European Management Journal (2011) 29, 260– 271

journal homepage: www.elsevier .com/ locate /emj

Buyer–supplier partnership quality and supply chainperformance: Moderating role of risks, andenvironmental uncertainty q

Mahesh Srinivasan a, Debmalya Mukherjee a,*, Ajai S. Gaur b

a Department of Management, College of Business Administration, University of Akron, OH, USAb Department of Management and Global Business, Rutgers Business School, Newark and New Brunswick, 1 Washington Park,Newark, NJ 07102, USA

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KEYWORDSPartnership quality;Supply chain risk;Environmental uncer-tainty;Supply chainperformance

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An earlier version of this mademy of Management Anada.* Corresponding author. Tel86.E-mail address: dmukher@

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Summary In this paper, we examine the relationship between buyer–supplier partner-ship quality, and supply chain performance, in the presence of supply and demand siderisks and environmental uncertainty. Based on the theoretical underpinnings ofresource-based view, relational capital theory, and transaction cost economics, we pro-pose a positive relationship between partnership quality and supply chain performance,which is strengthened in the presence of high demand and supply-side risks, but weakenedin the presence of high environmental uncertainty. Empirical evidence, based on the sur-vey data of 127 US firms supports a majority of our arguments. We discuss theoretical andpractical ramifications of these findings and offer future avenues of research.ª 2011 Elsevier Ltd. All rights reserved.

Introduction

In today�s networked economy most organizations dependon external suppliers for critical resources and complemen-tary capabilities (Holweg, Disney, Holmstrom, & Smaros,2005; Johnsen, Johnsen, & Lamming, 2008). The supplychain of a firm entails all activities associated with the flow

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t has been presented at theonference, 2010, Montreal,

0 972 7039; fax: +1 330 972

du (D. Mukherjee).

of goods and information from sourcing of raw materialsthrough to the end user. The �Supply Chain Performance�(referred to as SCP hereafter) of a firm refers to the perfor-mance of the various processes included within the firm�ssupply chain function. Supply chain models have predomi-nantly utilized two different performance measures: costand a combination of cost and customer responsiveness(Beamon, 1999). Examples of measures specifically used toassess supply chain performance of a firm include supplierperformance (Davis, 1993), customer satisfaction (Christo-pher, 1994), inventory costs, number of on-time deliveries,product availability performance and customer responsetime (Beamon, 1999). We take a more holistic approach

Buyer–supplier partnership quality and supply chain performance 261

on SCP by adopting a view that SCP includes not only havingsuperior in-bound logistics capabilities, but also superiorcustomer satisfaction.

Since effective and efficient collaboration with externalentities is crucial in the context of supply chains (Bidault &Salgado, 2001) researchers have examined the role of keypartnership components, for example, trust, commitment(Johnston, McCutcheon, Stuart, & Kerwood, 2004), mutualadaptation (Mukherji & Francis, 2008) in models explainingSCP However, with the exception of a few (Fynes, de Burca,& Marshall, 2004; Fynes, de Burca, & Voss, 2005), scantattention has been paid to explore how the partnershipquality, which refers to the perceived realization of ex-pected outcomes arising out of interorganizational relation-ship between the focal firm and its supplier (Lahiri & Kedia,2012), affects SCP.

A good partnership quality between the buyer and itssupplier, based on mutual trust, joint problem solving,and fulfillment of pre-specified promises, helps in avoidingcomplex and lengthy contracts, that are costly to writeand difficult to monitor and enforce (Fynes et al., 2004,2005; Zaheer & Venkatraman, 1995). Firms that rely on highquality partnerships with suppliers are better equipped toadapt to unforeseen changes, identify and produce well-crafted solutions to organizational problems, and reducemonitoring costs, all of which help improve the economicoutcomes (Ryu, Park, & Min, 2007). Given that firms� supplychains are often comprised of multiple actors (e.g.,Cravens, Piercy, & Shipp, 1996; Harland, Zheng, Johnsen,& Lamming, 2004; Hult, Ketchen, & Slater, 2004) empiricalresearch exploring the nature of the partnership of the focalfirm with its suppliers and the performance effect of suchrelationship is an important topic that deserves furtherattention (Cousins & Lawson, 2007; Stuart, 1997). Toaddress this gap in the literature, we examine how the part-nership quality between the focal firms and its supplieraffects focal firm SCP.

In addition, we also argue that the relationship be-tween partnership quality and SCP may not be the sameunder all conditions. Some scholars argue that the rela-tionship between various partnership dimensions of the ex-change partners and subsequent performance may becontingent on other factors (Carson, Madhok, Varman, &John, 2003; Fynes et al., 2005; Krishnan, Martin, &Noorderhaven, 2006). For example, Carson et al. (2003)argued that the effect of trust on performance in verticalR&D collaborations strengthens with the clients� ability tounderstand the tasks involved. Similarly, Lahiri, Kedia, andMukherjee (2012) found that higher partnership qualitybetween the buyer and the supplier leads to increasedperformance benefits when the management capabilityof the focal firm is also high. Collectively, these studiessuggest that the benefits derived from a higher level ofpartnership quality, or relational governance may increaseunder certain circumstances and diminish under other con-ditions. Indeed, as evidenced in the recent call for re-search (Gaur, Mukherjee, Gaur, & Schmid, 2011) there isa greater need to understand and identify the boundaryconditions of relational governance. Consequently, weinvestigate the contingent effects of supply risk, demandrisk, and environmental uncertainty on partnership qual-ity–SCP relationship.

