Industrial Marketing Management 57 (2016) 185200

Contents lists available at ScienceDirect

Industrial Marketing Management

Supplier relationship management capability: a qualication

and extension
Sebastian Forkmann a, Stephan C. Henneberg a, Peter Naud b,c, Maciej Mitrega d
a
Queen Mary University of London, Mile End, London E14NS, United Kingdom
b
University of Manchester, Booth Street West, Manchester M156PB, United Kingdom
c
University of Sydney, Sydney, NSW, Australia
d
University of Economics in Katowice, ul. 1 Maja 50, 40-287 Katowice, Poland

a r t i c l e i n f o a b s t r a c t

Article history:
Received 8 February 2015
Received in revised form 22 January 2016
Accepted 4 February 2016
Available online 5 March 2016
Keywords:
Supplier relationship management capability
Supply base performance improvement
Dynamic capabilities
Supplier relationship initiation
Supplier relationship development
Supplier relationship ending
Supply chain management theory recognizes the importance of managing supplier relationships. However, we
know less about the capabilities underlying such supplier relationship management that are required to restruc-
ture and develop the supply base in order to continuously improve its performance. A recent study by Mitrega
and Pfajfar (2015) provides initial insights regarding this topic. The objective of the present article is to provide
a qualication and extension based on their argument. For this purpose we utilize the concept of supplier relation-
ship management (SRM) capability, in line with a dynamic capabilities approach to management. SRM capability
comprises organizational processes and routines oriented at the initiation, development, and ending of supplier
relationships. Our study qualies and extends Mitrega and Pfajfar (2015) by providing a rigorous conceptualiza-
tion, nomological model, and operationalization of SRM capability. This study specically shows that differential
effects of components of SRM capability exist, which are attributed to the characteristics of the business environ-
ment in combination with the rm's strategic choices. A latent class analysis reveals the existence of two groups
of distinct SRM capability strategies: a status-quo optimization strategy and a dynamic optimization strategy, which
are contingent on characteristics of the supply base and the business environment.
2016 Elsevier Inc. All rights reserved.

1. Introduction
Dynamically managing supplier relationships and the supply base
represents an important managerial challenge for rms. Take Apple as
an example: Apple went through critical changes in supply partnerships
for the microprocessors powering their products in order to cater for
their specic needs at the time (Isaacson, 2011). Initially, MOS Technol-
ogy provided Apple with chips for the Apple I and Apple II and was se-
lected over Intel and Motorola primarily on the basis of price. However,
when designing the original Macintosh, Apple switched to Motorola to
utilize a more expensive, but more powerful processor that would sup-
port the advanced graphics and the use of a mouse. Soon thereafter,
Apple would switch again to yet another chip provided by Motorola
and IBM. This partnership would turn into a long-standing relationship
and Motorola-IBM would supply Apple desktop and portable computers
with chips for over a decade. However, when falling behind develop-
ment, Apple decided on a major switch to the faster Intel chips, and
product line by product line were transitioned to the new microproces-
sors. While Intel supplies Apple with chips for desktop and portable
computers, when designing their mobile devices, Apple went into a
E-mail addresses: s.forkmann@qmul.ac.uk (S. Forkmann), s.henneberg@qmul.ac.uk
(S.C. Henneberg), peter.naude@mbs.ac.uk (P. Naud), maciej.mitrega@ue.katowice.pl
(M. Mitrega).
new partnership with Samsung. Although Intel processors were power-
ful, Apple had to balance customer needs around speed and battery life-
time for their new mobile products. Samsung quickly turned into one of
Apple's key suppliers across displays, processors, and memory, with
sales worth $8 billion in 2012 (Reuters, 2013). However, recently the re-
lationship suffered considerably as Samsung entered the tablet and
smartphone market with their own products, and hence became a
major direct competitor. This again led Apple to start evaluating differ-
ent suppliers for microprocessors (Bloomberg Businessweek, 2013;
Reuters, 2013). Apple constantly adjusted their supply base to techno-
logical, demand and competitive forces by initiating and developing
new supplier relationships as well as ending them when they lagged be-
hind or became disadvantageous.
