Essays on supplier responsiveness and buyer firm value - Nyenrode ...

IdRR: We will briefly address the IdRR definition again to make the domain specification
unequivocal. IdRR is the specific risk that arises as a consequence of the supplier/buyer business
relationship. A business relationship involves the value created by the marketing process as well as all
of the core business processes which create customer value (Srivastava, Shervani, & Fahey, 1999). To
be specific, there are three core processes: new product development process (NPD), supply chain
management process (SCM), and customer relationship management (CRM), which is also referred to
as marketing process. Hence, IdRR incorporates the idiosyncratic risk that is generated by all three
aforementioned core business processes, while trying to generate value in a supplier and buyer
relationship.
There is a convergence of opinion in the marketing literature about the three core business
processes as primary creators of value for a business enterprise. For instance, Porter (1985) terms them
primary activities in the value chain. Three of the primary activities of Porter’s value chain, namely
inbound logistics, operations, and outbound logistics, correspond with the SCM and NPD business
processes, whereas sales, marketing and service correspond with CRM. Similarly, Lehmann and Jocz
(1997) agree that these three core business activities, in addition to market orientation, are the focus of
marketing or value creation for the customer. In summation, based on the above literature synthesis,
the three core business activities involved in customer value creation are NPD, SCM, and CRM.
Therefore, we also accept them as the core business activities in this dissertation.
The next step is to determine whether IdRR is composed of three sub-components or one
general factor that measures idiosyncratic risk because of NPD, SCM, and CRM. Srivastava et al.
(1999) suggest that the three core business processes are “not independent” of each other while
creating value for the customer (p. 169). Moreover, all of the core business processes must be
interdependent upon each other in order to create customer value (Srivastava et al., 1999). Hence, the
three core business processes create value by a shared mutual process. Furthermore, the mutual
process of value creation involves a mutually shared idiosyncratic risk that threatens value creation by
the supplier and buyer relationship. Therefore, we measure IdRR by one common latent factor for the
risk that results from all three core business processes. In addition, informal conversations with some
customers revealed a lack of face validity for three separate sub-component IdRR processes, but face
validity was present for a single general IdRR factor. Hence, in this research, we use a single latent
factor to measure IdRR.
Subsequently, we generate scale items that comprise the domain of IdRR. Based on a literature
review, we selected components of the three core business processes to measure IdRR. From the
literature review, we selected two studies with which to create a measure of IdRR, namely Day (1994)
and Srivastava et al. (1999). We decided to use the Srivastava et al. (1999) study for item generation
because it explicitly focused on the linkage of value creation by business processes and the resulting
risk. Our next step was to create the items that measured IdRR and were caused by the CRM, SCM,
and NPD value creation processes. The SCM processes that measure IdRR are controlling
manufacturing costs, inventory management, resolution of problems that arise in the relationship,
simplifying processes and reducing uncertainty by investments. Similarly, the NPD processes that
measure IdRR supplier investments in the buyers’ NPD capabilities, and the sharing of market
intelligence about markets where the buyers operate. The CRM processes that involve IdRR are the
service quality, resolving relational problems caused by the supplier, investment in technology for
efficiency, channel and distribution decisions, cooperation in the reduction of sales costs, sharing of
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