commit- ment on power variables after controlling for the con- trol variables and found significant main effects for nonmediated, reward, and coercive power bases (see Model 4 in Table 7). Consistent with previous studies (e.g., Maloni & Benton, 2000; Zhao et al., 2008), nonmediated powers had a strong positive effect on

TABLE 5

Measurement Models for Nonmediated and Mediated Power Constructs

Models Normed v2 (df) RMSEA (90% CI) TLI CFI SRMR

Nonmediated power Model 1 (single factor) 30.64 (43) .16 (.15, .16) .52 .62 .11 Model 2 (3 uncorrelated factors) 10.23 (43) .09 (.08, .09) .85 .88 .24 Model 3 (3 correlated factors) 2.37 (40) .03 (.03, .04) .98 .98 .03 Model 4 (second-order factor) 2.37 (40) .03 (.03, .04) .98 .98 .03 Reward and coercive powers Model 5 (single factor) 12.69 (13) .10 (.09, .11) .75 .89 .07 Model 6 (2 correlated factors) 3.95 (12) .05 (.04, .06) .94 .97 .04

RMSEA, Root-mean-square error of approximation; TLI, Tucker Lewis Index (also called non-normed fit index or NNFI); CFI, Com- parative Fit Index; SRMR, Standardized root-mean-square residual.

TABLE 6

Descriptive Statistics

Correlations

Reward Power

Coercive Power

Expert Power

Referent Power

Legitimate Power

Relationship Commitment

Reward power 1 Coercive power .456*** 1 Expert power .265*** !.053 1 Referent power .327*** .045 .502*** 1 Legitimate power .509*** .219*** .403*** .449*** 1 Relationship commitment .267*** !.067* .560*** .480*** .361*** 1 Mean 4.575 3.863 5.272 4.526 4.95 5.603 Standard deviation 1.044 1.355 .955 1.187 1.047 .798

*p < .05, ***p < .001.

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Buyer Power and Supplier Relationship Commitment

49

T A B L E 7

R e su

lt s o f M u lt il e v e l R e g re ss io n A n a ly se

s P re d ic ti n g R e la ti o n sh

ip C o m m it m e n t

D e p e n d e n t V a ri a b le

M o d e l 1

M o d e l 2

M o d e l 3

M o d e l 4

R e la ti o n sh

ip C o m m it m e n t

E st im

a te

S .E .

E st im

a te

S .E .

E st im

a te

S .E .

E st im

a te

S .E .

(C o n st a n t)

4 .9 8 0 **

* .1 6 8

4 .1 9 4 **

* .2 5 8

4 .6 7 4 **

* .1 8 0

4 .5 1 4 **

* .2 7 0

In d u st ry

d u m m y va ri a b le s

In cl u d e d

In cl u d e d

In cl u d e d

T h e o re ti ca l co

n tr o l va ri a b le s

F ir m

si ze

(s a le s)

.0 1 2

.0 2 1

.0 1 1

.0 1 6

.0 2 8 **

.0 1 0

D e p e n d e n ce

(% sa le s)

.0 0 5 **

.0 0 2

.0 0 5 **

.0 0 2

.0 0 2

.0 0 1

R e la ti o n sh ip

d u ra ti o n (y e a rs )

.0 0 7 **

.0 0 2

.0 0 7 **

.0 0 2

.0 0 3 **

** .0 0 2

P o w e r va ri a b le s

R e w a rd

p o w e r (H 1 )

.3 6 3 **

* .0 6 8

.1 0 9 *

.0 4 6

C o e rc iv e p o w e r (H 2 )

! .2 1 9 **

* .0 2 3

! .1 4 7 **

* .0 3 1

N o n m e d ia te d p o w e r

.4 9 4 **

* .0 2 8

In te ra ct io n s

N o n m e d ia te d 9

R e w a rd

(H 3 )

.0 5 5 *

.0 2 2

N o n m e d ia te d 9

C o e rc iv e (H 4 )

! .0 2 9 **

** .0 1 5

R e w a rd

9 C o e rc iv e (H 5 )

.1 1 5 **

* .0 2 3

R a n d o m

e ff e ct s p a ra m e te rs

W it h in

co u n tr y va ri a n ce

(r 2 )

.8 3 1

.0 8 9

.8 0 0

.0 7 9

.7 1 6

.0 5 8

.5 1 6

.0 2 3

B e tw

e e n -c o u n tr y va ri a n ce

(s 0 0 )