In an environment of risk, future events have probableoutcomes, i.e., the probability of occurrence of futureevents is known and is given by some probability distribution(Milliken, 1987). Uncertainty, as compared to risk, is a con-dition in which it becomes very difficult to predict the like-lihood of various future events (Gaur et al., 2011; Milliken,1987; Sutcliffe & Zaheer, 1998). It is widely posited thatrisks and uncertainty are inherent in supply chain relation-ships (Hult, Christopher, & Ketchen, 2010) Exploring theircontingency effects can help us better understand why cer-tain supply chain partnerships result in higher SCP, whileothers do not. This research contributes to the extant liter-ature in several important ways. First, by integrating re-source-based view (RBV) and relational capital view, weemphasize the importance of partnership quality in deter-mining superior SCP for the focal firm. Previous researchhas analyzed the impact of some relational attributes suchas trust, fit, information and risk sharing, commitment, mu-tual adaptation, etc. on the relational and organizationalperformance (Mukherji & Francis, 2008; Su, Song, Li, &Dang, 2008). We add to the previous literature by consider-ing partnership quality as a higher order construct and rec-ognizing it as an important determinant of SCP. Second, weidentify supply chain risks, demand risks, and environmentaluncertainty as crucial contingencies that may affect therelationship between partnership quality and SCP. In doingthis, we answer the call made by researchers to examinethe boundary conditions that limit the effectiveness of rela-tional governance (Gaur et al., 2011). Third, we contributeto the existing body of knowledge by untangling thedifferential moderating impact of risk and uncertainty onthe above relationship (Blackhurst, Craighead, Elkins, &Handfield, 2005; Craighead, Blackhurst, Rungtusanatham,& Handfield, 2007). We posit that the presence of risks willaccentuate the positive effects of buyer–supplier partner-ship quality on focal firm SCP. However, an environmentfraught with higher levels of uncertainty will weaken thepartnership quality–SCP relationship. Our empirical find-ings, based on a sample of 127 US firms largely supportour results.

The remainder of the paper is presented as follows.First, we conduct a focused literature review and under-score the importance of pertinent constructs used in thisstudy. We develop specific hypotheses based on the theo-retical tenets of RBV, relational capital theory, and TCEliterature. Second, we detail the research design and thedata analysis process utilized in this study. Thereafter,we report the empirical results and present the theoreti-cal and practical implications of the empirical findings.The final section of our paper spells out the limitationsof this study and identifies potential avenues for futurescholarly enquiries.

Literature review

Partnership quality as a relational resource

The RBV of the firm and the relational capital perspectiveserve as the foundation for our study. RBV of the firm arguesthat differential firm performance is fundamentally due tofirm resource heterogeneity (Barney, 1991; Wernerfelt,1984). Resources are defined as stocks of available factors

262 M. Srinivasan et al.

that are owned or controlled by the firm (Amit &Schoemaker, 1993). Capabilities, on the other hand, referto a firm�s capacity to deploy resources, usually in combina-tion with each other to achieve a desired outcome. Firmsthat are able to accumulate resources and capabilities thatare rare, valuable, non-substitutable, and difficult toimitate will achieve a competitive advantage (Barney,1991). Extending the RBV to the current context we contendthat �partnership quality� can serve as a strategic relationalresource for the focal firm (Hult, Ketchen, Cavusgil, &Calantone, 2006). More specifically, �partnership quality� isconceived in this work as a relational resource that mayrender superior performance outcomes.

Extant literature suggests that relationships character-ized by higher partnership quality are associated with mu-tual sharing of business risks, trust, commitment, mutualadaptation, reciprocity, and durability (Lahiri & Kedia,2012; Wu & Cavusgil, 2006). In a recent study, Lahiriand Kedia (2011, p. 3) noted that benefits associated withsuch close partnerships between the focal firm and itssuppliers may include ‘‘customer satisfaction, enhancedperception of fairness and justice, customer loyalty, rela-tionship satisfaction, positive word-of-mouth, repeattransactions and business continuity’’. Firms having trans-actional relationships with their suppliers may not experi-ence such benefits. In addition, the proponents of therelational capital view argue that such close partnershipsbetween the focal firm and its suppliers are hard to repli-cate because of the presence of partner-specific causalambiguity (Dyer, 1996; Lado, Dant, & Tekleab, 2008).Thus, in our study, we consider partnership quality as arelational resource. Our conception is in line with the rela-tional view of the firm that conceives firm�s competitiveadvantage as a function of inter-firm collaboration (Lado,Boyd, & Hanlon, 1997; Lado et al., 2008; Lahiri & Kedia,2011). In addition, we also conceptualize �partnershipquality� as a higher order construct consisting of severaldimensions of relational attributes (Lahiri & Kedia, 2011;Rauyruen & Miller, 2007; Su et al., 2008).

Research indicates that relational governance in generaland partnership quality in particular is critical in organiza-tional cooperation (Dyer & Singh, 1998; Lee, 2001; Lee &Kim, 1999). Close partnerships based on mutual trust andcommitment can reduce transaction costs (Zaheer,Perrone, & McEvily, 1998) and can have positive impact onperformance outcomes. Dyer and Singh (1998) suggestedthat a firm�s critical resources may span firm boundariesand may be embedded in inter-firm resources and routines.Accordingly, we argue that a superior partnership qualitybetween focal firm and its suppliers may have beneficialeffects on SCP. We also argue that the extent to which focalfirm can reap the benefits of such a partnership may becontingent on different types of uncertainty and risks thatare present in the supply chain environment that we discussnext.

