Gulati & Sytch 2007

Dependence Asymmetry and Joint Dependence in Interorganizational Relationships: Effects of Embeddedness on a Manufacturer’s Performance in Procurement Relationships

* Abstract

The procurement relationships of two major U.S. auto manufacturers

Two dimensions of organizational interdependence

1) Dependence asymmetry (power), the difference in actors’ dependencies on each other in a dyadic exchange relationship

2) Joint dependence (embeddedness): the sum of dependence between actors in the relationship

Joint dependence mediated by specific elements of embeddedness: (1) joint action, (2) trust, and (3) the quality and scope of information exchange

Dependence asymmetry  mediated by specific elements of power: (1) the conditions of a manufacturer’s and (2) a supplier’s dependence advantage,

2-1) Joint dependence enhances the performance of procurement relationships for manufacturers 

2-2) This effect is partially mediated by (1) the level of joint action and (2) the quality of information exchange between the partners

1) Manufacturer’s dependence advantage diminishes its performance

2) Supplier’s dependence advantage has a null effect

* Introduction

Interdependence between actors as a liability that needed to be managed (Pfeffer, 1972; Benson, 1975; Pfeffer and Nowak, 1976; Provan, Beyer, and Kruytbosch, 1980) because unequal dependence would cause power imbalances likely to be detrimental for the weaker actor (e.g., Thompson, 1967; Stolte and Emerson, 1976).

Emerson (1962), however, distinguished 

1) Joint dependence in a dyad, or the sum of actors’ dependencies on each other (Cohesion)

2) Dependence asymmetry, or the difference in actors’ dependencies on each other (Power advantage)

Emerson’s structural dichotomy allows interdependence to vary simultaneously across both dimensions, treating interdependence as a non-zero-sum game

Previous research: Drawn only to the implications of dependence asymmetry and its related power dynamics

The logic of embeddedness: Higher levels of joint dependence -> the increase of the depth of economic interaction between exchange partners, jumpstarting a stronger relational orientation (Mizruchi, 1989; Zaheer and Venkatraman, 1995; Uzzi, 1996, 1999)

Both from (1) the infusion of sentiment into highly dependent relationships, leading them to become less instrumental (cf. Abel, 1930; Lawler and Yoon, 1993), and from (2) the more calculative rationale of actors who now have a higher stake in maintaining a smooth relationship (e.g., Mizruchi, 1989; Heide and Miner, 1992)

The increased relational orientation -> Increased levels of joint action, higher trust between partners, and a more advantageous information exchange in the dyad.

how actors benefit from being in a position of power and claiming greater value in a distributive process

+ How different facets of interdependence may have an impact on the total value created in the relationship and affect the performance of the exchange partners

Casciaro and Piskorski (2005)

How different facets of interdependence contribute to a firm’s ability to manage external constraints stemming from dependence

1) Both dependence asymmetry and joint dependence create a motivation for absorbing constraints resulting from dependence, 

2) Joint dependence provides weaker firms with a greater ability to deal effectively with the resistance of a more powerful partner and to successfully absorb the constraints through a merger

The logic of embeddedness underlying joint dependence was thus not fully separated from the logic of power and, as a result, was much less fully explicated; moreover, this logic’s implications for firms’ performance in exchange relationships have yet to be considered.

The prism of power and influence

As the use of power and punitive actions (Kumar, Scheer, and Steenkamp, 1998), coerciveversuss non-coercive strategies (Gundlach and Cadotte, 1994), conflict levels (Kumar, Scheer, and Steenkamp, 1995), constraint absorption (Casciaro and Piskorski, 2005), and residual feelings of conflict (Gundlach and Cadotte, 1994) 

How auto manufacturers can exploit weaker suppliers in this industry to obtain superior economic returns (Perrow, 1970; Dore, 1983)

Dore (1983) emphasized the non-adversarial nature of jointly dependent ties

MacDuffie and Helper (1997) showed how the tight collaborations between the manufacturer and suppliers benefited Honda through mutual adjustment and interorganizational learning and allowed both parties to reap superior economic returns

Thus these prior accounts hint at the importance of joint dependence for the efficacy of pro- curement relationships and suggest some of the likely under- lying behavioral dynamics that make this possible.

Here, we take a step further by making systematic connections between joint dependence, the underlying logic of action triggered by those structural conditions, and actors’ performance in those procurement relationships

Fieldwork and survey data on manufacturer-supplier procurement relationships in the U.S. automotive industry

A high level of sequential interdependence (Blau and Scott, 1962: 219; Thompson, 1967).

We consider the influence of joint dependence on the potential value creation for and performance of procuring firms, as well as the mechanisms through which such effects may occur.

* THE EFFECTS OF INTERDEPENDENCE ON PERFORMANCE 

- Dependence Asymmetry and the Logic of Power