.1 0 9

.0 4 8

.0 9 6

.0 4 6

.0 7 1

.0 3 5

.0 4 5

.0 2 4

L o g -l ik e lih

o o d

! 1 6 3 9 .1 3

! 1 6 1 5 .2 1

! 1 5 4 6 .9 4

! 1 3 4 5 .4 7

D e vi a n ce

(! 2 L o g -l ik e lih

o o d )

3 2 7 8 .2 6

3 2 3 0 .4 2

3 0 9 3 .8 8

2 6 2 0 .5 4

D e vi a n ce

d if fe re n ce

! 4 7 .8 4

! 1 3 6 .5 4

! 4 7 3 .3 4

*p < .0 5 , **

p < .0 1 , **

*p < .0 0 1 , **

** p < .1 . U n st a n d a rd iz e d co

e ffi ci e n ts

a re

re p o rt e d . H e te ro sk e d a st ic it y ro b u st

st a n d a rd

e rr o rs

a re

u se d .

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relationship commitment (c = .49, p < .001). Reward power showed a significant positive main effect on the supplier’s relationship commitment (c = .11, p = .02) in support of H1. Coercive power, in con- trast, had a significant negative main effect on rela- tionship commitment (c = !.15, p < .001), supporting H2.

Two-Way Interactions among Power Variables H3 posits that nonmediated powers positively mod-

erate the impact of reward power on the supplier’s relationship commitment. Model 4 in Table 7 shows that the interaction between reward power and non- mediated powers had a significant positive effect (c = .05, p = .02) on relationship commitment, sup- porting H3. Hypothesis 4 suggests a negative interac- tion between coercive and nonmediated powers. The interaction between coercive power and nonmediated powers had a marginally significant negative effect (c = !.03, p = .05) on relationship commitment, pro- viding moderate support for H4. Figures 2 and 3 illus- trate the interactions between reward and nonmediated powers and between coercive and non- mediated powers, respectively. To test H5, the interac- tion between reward and coercive powers was also analyzed. The interaction between reward and coercive powers had a significant positive effect (c = .12, p < .001) on relationship commitment, supporting H5. Figure 4 displays this interaction.

Post Hoc Analysis: Country Slope Variance We checked whether the effects of reward and coer-

cive powers are different across the countries. Previous mixed findings on the effect of reward and coercive powers may be attributed to country differences. Zhao et al. (2008) recognized that the power dynamics in buyer–supplier relationships could be significantly affected by national culture. The effects of reward and coercive powers might be stronger in high power-

distance cultures, where people tend to accept power inequalities and the use of reward and coercive pow- ers by more powerful parties (Hofstede, 1991; Ran- dolph & Sashkin, 2002). Zhao et al. (2008) also noted that relationship commitment could be more easily developed in collectivist cultures due to the ten- dency to look for belongingness and relatedness (Eaton & Louw, 2000; Griffith, Myers & Harvey, 2006). After running random intercept models, we ran ran-

dom slope models, which allow the slopes of reward and coercive powers to randomly vary across the countries. The slopes of the other independent variables were not considered to be random. The results from the random slope models indicate that the between-country variances of the slopes of reward (sreward = .0001, p > .1) and coercive (scoercive = .007, p > .1) powers on relationship commitment are negli- gible. Thus, we conclude that the effects of reward and coercive powers are similar across the countries.

3.5

4

4.5

5

5.5

Low Coercive Power High Coercive Power

R el

at io

ns hi

p C

om m

itm en

t

Low Non- mediated Power High Non- mediated Power

FIGURE 3 Interaction between Coercive and Nonmediated

Powers

3.5

4

4.5

5

5.5

Low Reward Power High Reward Power

R el

at io

ns hi

p C

om m

itm en

t

Low Non- mediated Power High Non- mediated Power

FIGURE 2 Interaction between Reward and Nonmediated

Powers

3.5

4

4.5

5

5.5

Low Coercive Power High Coercive Power

R el

at io

ns hi

p C

om m

itm en

t

Low Reward Power

High Reward Power

FIGURE 4 Interaction between Reward and Coercive Powers

April 2017

Buyer Power and Supplier Relationship Commitment

51

DISCUSSION To work with suppliers, buying companies resort to

using both reward and coercive powers. Building on CET, our study investigates the varied influences of reward and coercive powers. It differentiates the com- petence-enhancing aspect of reward power and the competence-destroying aspects of coercive power (Deci & Ryan, 1985). We provide empirical evidence that reward power provides additional benefits by cre- ating synergy with nonmediated powers while coer- cive power undermines the positive influence of nonmediated powers. We also show how the strong negative impact of coercive power can be curbed by reward power.