Uncertainty and risk

Juttner, Peck, and Christopher (2003, p. 204) defined sup-ply chain risks as a ‘‘variation in the distribution of possi-ble supply chain outcomes, their likelihood, and theirsubjective values’’. These variations or disruptions affect

the flow of information, materials or products across orga-nizations. Wagner and Bode (2008) categorized supplychain risk sources into five distinct classes: (1) demandside; (2) supply side; (3) regulatory, legal and bureau-cratic; (4) infrastructure; and (5) catastrophic. They notedthat ‘‘while the first two risk source categories deal withsupply–demand coordination risks that are internal tothe supply chain, the latter three focus on risk sourcesthat are not necessarily internal to the chain’’ (Wagner& Bode, 2008, p. 310). In this paper, we focus on twotypes of supply chain risks, demand and supply risks thatare internal to supply chain and examine their impact onpartnership quality–SCP relationship.

Along with the risk, environmental uncertainty may influ-ence partnership quality–SCP relationship. Environmentaluncertainty refers to the degree to which firms� externalenvironment in terms of its competitors� actions, technol-ogy, and consumer tastes and preferences, is characterizedby an absence of pattern, unpredictability, and unexpectedchange (Fynes et al., 2004). Such unexpected changes re-quire that firms develop the capability to understand andadapt to environmental changes. Firms need to recalibratetheir strategies and use different rules of engagement be-cause the changes in uncertain environments are often fre-quent and rapid.

In sum, environment uncertainty includes factors thatare external to the supply chain, whereas supply chain risks(supply and demand risks) are internal to the supply chain.The former entails factors that are strategic in nature, forinstance, changes in product or process technology, com-petitor behavior, changes in consumer tastes and prefer-ences, etc. On the other hand, supply and demand risksinclude factors that are pre-dominantly operational in nat-ure (e.g. demand variability, lead-time variability, supplydelays, order cancellations, etc.). Hence supply and de-mand risks can usually be estimated using probability orlikelihood estimation but environment uncertainty cannotbe estimated.

Collectively, the supply chain risks and environmentaluncertainty can result in significant disruptions along thesupply chain, severely impacting a company�s ability to con-tinue operations, accurately fulfill customer orders in atimely manner and provide critical services to end-custom-ers. Similarly, such interruptions and unpredictable marketfluctuations could potentially influence the extent to whichthe focal firm may benefit from close collaboration with itssuppliers. The next section develops specific testablehypotheses to this end.

Hypotheses development

Partnership quality and SCP

A good partnership quality is a crucial precursor for any sta-ble exchange relationship which ensures the relationshipcontinuity (Jap & Anderson, 2003). Close relationshipsbased on trust and cooperation, mutual sharing of risksand benefits, between the buyer and the supplier, may havebeneficial performance effects. Research has shown thatthe quality of relationships between exchange partnershas important performance implications (Gaur et al.,2011; Lee, 2001; Lee & Kim, 1999). For example, increased

Buyer–supplier partnership quality and supply chain performance 263

inter-organizational trust has a positive effect on firm per-formance (Gaur et al., 2011; Zaheer et al., 1998). Relation-ships based on trust between two exchange entitiesallow the bypassing of traditional expensive governancemechanisms. In essence, increased partnership qualitybetween the focal firm and its suppliers may allow thesefirms to avoid formal contracts, which are rather costly towrite, monitor, and enforce (Williamson, 1991; Zaheer &Venkatraman, 1995). In addition, a close bond betweenthe buyer and the supplier enables the buyer to focus onits core competencies without having to worry about therisks associated with opportunism by the partner firm(Williamson, 1985, 1991).

Hult et al. (2006) suggested that four competitive prior-ities, speed, quality, cost and flexibility, are critical in themeasurement of SCP. A good partnership quality betweenthe focal firm and its supplier allows both parties to achievethese performance objectives and build a competitiveadvantage that a stand-alone partner cannot easily accom-plish (Cousins & Lawson, 2007). When the relationship ofthe focal firm with its suppliers is based on trust, effectivecommunication and intimacy, both parties find it easier tounderstand each other�s objectives and expectations which,in turn, improves SCP. Improved supplier performanceshould also ensure that customer order fill rate and cycletime are impacted positively. In addition, if both partnersshare a good relationship, they are likely to be more familiarwith each other�s knowledge-base which enhances theresulting performance.

Conversely, the absence of a good partnership qualitybetween a firm and its supply chain partners implies thattransactions are usually conducted at an arm�s-length. Suchtransactional relationships often fail to motivate suppliersto go beyond their usual capacities and deliver a higher levelof service to the buyer. Collaborative efforts to improvesupplier�s product quality and on-time delivery often havelong-term performance enhancing consequences. In fact,such endeavors may actually help provide better productquality and increased delivery performance to end-users,which, in turn, increase customer satisfaction.

Alliances based on good partnership quality with supplychain partners are typically multifaceted, goal-oriented,and high in cultural compatibility. If an alliance is basedon mutual understanding in which both business risks and re-wards are shared, it can lead to long-term strategic benefitsfor both partners (Gaur et al., 2011; Lahiri & Kedia, 2011;Lahiri et al., 2012). Studies with regard to partnership qual-ity–performance relationship support our contention. Forexample, Narasimhan and Jayaram (1998) observed thathigher levels of buyer–supplier partnership quality lead tosuperior operational performance. Krause, Handfield, andScannell (1998) in their study of reactive and strategic sup-plier development found that the strategic focus on supplierdevelopment brings operational benefits such as shorter or-der cycle times, higher quality levels and increased deliveryreliability. Furthermore, embedded relationships (charac-terized by trust, fine-grained information sharing and jointproblem-solving attributes) lead to many advantages overtransactional relationships. These include the adaptationto unforeseen changes, identifying and producing coordi-nated solutions to organizational problems, reducing moni-toring costs and improving economic outcomes (Dyer,

1996; Dyer & Chu, 2003). Accordingly, we argue that strongbonds between the focal firm and its suppliers should have apositive impact on focal firm�s SCP.