Mitrega and Pfajfar (2015; henceforth MP2015) have recently con-
tributed to understanding such issues by studying the capability that
rms need in order to adjust their supply base, i.e. the business relation-
ships they have with their suppliers. MP2015 provides relevant insights
as the business marketing and supply chain management literature rec-
ognizes the importance of business relationships for driving rm perfor-
mance (e.g. Spekman, Kamauff, & Myhr, 1998; Kannan & Tan, 2002;
Choi & Krause, 2006). The present study qualies and extends
MP2015 by providing a rigorous conceptualization, nomological
model, and operationalization relating to the issue of supplier relation-
ship management capability. Furthermore, our study specically shows

http://dx.doi.org/10.1016/j.indmarman.2016.02.003
0019-8501/ 2016 Elsevier Inc. All rights reserved.
186 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
that differential effects of components of supplier relationship manage-
ment capability exist, which can be attributed to the characteristics of
the business environment in combination with strategic choices by
the rm. As such, this study provides a replication with extensions
(Lynch, Bradlow, Huber, & Lehmann, 2015, p. 333) of MP2015.
Our study takes the perspective that effective management of supplier
relationships requires the implementation of organizational processes
and routines aimed at reconguring the supply base. In line with
MP2015, we follow the concept of dynamic capabilities (DC) (Teece,
Pisano, & Shuen, 1997; Eisenhardt & Martin, 2000), which suggests that
a company's competitive advantage stems not solely from the congura-
tion of resources dedicated to a given supplier relationship, but that it also
requires sensing and seizing opportunities related to new resource
congurations through restructuring the supply base. Such a dynamic
capabilities approach to the management of supplier relationships ts
well with the increasing turbulence being observed in today's business
environment and attempts by global companies to make their supply
chains more exible and adaptive, as exemplied by results of the annual
global CEO Survey conducted by PricewaterhouseCoopers (2012): One
key point of our strategic advantage is the capability to orchestrate the
production and engineering value chain we create in partnership with
other companies. That gives us the ability to scale up or scale down quickly
and efciently. We try to ensure our organizational structure is sufciently
uid so that we can respond quickly to changes in demand. (Pertti Korhonen,
President and CEO, Outotec Oyi, Finland, 2012).
Previous literature on supply chain exibility (e.g. Avittathur &
Swamidass, 2007; Malhotra & Mackelprang, 2012; Stevenson & Spring,
2007) and agility (e.g. Braunscheidel & Suresh, 2009; Christopher,
2000; Swafford, Ghosh, & Murthy, 2006) have treated the ability to
cope with dynamic business environments as a characteristic of the sup-
ply base. However, the strategic exibility within the supply base is lim-
ited, as is often the potential for further improvements. Business
relationships and supplier performance are dynamic and rms need to
be able to continuously improve their supply base performance, which
requires them to go beyond their existing suppliers and recongure
their supply base. Therefore, our study understands supplier relationship
management (SRM) capability as a dynamic capability that allows rms
to address the structural composition of their supply base in an effort to
keep aligning rms' resource endowments with their fast changing busi-
ness environments (Duclos, Vokurka, & Lummus, 2003; Gosling, Purvis,
& Naim, 2010; Lee, 2004; Tachizawa & Thomsen, 2007). From this per-
spective, rms not only leverage resources available within their
existing supply base but proactively recongure (i.e. extend and reduce)
their supplier network to streamline their resource portfolio. As such the
concept of SRM capability corresponds to MP2015's concept of business
relationship process management. Both concepts emanate from Mitrega,
Forkmann, Ramos, and Henneberg's (2012) concept of networking
capability (NC). We chose the term SRM capability to highlight that we
refer to a specic networking capability relating to managing supplier
relationships in contrast with the original conceptualization by
Mitrega et al. (2012), which refers to the management of business rela-
tionships in general, i.e. covering both customers and suppliers.
While the extant literature focuses primarily on the management of
existing supplier relationships (e.g. Lambert & Cooper, 2000; Kwon &
Suh, 2004; Petersen, Ragatz, & Monczka, 2005; Carr & Kaynak, 2007),
less is known about the dynamic aspects of managing supplier relation-
ships as part of a supply base, including dealing with fading partner-
ships, ending non-performing supplier relationships, and restructuring
the supply base by initiating relationships with promising new sup-
pliers (Wagner & Friedl, 2007; Ritter & Geersbro, 2011; Friedl &
Wagner, 2012; Zaefarian, Forkmann, Mitrega, & Henneberg, 2015). In
this context, research on relationship portfolios stresses the importance
of an integrated approach, which covers initiation, development, and
ending of business relationships (Reinartz, Krafft, & Hoyer, 2004; also
MP2015). These considerations illustrate an important managerial chal-
lenge, in particular if threats associated with a static and mature supply
base (both nancial, e.g. fading supplier performance, and non-
nancial, e.g. limited innovativeness) are taken into consideration (e.g.