Contrasting the Effects of Reward and Coercive Powers The results demonstrate that the buyer’s reward

power enhances the supplier’s relationship commit- ment (H1), while its coercive power hampers it (H2). Although there have been several empirical findings that show positive influences of reward power on rela- tionship commitment, these findings had been inter- preted as being inconclusive (Benton & Maloni, 2005; Maloni & Benton, 2000) or as an artifact of a specific national culture (Zhao et al., 2008). Based on the data from five different countries, our study reveals that the differential effect of reward and coercive pow- ers on relationship commitment is consistent across different countries. This is an important finding because supplier commitment, compared to supplier compliance, is a stronger predictor on performance (Brown et al., 1995; Zhao et al., 2008). Therefore, reward power indeed operates differently

from coercive power when applied to supplier rela- tionship management. Reward and coercive powers should therefore not be simply bundled together as mediated powers, as have been done before (e.g., Brown et al., 1995; Dapiran & Hogarth-Scott, 2003; Handley & Benton, 2012b; Ke et al., 2009; Teimoury et al., 2010). Reward power, as a form of positive feedback to the supplier, promotes a sense of compe- tence and enhances the supplier’s motivation to com- mit to the relationship. In contrast, coercive power, as a form of negative feedback, destroys the supplier’s sense of autonomy and competence. This, in turn, dis- rupts its motivation to sustain a long-term relation- ship with the buyer and its willingness to meet the buyer’s requirements. For the buyer, a proper understanding of reward

power is paramount to getting its suppliers to be fully committed to their relationship, beyond merely com- plying with requests (Podsakoff, Todor & Skov, 1982; Wayne, Shore, Bommer & Tetrick, 2002). With a theo- retical argument based on CET and empirical support

based on the multinational data, our study takes a step toward identifying potential benefits of reward power in buyer–supplier relationships. Our study points out the need to re-evaluate the roles of reward power, as compared to those of coercive power, in enhancing relational outcomes, as many published studies have grouped them together as one construct under the label of mediated powers. We may need to reconsider trust (Hausman & Johnston, 2010), collaborative behaviors (Nyaga et al., 2013), and partner-specific resource allocation (Pulles et al., 2014) and oppor- tunism (Handley & Benton, 2012a,b). Furthermore, this study encourages future research to investigate effective design and administration schemes of how a buyer should dispense positive feedback to promote supplier commitment. For instance, should the posi- tive feedback be task-contingent or performance-con- tingent? Should the feedback involve noncontingent rewards with positive feedback (Deci & Ryan, 1985)?

Nonmediated Powers and Amplifying Effects The positive influence of the buyer’s reward power

on the supplier’s relationship commitment is, on the one hand, amplified with higher nonmediated powers (H3). On the other, the negative effect of coercive power on relationship commitment is increased under the high nonmediated powers of the buyer (H4). In the same token, the positive effect of reward power on relationship commitment is weakened under lower nonmediated powers (see Figure 2). When a supplier can perceive autonomy in the relationship with the buyer, the buyer’s nonmediated power can facilitate the effectiveness of reward power. The positive interac- tion between nonmediated powers and reward power aligns with the CET literature, in that rewards can be more effective when intrinsic motivation is high (Amabile, 1993; Hennessey et al., 1989). In contrast, nonmediated powers and coercive power can interact negatively as the autonomy-supporting environment created by nonmediated power is disrupted by the use of coercive power. Our study brings to the fore the interactions among

different types of power. Whereas past studies have focused on the main effects of power, our study addresses how the effects of reward and coercive pow- ers can be moderated by nonmediated powers. For instance, Gaski (1986) investigates causal interrela- tionships among the five power variable but without considering interaction effects across different types of powers. The buyer’s nonmediated powers (expert, ref- erent, and legitimate) cannot be easily controlled or manipulated in the short term (French & Raven, 1959). As such, the present study demonstrates how nonmediated powers would provide an important relational context in which the buyer’s reward and