Hypothesis 1. A higher level of partnership quality ispositively related with a higher level of SCP.

Moderating effect of environmental uncertainty

The effectiveness of a collaborative strategy depends on theenvironmental dynamics within which the exchange part-ners are embedded (Fynes et al., 2004; Holweg et al.,2005; Krishnan et al., 2006). Two opposing viewpoints existregarding the effect of environmental uncertainty on ex-change relationships. One view posits that when faced withhigh uncertainty, firms will coordinate their activities moreclosely in an attempt to reduce uncertainty (Pfeffer &Salancik, 1978). The other stream of literature, based onTCE, argues that firms attempt to maximize their flexibilityin uncertain environments by reducing their reliance oninterfirm relationships (Heide & Miner, 1992). Studies sug-gest that perceived environmental uncertainty exertssignificant influence on organizational processes (Sutcliffe& Zaheer, 1998; Williamson, 1985). Unpredictability andsudden changes in the external environment may result inhigh information processing demand for firms (Tushman &Nadler, 1978). TCE-based reasoning suggests that underuncertain circumstances, ex post performance evaluationof the exchange partner is difficult when transactions devi-ate from expectations (Fynes et al., 2004; Williamson,1985). Ex ante, in an environment fraught with uncertaintythe parties to the exchange finds it difficult to develop longlasting and trusting relationships as such relationships in-volve mutual commitment and drafting, negotiating andmonitoring complex contracts (Williamson, 2008).

Although the literature on interorganizational partner-ship has been relatively equivocal on depicting the positiveeffect of superior partnership quality on performance(Lahiri & Kedia, 2011), the contingency perspective high-lights the importance of uncertainty faced by a firm as aninfluence on the nature of partnership quality–performancerelationship. Some scholars argue that very close-knittedpartnerships can also have a negative impact on perfor-mance (Krishnan et al., 2006; McEvily, Perrone, & Zaheer,2003). We argue that increased environmental uncertaintymay limit the efficacy of partnership quality as a relationalresource. Partnership quality as a relational resource mayimpact organizational performance by promoting betterinformation/knowledge exchange, improved partner com-mitment, enhanced coordination, and by reducingtransaction costs associated with expensive monitoringmechanisms (Krishnan et al., 2006; Lado et al., 1997). How-ever, under conditions of enhanced uncertainty the benefitsof a good quality partnership may not be achieved.

Under conditions of uncertainty a complete and accuratescanning of external environment is critical. Superior part-nership quality may involve excessive and often blind reli-ance on external information gathered by the exchangepartners. As uncertainty limits the information processingcapability of partners, inaccurate and incomplete informa-tion may result in sub-optimal decision making. Krishnanet al. (2006, p. 898) observed that under uncertain

264 M. Srinivasan et al.

conditions, the exchange partners may even prefer inaction‘‘culminating in their alliance failing to respond to demandsof its environment’’. Reliance on a partner without properchecks may also cause strategic blindness which constrainsthe ability to scan the external environment effectivelyand efficiently (McEvily et al., 2003). Thus, a high level ofenvironmental uncertainty may lead to increased risk ofopportunistic behavior by the partners, and consequentlyreduced value of relationship-specific resources in a trans-action relationship (Gaur et al., 2011).

The failure to foresee pertinent contingencies in uncer-tain environments creates difficulties for a focal firm incoordinating the relationships with its suppliers. This nega-tively affects the focal firm�s ability to assess supplierperformance (Williamson, 2008). To the extent that envi-ronmental uncertainty leads to communication and moni-toring distortions, it may have significant negativeinfluence on partnership quality–SCP relationship. Con-versely, in a more stable environment it may be easier forthe focal firms to exchange information, evaluate supplierperformance, and gauge the relevance of mutual organiza-tional objectives. In other words, under conditions of lowenvironmental uncertainty, exchange partners can makebetter judgments about the external environment leadingto enhanced effectiveness of partnership quality. Thus, weexpect the positive relationship between partnership qual-ity and SCP to be weaker when the environmental uncer-tainty is higher.

Hypothesis 2. The lower the environmental uncertainty,the stronger the positive relationship between partnershipquality and SCP.

Moderating effect of demand risks

Demand risk is any risk associated with the outbound logis-tics flows and product demand, which can be caused eitherby inbound disruptions or other factors such as seasonality,volatility of fads, new product adoptions or short productlife cycles (Johnson, 2001). Demand side risks may also stemfrom mismatch between a company�s forecasts and actualdemand as well as from poor supply chain coordination.The consequences of such disruptions are costly shortages,obsolescence, and inefficient capacity utilization (Wagner& Bode, 2008).

In order to effectively deal with the demand side risksand manage or mitigate some of the negative effects of suchrisks on SCP, there is an incentive for the focal firm to formstrong partnerships with the supply chain partners. Strongrelationships enable firms to be more efficient and effectivein producing and delivering better quality products and ser-vices, which, in turn, reduces transaction costs (Walter,Muller, Helfert, & Ritter, 2003). Such partnerships could re-sult in better coordination and information sharing amongthe partners which could mitigate some of the risks and leadto superior SCP (Hsu, Kannan, Tan, & Leong, 2008; Kannan &Tan, 2006).