Capaldo, 2007; Doz & Kosonen, 2008; Anderson & Jap, 2005). Further-
more, the paucity of research on the management of supplier relation-
ships focusing on organizational capabilities, especially those aimed at
initiating, developing, and ending supplier relationships represents a
systematic gap between the theories of supply chain management and
general management (Ketchen & Hult, 2007), which MP2015 initially
tries to address. The existing literature on supply chain management
uses a variety of terms to describe organizational capabilities, but
these denitions are often inconsistent with the understanding of capa-
bilities in the management literature (Peng, Schroeder, & Shah, 2008).
Such capabilities were typically dened and measured as
performance-related constructs, for example, the quality of partners' in-
formation sharing, or their collective responsiveness (Ward, McCreery,
Ritzman, & Sharma, 1998; Li, Ragu-Nathan, Ragu-Nathan, & Rao,
2006a; Wu, Yeniyurt, Kim, & Cavusgil, 2006). Peng et al. (2008, p. 732)
suggest that These approaches to studying capabilities offer important in-
sights (...), but do not provide guidance on the means to achieve superior
capabilities. Instead of treating SRM capability as an output-related con-
cept, in line with MP2015, we focus on SRM capability as a process-re-
lated concept, and are interested in organizational processes and
routines that constitute this SRM capability (Winter, 2003).
Similarly to MP2015 our study therefore takes a rm's need to dy-
namically manage supplier relationships by reconguring and develop-
ing their supply base as the starting point, and addresses the underlying
capability enabling rms to exert such a structural agility with respect to
their supplier portfolio and thus to sustain competitive advantage over
time. To understand these issues, we focus on SRM capability as pro-
cesses and routines that are institutionalized by rms, i.e. behavior
that is learned, highly patterned, repetitious, or quasi repetitious, founded
in part in tacit knowledge (Winter, 2003, p. 991). Those processes and
routines constitute a capability as they aim at utilizing tangible and in-
tangible resources embedded in supplier relationships to achieve com-
petitive advantage (Grant, 1991; Mesquita, Anand, & Brush, 2008). For
example, such organizational routines refer to dening and assigning
specic objectives (e.g. operational or strategic) for both new and
existing supplier relationships, translating these objectives into search
and evaluation metrics, collecting data in regular intervals to inform
those metrics, as well as implementing formal periodic reviews to ana-
lyze and evaluate the captured metrics to inform decision-making. This
represents a dynamic capability as it can be used to enable a reaction to
changing business environments, for example through routinely
updating objectives and measurements of performance to reect
changes in the business environments and therefore helps to identify
and accomplish new resource congurations in order change the prod-
uct, the production process, the scale, or the customer (markets served)
(Winter, 2003, p. 992), and to ultimately sustain competitiveness
(Eisenhardt & Martin, 2000; Teece et al., 1997). Furthermore, we
adopt the supply base as our focal phenomenon, dened as those sup-
pliers that are actively managed through contracts and the purchase of
parts, materials, and services (Choi & Krause, 2006, p. 639). This is anal-
ogous to MP2015. From a supply chain management perspective, we
thereby narrow in on one specic part of the supply chain and do not
focus on suppliers from multiple (indirect) tiers, or on the customer
side of the supply chain (Lambert & Cooper, 2000). We follow studies
on organizational competences devoted to managing exchange rela-
tionships (Lorenzoni & Lipparini, 1999; Kale, Dyer, & Singh, 2002; Kale
& Singh, 2007; Ritter, 1999; Ritter, Wilkinson, & Johnston, 2002, Ritter
& Gemnden, 2003, Ritter & Gemnden, 2004; Rai, Patnayakuni, &
Seth, 2006; Walter, Auer, & Ritter, 2006, also MP2015), in particular
the concept of networking capability offered by Mitrega et al. (2012)
by adapting it to the supply base context, and conceptualize SRM capa-
bility as the rm's distinctive capability, i.e. organizational processes and
routines developed and implemented at the focal organization to (1) initi-
ate, (2) develop, and (3) end supplier relationships. Adopting a portfolio
 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
perspective to managing business relationships requires an integrated
view of managing initiation, development, and ending (Reinartz et al.,
2004, also MP2015). Consequently, SRM capability is composed of
three components: Supplier Relationship Initiation Capability (SRIC), Sup-
plier Relationship Development Capability (SRDC) and Supplier Relation-
ship Ending Capability (SREC). We conceptualize SRM capability as
specic to the whole supply base rather than as a single supplier
relationship-specic construct. This is in line with our emphasis on dy-
namic aspects of the management of supplier relationships (as well as
with the argument of MP2015), where rms improve the performance
of their entire supply base by, for example, ending supplier relationships
that are not performing as expected, in order to free up rm resources
that can be used in a more benecial way elsewhere (i.e. new or existing
supplier relationships) to improve the supply base (Gadde & Snehota,
2000; Gulati, Nohria, & Zaheer, 2000). Dynamic capabilities from this
perspective capture processes and routines aimed at aligning resources
in response to changes in the external business environment by means
of accessing or developing resources that lie within as well as outside of
the existing supply base (Teece et al., 1997; Eisenhardt & Martin, 2000).