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coercive powers become either more effective or more detrimental. In other words, nonmediated powers are the context that can reshape the influences of reward and coercive powers—we believe this recognition spells a significant point of departure. It provides an explanation for the previously inconsistent findings regarding the roles of reward and coercive powers in buyer–supplier relationships and the need for investi- gating more nuanced, contextual use of power in sup- ply chain relationships. One avenue for future studies could be on individ-

ual types of nonmediated powers that can augment the effectiveness of reward power or nullify the dam- aging effect of coercive power on buyer–supplier rela- tionships. For example, Sahadev (2005) substantiates the positive effect of expert power on cooperation, communication, and conflict resolution, while Ter- pend and Ashenbaum (2012) find that referent power is the most significant source of buyer power in deter- mining supplier performance. Zhao et al. (2008) also report that expert and referent powers significantly affect relationship commitment but legitimate power does not. These studies imply that each component of nonmediated powers may have varying degrees of impact on intrinsic motivation for relationship com- mitment. These studies call for investigation of addi- tional contexts that can alter the impacts of reward and coercive powers, such as buyer-specific, supplier- specific, or broader environmental contexts. Another related research area is on how to develop supplier- perceived expert and referent powers, take, for instance, a supplier development program. A buyer’s supplier development programs demonstrate the buyer’s expertise, philosophies, values, and norms (Prahinski & Benton, 2004; Modi & Mabert, 2007) and may have profound implications for its expert and referent powers. It would be a fruitful endeavor to investigate the linkages between supplier develop- ment, supplier-perceived expert and referent powers, and the supplier’s relationship commitment.

Curbing the Negative Influence of Coercive Power The empirical support for H5 reveals that reward

power can reduce the negative influence of coercive power on relationship commitment. If the effects of reward and coercive powers on suppliers were similar, as suggested by the past literature, there would be no interaction between the two. In line with Lewin (1935), reward power appears to be the restraining force against coercive power. This finding echoes the experimental results of complementarity between reward and coercive powers (Andreoni et al., 2003), in that cooperation is most successfully enforced when both rewards and punishment are available. Andreoni et al. (2003: 901) contend that “the stick

can help by getting people to move away from perfect selfishness and to test the waters of cooperation. The carrot can then take over by encouraging further coop- eration, rendering the stick a rarely used but necessary tool.” In other words, if coercive power (stick) is applied as a means to guide suppliers, reward power (carrot) should also be used as a necessary tool to support a supplier’s competence. While the buyer’s reward power can reduce the neg-

ative effect of its coercive power, one might also sur- mise that coercive power can weaken the positive impact of reward power. This reverse argument might be plausible if the competence-destroying aspect of coercive power dominates the competence-enhancing aspect of reward power. To test this reverse argument, we split the sample into two groups where one group has buyers with stronger coercive power and the other group has buyers with stronger reward power. In both groups, the interaction between reward and coercive powers has a strong positive effect (high coercive power group: c = .12, p < .001; high reward power group: c = .21, p < .001) on relationship commit- ment, which does not support the reverse argument. Depending on the maturity of buyer–supplier rela-

tionship, the interaction between reward and coercive powers may or may not happen. Based on the dynam- ics of self-regulation, Fishbach, Eyal and Finkelstein (2010) contend that negative feedback will undermine commitment for new relationship partners who wish to evaluate the strength of their commitment. As the relationship deepens, however, relationship partners could become more committed to the relationship and wish to monitor the progress of their relationship by seeking more negative feedback and respond to it by increasing their efforts (Fishbach & Finkelstein, 2009). Therefore, it is plausible that a buyer’s simulta- neous administration of reward and coercive powers may shift from a negative interaction to a positive interaction as their relationship matures over time.

MANAGERIAL IMPLICATIONS For practicing supply managers, our study points to

the need for more careful application of reward and coercive powers. Unlike nonmediated powers, reward and coercive powers can be wielded (Carver & White, 1994) according to the intentions of the supply man- agers at the buying company. Rather than using reward and coercive powers simply to induce desired behaviors from suppliers, supply managers should consider the competence-enhancing role of reward power and the autonomy/competence-destroying aspect of coercive power. By doing so, the managers can better motivate the suppliers. The buyer’s reward power has a positive impact on