A superior quality supplier partnership is characterizedby the expectation that partners in an exchange will notact opportunistically even under conditions of high vulnera-bility (Krishnan et al., 2006). The notion of relational

governance is inherently connected to situations of risk(Mayer, Davis, & Schoorman, 1995) where parties associatedwith the exchange rely on each other. The ambiguity inher-ent in the concept of risk may compel supply chain partnersto be more relationally oriented as reliance on relationalgovernance may mitigate concerns related to fluctuatingmarket demands. When such fluctuations are associatedwith customer behavior, the focal firm may need to workmore closely with its suppliers to ensure flexibility underconditions of high risk. Scholars have found relational gover-nance to be less expensive in mitigating transaction relatedhazards under risky conditions (Mayer et al., 1995). Cooper-ative steps such as greater information sharing, mutuallybeneficial decision making, joint problem solving with thesuppliers may improve SCP under conditions of high demandside risk. On the contrary when no risk is involved, the needsfor such an intimate supplier bonding cease to exist. Thisdynamic suggests the following:

Hypothesis 3. The greater the demand side risk, thegreater the positive relationship between partnership qual-ity and SCP.

Moderating effect of supply risks

Supply risk has been defined as ‘‘the potential occurrence ofan incident associated with inbound supply from individualsupplier failures or the supply market, in which its outcomesresult in the inability of the purchasing firm to meet cus-tomer demand or cause threats to customer life and safety’’(Zsidisin, 2003, pp. 14–15). In other words, supply risk is thehazards associated with supplier activities and in generalsupplier relationships (Zsidisin, Panelli, & Upton, 2000, p.187). Supply risk may include supplier business risks, pro-duction capacity constraints on the supply market, qualityproblems, and changes in technology and product design(Zsidisin et al., 2000).

The transaction cost based prescription to deal with sup-ply risk, similar to demand risk, is to internalize the opera-tions that create this risk. However, there are costsassociated with internalization which may be prohibitivelyhigh. An alternative to internalization is to develop closercoordination and collaboration with the supply-chain part-ners. When there is supply scarcity for certain items andsources of supply are constrained, there is a greater needfor firms to enter into strategic relationship with suppliers(Kraljic, 1983; Lamming, Cousins, & Notman, 1996). Suchitems need to be classified as strategic procurement itemsdue to their high profit impact and/or high supply risk andthat calls for a radically different procurement strategy,characterized by long-term partnerships with suppliers.Reliance on frequent and long term exchange relationshipwould minimize the transaction hazards associated with ris-ky situations. There is a perceived need for both partieswithin a supply contract to assess the relationship jointly,in order to work together to improve their performanceand value adding potential (Lamming et al., 1996). Indeed,in the face of supply risks, firms tend to adopt relationalpractices such as fairness, loyalty, and seek out responsive,dependable, and like-minded suppliers (Ellegaard, 2008).This leads to the following hypothesis:

Figure 1 Theoretical model.

Buyer–supplier partnership quality and supply chain performance 265

Hypothesis 4. The greater the supply side risk, the greaterthe positive relationship between partnership quality andSCP.

Figure 1 delineates the theoretical relationships dis-cussed above.

Methods

Sample and data collection

We collected the data for the research study through a web-based electronic survey. We pre-tested the survey instru-ment by administering it to attendees at an annual supplychain event at the one of the author�s academic institution.The attendees at this event included executives working inthe field of supply management at local businesses. Basedon the feedback received from the pre-testing, some ques-tions were modified to make them clearer, and some lessrelevant items were deleted. We sent the final survey toexecutives of the Institute of Supply Management (ISM –also called the National Association of Purchasing Managers,NAPM) affiliates throughout the United States. ISM is thelargest supply management association in the world.1 Theexecutives of ISM affiliates are supply management profes-sionals working for various firms and the respondents sur-veyed were asked to respond in their capacity asexecutives/officers in those firms.

We sent out the first round of survey invitations in thefirst week of June 2009 via email. This was followed up withtwo reminders, each within a gap of 2 weeks after the pre-ceding survey invitation. A total of 1357 emails were sentout. Out of these, 230 emails were returned as undeliver-able. 147 partially complete responses were received, giv-ing a response rate of 13.04% (147/1127). However, forthe final analysis we retained only complete responses.Thus, the final sample size was 127. We tested for thenon-response bias by comparing the early and late respon-dents (Armstrong & Overton, 1977). There were no signifi-cant mean differences between these two groups on keymeasures such as firm size and industry affiliation.

1 As reported by ISM on their website: www.ism.ws.

Survey instrument

Measures of constructs were gathered from the extant liter-ature and suitably adapted, wherever needed, to fit our re-search context. A total of 32 survey items (shown inAppendix 1) were used to measure independent, dependent,and moderating variables used in this study.

Independent variableWe measured Partnership quality using a five item scalethat included questions about the executives� perceptionof the extent of close working relationship they maintainwith their external vendors. Respondents were asked toindicate their choice on a scale of 1–5 where 1 represented‘‘strongly disagree’’ and 5 represented ‘‘strongly agree’’.Scale items were adopted from the measure of partnershipquality developed by Lahiri et al. (2012).

