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

accompanies any innovation, according to the extant marketing literature (Kohli &
Jaworski, 1990). Our findings are that supplier responsiveness does reduce IdRR. This is an
important insight for managers because of the widespread management assumption that
innovation or market orientation is positively associated with risk (Slater & Narver, 1995).
This insight can be used by marketing managers to communicate to senior management the
dual benefits of being market oriented. First, for the buyers and suppliers it is a means of
reducing their own IdRR; second, for suppliers it is a means of increasing brand value, and
third, for buyers it is a means of increasing their profits. Further, both suppliers and buyers
can convince management to give marketing managers greater budgets for market
orientation.
From our review of the literature, we have found that innovation is generally
considered to be a process that is involved with risk. Evidence from the business world in
an inter-organizational context suggests otherwise. Consider the list of brands on both the
Interbrand B2B brand rankings and BusinessWeek’s innovation index (BusinessWeek,
2012). Brands such as Intel that follow an ingredient branding strategy through accelerated
innovations not only secure a competitive position in the marketplace, but also add
customer value and insulation from risk. But not all brands follow an ingredient branding
strategy. In that case, we suggest that buyer firms choose those ingredient suppliers who
reduce their IdRR. A strategic supplier status is normally conferred after a thorough
examination of the strategic supplier’s capabilities, we believe that IdRR is an important
indicator to check for potential value creation from the relationship.
2.8.3 Understand the Customer Business Process Specifically Related to IdRR
For business managers, an oft-repeated mantra is understanding their customers. At a
general level, this is an expensive and time-consuming exercise. Therefore, as a rule of
thumb, for suppliers it should represent a sustainable business volume from which they can
acquire their returns. The next step would be to focus on IdRR. Managers need to map the
business processes which cause the most potential risk to their relationship. Trade-offs need
to be made in terms of time and cost effectiveness. For instance, consider the Caterpillar
and Linamar strategic relationship. Linamar is an expert in “collaborative design,
development and manufacture of precision metallic components, modules and systems for
global vehicle markets” (Marketwire, 2007). Through their market-sensing mechanism
Linamar has been able to considerably reduce Caterpillar’s IdRR and help them to maintain
the quality they offer to the market. Likewise, Caterpillar has a “partners in quality”
program by which it ensures regular interaction with its key customers to facilitate the
smooth flow of operations. To summarize, customer understanding is a key component to
reducing IdRR and ensuring relational benefits.
2.8.4 Responsiveness as a Strategy for Sustainable Brand Equity
Strategic supplier responsiveness is an investment in creating idiosyncratic market-based
assets. As illustrated by our model, strategic supplier responsiveness reduces IdRR. In turn,
IdRR positively effects supplier brand value. Hence, supplier brand value is increased by
idiosyncratic relational risk reduction. From the buyer’s perspective, it is difficult to find an
immediate replacement for the supplier because IdRR is reduced by the idiosyncratic
responses of the supplier. These are developed over time by the supplier and are unique.
According to the resource-based view of the firm, assets that are inimitable, rare, valuable,
lack perfect substitutes can be sources of competitive advantages for the firm. Following
that line of thought, the brand value that is created for the supplier is a competitive
resource. It is sustainable because of the difficulty that competitors would have in creating
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