Our conceptualization of SRM capability therefore does not overlap with
Croxton, Garca-Dastugue, Lambert, and Rogers's (2001) denition of
supplier relationship management, which is activity-based (described
as sub-processes), incorporates also indirect supplier relationships,
but focuses mostly on issues around developmental activities (see also
Lambert & Cooper, 2000).
Through analyzing the capabilities to initiate, develop and end sup-
plier relationships, our study contributes by qualifying and extending
MP2015 and therefore augments the existing literature on supply
chain management. Our study provides a rigorous conceptualization,
operationalization as well as nomological model by maintaining the in-
tegrity of the original NC concept (Mitrega et al., 2012) based on DC
(Eisenhardt & Martin, 2000). While prior literature has focused on dif-
ferent components of the SRM capability in isolation (e.g. Mortensen,
Freytag, & Arlbjrn, 2008; Wagner & Krause, 2009; Havila & Medlin,
2012; Zaefarian et al., 2015), we use a data set of 261 UK companies
to replicate the ndings of MP2015 about integrating these capability
components and empirically test the relative importance of each of
the three distinctive SRM capability components identied. Qualifying
MP2015, our ndings show that all SRM capability components posi-
tively affect supply base performance improvement, and in turn rm
performance. This effect is particularly amplied in turbulent environ-
ments characterized by demand uncertainty. We control for the poten-
tial trade-off between the dynamic SRM capability and supply base
stability. Extending MP2015, an exploratory latent class analysis reveals
the existence of two distinct SRM capability strategies. Firms following a
status-quo optimization strategy effectively address supply base perfor-
mance improvement through organizational processes and routines
oriented at development of existing supplier relationships, while those
adopting a dynamic optimization strategy are more successful through
company routines and processes oriented at initiation and ending.
The article is structured as follows. We rst introduce the theoretical
basis for our argument as well as derive the overall conceptual frame-
work guiding this study. Next, we discuss the literature on supplier re-
lationship initiation, development, and ending, and derive specic
hypotheses. After introducing our research design and the empirical
testing of the hypotheses, we provide a discussion of the insights gained
from our study, compare our results to MP2015, and outline the theoret-
ical and managerial implications as well as the limitations and further
research themes related to our study.
2. Conceptual framework and hypotheses development
2.1. Conceptual framework
To achieve competitive advantages in turbulent business environ-
ments, rms need dynamic capabilities, enabling them to sense
187
opportunities and threats, and to seize or overcome them by
reconguring their resources (Teece et al., 1997). According to
Eisenhardt and Martin (2000), the value of DC for competitive advan-
tage lies in their ability to alter the resource base: create, integrate,
recombined, and release resources (p. 1116). They argue that such dy-
namic capabilities are organizational processes and routines related to
product development, strategic decision-making, as well as forming al-
liances and managing relationships. Thus, in line with MP2015, we
argue that companies need to implement such dynamic capabilities re-
lating to the management of supplier relationships to congure their
supply base as a means of keeping their resource base competitive
over time (Jiang, Tao, & Santoro, 2010; Wassmer, 2010). Such supplier
relationship management capability, in particular those components
aimed at the initiation, development, and ending of supplier relation-
ships will therefore be the focus of our article. MP2015 argues for causal
relationships among the different components of the SRM capability,
based on relationship process considerations. MP2015 states that a
company's routines oriented at handling a given stage of supplier relation-
ship [sic] inuence the company routines oriented at handling next [sic] re-
lationship stage. (p. 195). However, DC do not provide sufcient
explanatory mechanisms as to the specic relationship between differ-
ent components of the SRM capability, nor does the original research by
Mitrega et al. (2012) suggest or empirically test such inter-relationships
among components. Therefore, we treat the three SRM capability com-
ponents as causally non-related in our nomological framework. Simi-
larly to MP2015, we also capture the effect of environmental
uncertainty on the value of dynamic capabilities in our conceptual
framework through demand uncertainty as the key moderator construct.