Moderating variablesFor demand risk, we developed a five-item scale. One of themeasures – ‘‘Inability or unwillingness of your customer toshare their demand and/or stock level information’’ – wasadapted from the measures used in Wagner and Bode(2006). Three other measures – ‘‘Request from customerto delay shipment of an order’’, ‘‘Cancellation of an orderfrom customer’’ and ‘‘Request from the customer to expe-dite pending order(s)’’ were adapted from Hendricks andSinghal (2003). One measure – ‘‘Unusual payment delaysfrom the customer end’’ was developed based on our inter-actions with executives through the pre-testing of the sur-vey instrument. All the items were based on five-pointLikert-type scale (1 = very high frequency; 5 = very lowfrequency).

For supply risk, again a five-item scale was developed.Three of the measures – ‘‘Delivery delays from your sup-plier’’, ‘‘Quality problems with materials delivered or ser-vices provided by your supplier’’ and ‘‘Disruption of yoursupplies on account of loss of production capacity or down-time at your supplier�s end’’ were adapted from the mea-sures used in Wagner and Bode (2006). Two of themeasures – ‘‘Disruption of supplies due to constrainedsources of supply on account of high overall industry de-mand for materials or components being procured’’ and‘‘Substantial price fluctuation in materials or services beingprocured’’ – were developed based on our interactions withexecutives through the pre-testing of the survey instru-ment. All the items were based on five-point Likert-typescale (1 = very high frequency; 5 = very low frequency).

We developed our construct of environmental uncer-tainty following the definitions proposed by Duncan (1972)and Milliken (1987) and adopted by Gaur et al. (2011). Weused three additional items which asked the respondentsabout the product/service obsolescence, rate of change ofproduction technology in the industry and the rate of tech-nological advances in the industry. Finally, we used oneindicator to assess the competitor�s actions in the industry.Respondents were asked to indicate their choice on a Likerttype scale of 1–5.

Dependent variableWe measured SCP using a six item scale that included ques-tions about the executives� perception of their firm�s SCP in

266 M. Srinivasan et al.

the last 2 years with respect to close competitors. Respon-dents were asked to indicate their choice on a scale of 1–5 where 1 represented ‘‘significantly lower’’ performanceand 5 represented ‘‘significantly higher’’ performance.Three of the scale items – ‘‘your customer order cycletime’’, ‘‘your customer order fill rate’’ and ‘‘your customeron time delivery’’ performance were adapted from measureof performance developed by Wagner and Bode (2008)which was previously used in the context of the examinationof SCP along several dimensions of risks. Three other scaleitems – ‘‘your supplier delivery performance’’, ‘‘inventoryturnover’’ performance and ‘‘supply chain/logistics costs asa percentage of sales’’ were developed based on our inter-actions with executives through the pre-testing of the sur-vey instrument.

Control variableConsistent with previous organizational research, firm size(natural logarithm of annual revenue) was entered as con-trol variable.

Results

Scale reliability

We tested the reliability of our scales using ExploratoryFactor Analyses (EFA), and Cronbach alpha coefficients(Cronbach, 1951). The EFA on our data presented us withclean factors after we removed two reverse coded itemsfrom the scale of SCP. Results showed that rest of themeasured items loaded on the expected components.EFA showed that one component was extracted for eachvariable based on Eigen values greater than one. The highcommunalities showed that the majority of the measures�variance was being explained by the constructs and indi-cated item appropriateness (Pedhazur & Schmelkin,1991).

The Cronbach alpha for the scales was as following: SCP(0.725), uncertainty (0.727), supply side risk (0.758), de-mand side risk (0.768), partnership quality (0.873). All ofthe Cronbach alpha values are higher than the cutoff valueof 0.70 as suggested by Nunnally (1978). The Cronbach alphavalues of our scales provide reasonable confidence aboutthe scales reliability as scholars have shown that the Cron-bach alpha values are similar to the composite factor reli-ability that can be obtained using confirmatory factoranalysis.

Table 1 Descriptive statistics and correlations.a

Variables Mean Standard deviation 2

1. SCP 3.39 0.57 –2. Sizeb 7.21 2.383. Uncertainty 2.82 0.734. Supply side risk 2.35 0.60 �5. Demand side risk 2.35 0.746. Partnership quality 3.68 0.82a N = 127, Pearson correlations >0.18 or <�0.18 significant at 0.05 leb Natural logarithm of firm sales.

Hypotheses testing

Table 1 provides the descriptive statistics and correlationmatrix. As can be seen from Table 1, none of the correla-tions are high enough to warrant any problem ofmulticollinearity.

Table 2 presents the results of our regression analyses.We tested our hypotheses using multiple hierarchicalregressions. Models 1–5 in Table 1 present our analysisof the antecedents of SCP. In Model 1, we enter onlythe main effect variables and the control of firm size. InModels 2–4, we enter the interaction of partnership qual-ity with uncertainty, demand risk and supply risk, respec-tively. In Model 5, we enter all the interaction effectstogether to see the stability of our results. As can be seenfrom Table 2, there is significant improvement in model fitin all the models other than Model 4, when we enter aninteraction term. This provides further confidence thatour results are not spurious. Hypothesis 1 predicted a po-sitive relationship between partnership quality and SCP.The coefficient on partnership quality in Model 1 is posi-tive and significant, giving support to Hypothesis 1.Hypothesis 2 predicted a negative interaction betweenpartnership quality and uncertainty in affecting SCP. Thecoefficient on the interaction term is negative and signif-icant in Model 2, giving support to our argument that thepositive effect of partnership quality on SCP weakenswhen there is a greater level of uncertainty. Hypothesis3 predicted a positive interaction between partnershipquality and demand risk in affecting SCP. The coefficienton the interaction term is positive and significant in Model3, giving support to our argument that the positive effectof partnership quality on SCP is stronger when firms facegreater demand side risk. Hypothesis 4 predicted a posi-tive interaction between partnership quality and supplyrisk in affecting SCP. Even though the coefficient on theinteraction term is positive, it is not significant. Thus,Hypothesis 4 is not supported. Further, these relationshipsare reasonably robust in Model 5, when we enter all theinteraction terms together, giving confidence in ourfindings.

