The antecedent and impacts of social capital in the buyer-supplier relationship

In supply chain management, the buyer-supplier relationship plays the key role in improving the buying firm’s performance. Over time various strategies have been adopted by buying firms in relation to their key suppliers in order to improve their performance. In the last five years, buying firms have become more inclined to develop social capital with their key suppliers as a mechanism to improve their performance. Considering the potential of social capital as a value creating mechanism, this thesis presents empirical research that investigates the antecedent and impacts of social capital in the buyer-supplier relationship and its consequences for improving a buying firm’s performance. Thus the study seeks to advance previous research in two principal ways. First, the literature on the motives for developing social capital suggests that the achievement of strategic benefits is the key motive. Drawing on previous literature, this study investigates rational perspectives of buying firms for developing social capital with their key suppliers. Examining rational perspectives explicates the necessary conditions for the buying firm to build social capital with key suppliers. Second, previous studies on social capital theory in the buyer-supplier relationship have highlighted the impact of developing social capital between the buyer and key suppliers on the buying firm’s performance improvement. As social capital theory demonstrates its usefulness in creating value in terms of developing knowledge and collaboration with others, the present study explores this social capital–performance linkage by incorporating the quality of supply chain collaboration and knowledge between them. Investigating the unique effect of three dimensions of social capital (i.e., social interaction, trust and shared vision) on the buyer-supplier relationship is important in understanding the theory as an enduring mechanism for developing supply chain collaboration and knowledge, which enhance the competitiveness of the firm. In addition, the study investigates the unique effect of supply chain collaboration and the quality of supply chain knowledge on the buying firm’s operational performance in terms of cost, quality, delivery and flexibility. Such an investigation is essential in identifying the relative importance of supply chain collaboration and knowledge in enhancing a buying firm’s operational performance. In response to these literature gaps, this study presents a research framework which develops and incorporates two research questions that focus on ten hypotheses. A triangulation approach has been employed by combining quantitative and qualitative methods. In the first phase, quantitative data were obtained from a mail survey, completed by the managers (self-administered) from 204 manufacturing firms in Australia. Structural Equation Modelling was used as the primary tool for analyzing the relationships among the variables articulated in the research questions. The findings of the quantitative phase were confirmed and followed up in a qualitative phase in which data were obtained through interviews with six senior/mid-level managers from six companies. Content analysis was used to analyse the interview data. The findings from both quantitative and qualitative analysis were then synthesised and discussed with reference to relevant theories and previous research. Three major findings were obtained from the empirical study. First, the rational perspective of buying firms is shown to be significantly and positively related with three dimensions of social capital (i.e., social interaction, trust and shared vision). This result indicates that satisfying the strategic needs of buying firms requires developing social capital with key suppliers as a rational choice. The findings also highlight that rational perspectives play a relatively more important role in developing shared vision and trust compared to social interaction. This suggests that firm’s rational choice of accessing complementary resources (tangible, e.g., design and manufacturing capability, or intangible, e.g., reputation), required compatibility of goals or vision between firms (i.e., the buyer and its key suppliers) and a trustworthy relationship which will avoid opportunism. Second, findings of this study support the proposition that social capital between buyer and its key suppliers facilitates the development of supply chain collaboration and the quality of supply chain knowledge. Specifically, the result reveals that social interaction and shared vision play the key role in developing collaboration and knowledge between a buyer and its key suppliers. This demonstrates that sharing a common vision or goal motivates both firms to achieve mutual benefits through joint actions. Therefore, shared vision is a mandatory component for beginning collaboration and developing an updated knowledge base between the buyer and its key suppliers. Apart from a shared vision, buying firms also need to interact socially with their key suppliers to maintain the collaboration in terms of sharing strategic information and technology. The other dimension of social capital, i.e. trust, shows no significant relationship with supply chain collaboration and knowledge. S uch a result indicates that trust is not necessary at the outset of developing collaboration and knowledge in the buyer-supplier relationship but acts as a catalyst for maintaining such collaboration and updating the knowledge base. Overall, the finding suggests that social capital provides a new strategic means for developing supply chain collaboration and knowledge. Third, supply chain collaboration and quality of supply chain knowledge are shown as significantly and positively related to the buying firm’s operational performance in terms of cost, quality, delivery and flexibility. The result indicates that quality of supply chain knowledge plays a relatively more important role compared to supply chain collaboration for improving a buying firm’s operational performance. This finding suggests that firms need to focus more on developing and maintaining supply chain knowledge rather than collaboration for improving their performance.