Coopetitive Buyer–Supplier Relationship: An Investigation of Bargaining Power, Relational Context, and Investment Strategies

Anand Nair · Ram Narasimhan · Elliot Bendoly

81 citations0/0 files storedDecision Sciences

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Business Strategy and Innovation Merger and Competition Analysis Supply Chain and Inventory Management

Abstract

ABSTRACT This study proposes an analytical approach combined with a behavioral experiment for a joint examination of the competitive and cooperative (i.e., coopetitive) relationship between a buyer and a supplier. Specifically, the article considers the scenario in which the buyer and the supplier invest in strategic capabilities to increase their relative bargaining power. The article examines how dynamic investments in strategic assets are influenced by the locus of bargaining power and by the underlying context (synergistic vs. adversarial) of the interfirm relationship. The dynamic evolution of bargaining power is also examined. A dynamic game model is considered to examine the evolution of investment strategies in critical resources and to investigate the issues of bargaining power in a buyer–supplier dyad. Equilibrium expressions for the investment strategies of the buyer and the supplier are presented and their implications for buyer–supplier relationships are examined. The behavioral experiment complements the analytical model and examines the correspondence between optimal behavior suggested by the analytical model and the boundedly rational behavior of decision makers in an experimental context. The results from the model and behavioral experiments suggest that the strategies are a function of the risk‐adjusted returns obtained from investments. The experiment shows that, in a synergistic relational context when the buyer maintains bargaining power, the investment shifts of the buyer and the supplier accord well with theoretical predictions. In an adversarial relational context, the results of the experimental study do not correspond well with that predicted by the theoretical model. The implications of the results are discussed and directions for future research are presented.

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References

1986The Economic Institutions of Capitalism 1998The Relational View: Cooperative Strategy and Sources of Interorganizational Competitive Advantage 1997Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness 1986The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration 1979The External Control of Organizations: A Resource Dependence Perspective 1972A Garbage Can Model of Organizational Choice 1962Power-Dependence Relations 1990Property Rights and the Nature of the Firm

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