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Paper info: The Role Of Incentives In Buyer-Supplier Relationships: Industrial Cases From A Uk Study

Title


The Role Of Incentives In Buyer-Supplier Relationships: Industrial Cases From A Uk Study

Authors


Andrew Cox, Chris Lonsdale and Glyn Watson

Place of Publication


The paper was published at the 19th IMP-conference in Lugano, Switzerland in 2003.

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Abstract


This paper investigates the role of incentives in the formation and conduct of buyer-supplier relationships. It draws upon evidence collected during a two-year, EPSRC-funded research project . In this research project, the authors tested the proposition that the manner in which buyer-supplier relationships are formed and conducted is significantly affected by the incentive structure that exists between the two parties. In our view, the incentive structure is determined by the power relationship that exists between the two parties.The research was based upon a model of generic relationship types. According to this model, buyer-supplier relationships are characterised by two main elements: the nature of the interaction between the two parties and the manner in which the surplus value in the relationship is divided between the two parties. In this paper, we first describe this relationship management model and then provide case evidence on its utility. One of the conclusions drawn in the paper, which is written from the point of view of the buyer, is that the concept of power can provide managers with a critically important predictive tool that can help them to manage the risks of industrial purchasing. The implications of power and incentives, however, rules out any thoughts of there being any ?best practice? form of buyer-supplier relationship, something that has been maintained in many quarters over the past decade.