the supplier’s relationship commitment, whereas an

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overemphasis on coercive power can damage future relationships with the supplier (Golicic & Mentzer, 2005; Maloni & Benton, 2000; Terpend & Ashen- baum, 2012; Zhao et al., 2008). In this regard, the positive interaction between reward and coercive pow- ers delivers a practical message to supply managers: Coercive power used in isolation can hurt the sup- plier’s relationship commitment, but in combination with reward power, it can be less damaging to rela- tionship commitment. This finding can be particularly useful for buyers that use coercive power. Consider a situation where a buyer may have to exercise coercive power to address poor supplier quality, environmen- tally harmful practices, or ethical issues. For instance, Apple has enforced its supplier code of conduct to all suppliers to the point of terminating contracts with noncompliant suppliers (Apple Inc., 2016). In this case, Apple should also enact reward power to mini- mize the negative effect of the coercive power. For the same reason, if mandatory annual cost reduction is unavoidable via the use of coercive power, the buyer should consider combining that with a reward such as the “Supplier of the Year Award” and other forms of recognition. Our findings on the moderating role of nonmedi-

ated powers have implications for supply managers. On the one hand, reward power can be more effective for enhancing the supplier’s relationship commitment when the buyer has high nonmediated powers. On the other hand, coercive power can be even more damaging for the supplier’s relationship commitment when the buyer with high nonmediated powers exer- cises it. Therefore, the buyer with high nonmediated powers should exercise caution when applying coer- cive power. Further, the buyer with low nonmediated powers should be mindful of the potentially limited effectiveness of its reward power. This finding is par- ticularly meaningful because buyers are now increas- ingly concerned with how they are being perceived by their suppliers in terms their working relations (Plan- ning Perspectives, 2015). The supplier’s perception of a buyer reflects not only the buyer’s reward and coer- cive powers but also its nonmediated powers. The buyer should keep in mind that the influence of

reward and coercive powers on supplier relationship commitment, either positively or negatively, depends on the supplier’s perception of nonmediated powers. For example, we suspect that a company such as Toy- ota, which is recognized as “the customer of choice” or “the most favored buyer” (Planning Perspectives, Inc., 2015), is effectively exercising its reward power in the context of nonmediated powers. We propose that if such a company, with high levels of nonmedi- ated powers, were to exercise coercive power, the neg- ative consequences would be worse. Therefore, buyers

should understand carefully how they are being regarded by their suppliers in terms of nonmediated powers before attempting to influence them through coercive power.

LIMITATIONS AND CONCLUSION Our study is based on the data collected from only

five countries. Due to this limitation, we could not explicitly test the effects of national culture (e.g., power distance and individualism/collectivism). Instead, we examined slope variances of reward and coercive powers across the five countries. Future stud- ies should utilize data collected from a larger number of countries and investigate the cross-level interactions between firm-level power variables and national-level culture variables to gain a deeper understanding of the role of power in different cultural contexts. In addition, our study considers the influence of

power exerted by the buyer. In many cases, however, the supplier may also hold power over the buyer (Bastl, Johnson & Choi, 2013). The supplier may, in fact, have comparatively more power (i.e., intellectual properties), or the buyer and the supplier both may have significant power over each other (Davis & Ment- zer, 2006). Further research may investigate varying dynamics created by relative power differences between the buyer and the supplier. Lastly, our study does not consider that there could

be differences in the level of the buyer’s power as per- ceived by the buyer and by the supplier. In other words, “power dissonance” (Flynn, Gruenfeld, Molm & Polzer, 2011) may exist between two partner firms. The buyer can overestimate its relative power over the supplier while the supplier can underestimate it. How might this discrepancy in the perception of relative power affect various aspects of buyer–supplier rela- tionships? The obvious limitation of our study is that the data are collected from only the supplier’s side. Future research needs to collect dyadic data from both the supplier’s and customer’s sides and delve into the issue of differences in power perceptions to uncover more realistic yet complex dynamics of power in buyer–supplier relationships. To enhance its competitive strength, a buyer tries to

induce their suppliers to engage in various partnership behaviors. Building on CET, this study contends that a supplier’s relationship commitment, as a key driver of partnership behaviors, represents its intrinsic moti- vation for a continued relationship and that the buyer’s powers can facilitate or undermine the sup- plier’s commitment. A deeper understanding of the interplay between buyer powers and supplier intrinsic motivation, therefore, would be crucial for effective supplier management.

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Sangho Chae (M.Sc., University of Manchester) is a Doctoral Candidate at W. P. Carey School of Business, Arizona State University. He will be joining the Department of Management at Tilburg University in the summer of 2017 as an assistant professor in sup- ply chain management. His research interests include supply network structures, multitier sourcing practices, sustainability, and behavioral bias in supply chain decision-making. He won the 2016 Institute for Sup- ply Management Dissertation Grant for his disserta- tion work.