To further illustrate the nature of interaction, we plotthe significant interaction effects in Figures 2 and 3. Asdepicted by the relative slopes of the two lines in Figure 1,the relationship between partnership quality and SCP per-formance is stronger when there is low level of uncer-tainty as compared to high level of uncertainty.

3 4 5 6 7

0.03 –0.20 �0.05 –0.04 �0.05 0.10 –0.14 �0.11 0.08 0.39 –0.18 �0.09 �0.09 �0.28 �0.18 –

vel.

Table 2 Results of OLS estimation.

Variables DV–SCP

Model 1 Model 2 Model 3 Model 4 Model 5

Beta S.E. Beta S.E. Beta S.E. Beta S.E. Beta S.E.

Constant 1.94*** 0.47 �0.21*** 0.99 4.01*** 1.01 2.11* 1.04 1.43 1.76Sizea 0.01 0.02 0.02 0.02 0.01 0.02 0.01 0.02 0.01 0.02Uncertainty (Unc) 0.20** 0.07 0.85** 0.28 0.15* 0.07 0.20** 0.07 0.66* 0.30Supply side risk (SR) �0.06 0.09 �0.03 0.09 �0.09 0.09 �0.13 0.36 0.14 0.36Demand side risk (DR) 0.16* 0.07 0.19** 0.07 �0.60� 0.34 0.15* 0.07 �0.41 0.38Partnership quality (PQ) (H1) 0.16* 0.06 0.67** 0.22 �0.33 0.22 0.12 0.24 0.29 0.41RQ * Unc (H2) �0.17* 0.07 �0.13� 0.08RQ * DR (H3) 0.20* 0.09 0.16� 0.10RQ * SR (H4) 0.02 0.09 �0.05 0.10

Adjusted R2 0.091 0.126 0.122 0.083 0.131DR2 0.041** 0.037* 0.00 0.059**

N = 127.a Transformed to natural logarithm.� p < 0.10.* p < 0.05.** p < 0.01.*** p < 0.001.

Figure 2 Moderating effect of relationship quality anduncertainty on supply chain performance.

Figure 3 Moderating effect of relationship quality anddemand side risk on supply chain performance.

Buyer–supplier partnership quality and supply chain performance 267

Likewise, Figure 2 depicts that partnership quality has astronger positive effect on SCP when demand risks arehigh.

Discussion and conclusion

Effective management of supply chain plays an importantrole in contributing to competitive advantage for firms. Toensure effective management of supply chains, many firmsare focusing on exploiting collaborative advantages byclosely working with their key suppliers. Such closepartnerships often allow focal firms to bypass additionaltransaction costs associated with �arm�s length supplierrelationships. However, supply and demand risks inherentin supply chains, and uncertainties characterized byrapidly changing external environment, may enhance or

worsen the benefits associated with such closely-knit part-nerships. Therefore, the existing literature has identified agreater need to understand the boundary conditions ofbuyer–supplier relationships characterized by superiorpartnership quality.

In this paper we set out to address this void in the liter-ature. Drawing from RBV-based relational view we augmentour understanding of the effect of supply chain partnershipquality on SCP. In addition, by integrating TCE with the rela-tional view, we examined the moderating effect of differentforms of risks (demand and supply risk) and environmentaluncertainty on the partnership quality–SCP relationship.In doing so, we shed light on two interrelated research ques-tions: (1) does higher partnership quality lead to enhancedSCP, (2) how do supply risk, demand risk, and environmentaluncertainty moderate the relationship between partnershipquality and SCP?

268 M. Srinivasan et al.

Our results demonstrate a positive relationship be-tween partnership quality and SCP. This is in line with ear-lier findings pertaining to the relational advantageperspective of the firm (Dyer, 1996; Fynes et al., 2004;Lado et al., 2008; Lee, 2001). Furthermore, evidence ofhigher demand side risk resulted in a stronger positiverelationship between partnership quality and SCP. Thiscorroborates with earlier findings that closely-knit part-nerships could lead to better coordination and informationsharing among the partners which could mitigate some ofthe demand side risks and lead to superior SCP (Hsu et al.,2008; Kannan & Tan, 2006). By including partnership qual-ity in our research as a useful relational resource whichfirms can develop over time, we have added to the evolv-ing partnership-based studies in the domain of buyer–sup-plier literature (Lahiri & Kedia, 2011). In particular, ourfindings draw attention to the importance of consideringthe nature of partnership in tandem with supply chainrisks and external uncertainty in determining perfor-mance. This research has undertaken an endeavor to en-rich this growing body of knowledge.

We did not find a significant the moderating effect ofsupply risk on the relationship between partnership qualityand SCP. One reason for the insignificant moderating ef-fect of supply risk could be that, unlike demand-side risks,perceived supply-side risks do not affect an already clo-sely-knitted buyer–supplier partnership quality. In otherwords, if the partnership quality is high, the focal firmmay continue relying on its suppliers regardless of theexistence of supply-side risks. The finding that existenceof demand risks strengthens the partnership quality–SCPrelationship indicates that in the presence of risks, ex-change partners rely more on each other to help boostperformance. As we have generally argued that underhigher levels of risks, the performance enhancing effectsof high levels of partnership quality are magnified whentrust rather than formal governance mechanisms such ascontracts are used. With the increase in risks partnersneed to adapt and require the enhanced flexibility andbehavioral confidence of relational exchanges (Cannon,Achrol, & Gundlach, 2000; Palmatier, Dant, & Grewal,2007).