Thomas Y. Choi (Ph.D., University of Michigan) is the Harold E. Fearon Eminent Scholar Chair of Pur- chasing Management at W. P. Carey School of Busi- ness, Arizona State University. His research studies the upstream side of supply chains, where a buying com- pany interfaces with many suppliers organized in vari- ous forms of networks. He has published in the Academy of Management Executive, Decision Sciences, Harvard Business Review, Journal of Supply Chain Man- agement, and Production and Operations Management, among others. He has co-authored two trade books on purchasing and supply management. Choi is executive director of CAPS Research, a joint venture between Ari- zona State University and the Institute for Supply Man- agement. He also codirects the Complex Adaptive Supply Networks Research Accelerator (CASN-RA), a research group focused on complex adaptive supply networks. In 2012, he was recognized as the Distin- guished Operations Management Scholar by the OM Division at the Academy of Management and has con- sulted with numerous corporations. He served as co- EIC for the Journal of Operations Management from 2011 to 2014. Recent consulting work with the U.S. Department of Energy focused on the role of supply chains in bringing sustainable energy technologies to market.

Daesik Hur (Ph.D., Indiana University) is an associ- ate professor of operations management, in the School of Business at Yonsei University. His research has been published in the Journal of Supply Chain Management, Journal of Operations Management, and Production and Operations Management, among others. His current research projects focus on supplier devel- opment, directed sourcing, and innovation in supplier networks. Dr. Hur is the president of the Asia Pacific Decision Sciences Institute (APDSI) and a vice presi- dent of the Korean Production and Operations Man- agement Society. He is on the editorial boards for the Journal of Operations Management and Korean Manage- ment Review.

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APPENDIX Measurement Items with Factor Loadings

Power: The following statements are about you and your major customer concerning power. Please indicate the degree of agreement that you have with each statement (1 = strongly disagree; 7 = strongly agree).

Reward power (Cronbach’s a = .77) If we do not do what as our major customer asks, we will not receive very good treatment from it.

.59

We feel that, by going along with our major customer, we will be favored by it on some other occasions.

.82

By going along with our major customer’s requests, we have avoided some of the problems other suppliers face.

.75

Our major customer often rewards us, in order to get our company to go along with its wishes.

.56

Coercive power (Cronbach’s a = .89) Our major customer’s personnel will somehow get back at us if they discover that we did not do as they asked.

.75

Our major customer often hints that it will take certain actions that will reduce our profits if we do not go along with its requests.

.85

Our major customer might withdraw certain needed services from us if we do not go along with its requests.

.86

If our company does not agree to its suggestions, our major customer could make things more difficult for us.

.82

Expert power (Cronbach’s a = .85) Our major customer’s business expertise makes it likely to suggest the proper thing to do. .70 The people in our major customer’s organization know what they are doing. .80 We usually get good advice from our major customer. .78 Our major customer has specially trained people who really know what has to be done. .77 Referent power (Cronbach’s a = .87) We really admire the way our major customer runs its business, so we try to follow its lead. .78 We generally want to operate our company in a way that is very similar to the way we think our major customer would.

.89

Our company does what our major customer wants because we have very similar feelings about the way a business should be run.

.83

Legitimate power (Cronbach’s a = .82) It is our duty to do as our major customer requests. .77 We have an obligation to do what our major customer wants, even though it isn’t a part of the contract.

.77

Since it is the customer, we accept our major customer’s recommendations. .70 Our major customer has the right to expect us to go along with its requests. .65

59

Buyer Power and Supplier Relationship Commitment

April 2017

Relationship commitment (Cronbach’s a = .84): The following statements are about the relationship between your organization and your major customer. Please indicate the extent to which you agree with each statement (1 = strongly disagree; 7 = strongly agree).

The relationship that our firm has with our major customer is something our firm is very committed to.

.59

The relationship that our firm has with our major customer is something our firm intends to maintain indefinitely.

.61

The relationship that our firm has with our major customer deserves our firm’s maximum effort to maintain.

.63

Our attachment to our major customer is primarily based on the similarity between its values and ours.

.74

The reason we prefer our major customer to others is because of what it stands for, its values.

.69

During the past year, our company’s values and those of our major customer have become more similar.

.68

What our major customer stands for is important to our company. .68

60 Volume 53, Number 2

Journal of Supply Chain Management

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