In addition, we found that the positive relationship be-tween partnership quality and SCP is weakened when envi-ronmental uncertainty is higher. This finding cautions usabout the unconditional use of relational governance whenenvironmental uncertainty is high. In addition, the differen-tial moderating impact of risk and uncertainty found in thisstudy also adds to the growing body of literature that ex-plores the role of risk and uncertainty in the supply chaincontext (Blackhurst et al., 2005; Craighead et al., 2007;Hult et al., 2010). Broadly, our findings uphold the intellec-tual movement that contends that a firm�s superior perfor-mance (competitive advantage) sometimes arises not fromthe firm itself, but from inter-firm sources of advantage,in this case, the quality of partnership between supply chainpartners (Dyer, 1996; Kedia & Mukherjee, 2009; Lado et al.,1997; Lahiri & Kedia, 2011).

Important managerial implications emerge for both thefocal firms and their supply chain partners. Top managersfrom partner organizations need to develop and maintaingood quality partnerships since this was shown to have a

positive effect on SCP. Ideally, supply chain partners needto move from a formal contractual relationship to a morerelational form of governance as our research has shownthat reliance on relational governance creates value andsuperior performance (Kedia & Mukherjee, 2009). The sup-ply chain partners should also understand that uncertaintyarising from the business environment may negatively im-pact the performance of their supply chain partnership.Thus, top managers from both firms need to continuouslyexamine environmental uncertainty and to devise strate-gies to mitigate the potentially negative impact of thesefactors on supply chain performance. Appropriate mea-sures should be taken by the managers, such as proactiveenvironmental scanning, or proactive planning to create amore stable environment, since it may be easier for thefocal firms to collaborate and coordinate in such an envi-ronment leading to enhanced effectiveness of the partner-ship quality. Managers must also understand that goodquality partnerships could be the key to dealing withand mitigating some of the common inherent demand siderisks.

Limitations and suggestions for future research

Although this study presents some important findings andcontributions, these should be interpreted in light of somelimitations which open up avenues for future research.First, the scope of this study was restricted to purchas-ing/sourcing executives within the United States. By sur-veying only purchasing/sourcing executives, this researchis restricted to studying the relationship between partner-ship quality and SCP in the presence of risks and uncer-tainty only between the focal firm and its upstreamsuppliers. Consequently, extension of this research toother countries, and extension of this study�s frameworkto the partnership between the focal firm and itsdownstream supply chain partners (distributors/consum-ers) is needed to examine the external validity of ourfindings.

Second, our data was collected using a survey. Thisraises concerns about the reliability of some of the sub-jective measures such as SCP. However, a survey wasnecessary to collect SCP data as published sources ofSCP are not available. Relatedly, the cross-sectional de-sign of this study did not allow for the investigation ofthe proposed relationships over a longitudinal time-frameand thus we should be somewhat cautious about the cau-sal inferences. However, �[a] cross-sectional approach issometimes inevitable when a survey methodology is used�(Armstrong & Shimizu, 2007, p. 977). Future studiesshould consider the usage of archival data and longitudi-nal research design to cross-validate the findings of thisresearch endeavor. Finally, future studies may also inves-tigate the effect of other types of supply chain risks onpartnership quality and SCP. We chose to focus on a par-simonious model involving partnership quality, supply anddemand risks, environmental uncertainty, and supplychain performance for the sake of increased focus andbrevity.

Despite these limitations this study makes importantcontributions to the buyer–supplier literature in terms

Buyer–supplier partnership quality and supply chain performance 269

of providing a more fine-grained understanding of thenature of supply chain partnerships, resulting performancebenefits, and boundary conditions of such performancebenefits. As research pertaining to supply chain manage-ment continues to grow we hope this study sets the foun-dation for further theoretical and empirical research inthis important domain.

Acknowledgements

The article benefited greatly from comments and adviceprovided by the editor, Herve Laroche, as well as two anon-ymous reviewers.

Supplementary data associated with this article can be

Appendix A. Supplementary data

found, in the online version, at doi:10.1016/j.emj.2011.02.004.

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nce 271

MAHESH SRINIVASAN is an Assistant Pro-

fessor at the University of Akron. Hereceived Ph.D. in Business Administrationfrom the Pennsylvania State University. Hisresearch interests include supply chain andoperations management with particularfocus on interorganizational relationships.He has made several regional, national andinternational conference presentations andhis work has appeared in Journal of Business

Logistics and Supply Chain Practice Journal.

Buyer–supplier partnership quality and supply chain performa

DEBMALYA MUKHERJEE is an AssistantProfessor at the University of Akron. Hereceived Ph.D. in Business Administrationfrom the University of Memphis. Hisresearch interests include internationalbusiness and management with particularfocus on interorganizational relationships.He has made several regional, national andinternational conference presentations andhis works have appeared in Asia-Pacific

Journal of Management, Journal of Management Studies, Journal

of World Business, and Leadership and Organization DevelopmentJournal.

AJAI S. GAUR is an Assistant Professor at theRutgers University. He holds a Ph.D. inBusiness Policy and Strategy and a Ph.D. inManagement. His research interests lie atthe intersection of strategy and interna-tional business. His works have appeared inoutlets such as Journal of Management,Journal of Management Studies, Manage-ment International Review, British Journalof Management and European Journal of

Marketing among several others.