Analogously to MP2015, SRM capability is conceptualized at the
level of the supply base (Olsen & Ellram, 1997; Lavie, 2007) rather
than being supplier specic (Dyer & Hatch, 2006). We follow Krause,
Handeld, and Scannell (1998) and focus on strategic supplier manage-
ment of the supply base as opposed to reactive supplier management
conned to a particular supplier relationship. Furthermore, SRM capa-
bility as DC (Teece et al., 1997; Zollo & Winter, 2002) focuses on the sys-
tematic processes of reconguring and sustaining competitive
advantages related to the supply base, rather than on its performance
at a particular point in time. In line with MP2015 this is captured by
our key dependent construct continuous supply base performance im-
provement which refers to the trajectory of the suppliers' track record
in terms of meeting customer (i.e. manufacturer) expectations on a range
of performance metrics (Joshi, 2009, p. 135), and in addition by includ-
ing rm performance, which was not part of MP2015. Continuous supply
base performance improvement serves as the mediator, i.e. provides the
underlying mechanism by which SRM capability affects sustainable
competitive advantage through the systematic sensing of new resource
opportunities that lie in external partnerships, and anticipating decreas-
ing returns from existing suppliers. Our example of Apple (see introduc-
tion) provides evidence for the relevance of such considerations: Based
on different internal as well as customer needs, Apple phased out cer-
tain supply relationships and substituted or supplemented them
through new suppliers of microprocessors which were better aligned
with Apple's strategic aims. Our research on SRM capability attempts
to substantiate the organizational processes and routines enabling
such dynamic adjustment of the supply base, and the resulting overall
nomological model guiding this research is outlined in Fig. 1.
2.2. Supplier relationship initiation capability
In line with the original conceptualization of Mitrega et al. (2012)
we argue that supplier relationship initiation capability (SRIC) is an im-
portant building block of SRM capability, and dene SRIC as the rm's or-
ganizational processes and routines developed and implemented to initiate
supplier relationships through (1) new supplier selection processes and (2)
new supplier attraction processes.
188 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
Fig. 1. Nomological model.
Selection refers to the assessment of the attractiveness of potential
suppliers (Mitrega et al., 2012). Spekman et al. (1998) see partner selec-
tion as a separate aspect of supply chain management, and a variety of
criteria and heuristics have been proposed for effective selection (Ha
& Krishnan, 2008; Ordoobadi, 2009; Adebanjo, Ojadi,
Laosirihongthong, & Tickle, 2013). While studies have shown the im-
portance of supplier selection for rms' manufacturing performance as
well as overall performance (Vonderembse & Tracey, 1999; Kannan &
Tan, 2002, 2006), the primary focus has been on the particular criteria
that should be considered when selecting suppliers. The importance of
expanding selection criteria beyond those traditionally used (price,
quality, service, etc.) to include more strategic and relationship-
oriented criteria has been stressed (McCutcheon & Stuart, 2000;
Kannan & Tan, 2006).
Attraction refers to the suitability of the buying rm in the eye of the
supplier (Mitrega et al., 2012; Tth, Thiesbrummel, Henneberg, &
Naud, 2015). In line with Hill (1990), who argues that the market
has a memory and thus dis-incentivizes opportunistic behavior,
Eisenhardt and Schoonhoven (1996) argue that a rm's reputation is
important in attracting business partners. The literature on buyer at-
traction makes an important distinction between ex-ante and ex-post at-
tractiveness (Harris, O'Mally, & Patterson, 2003). While ex-ante
attractiveness refers to a buyer's attractiveness before a relationship
has been initiated, and thus inuences a supplier's decision as to
whether or not to engage in a relationship, ex-post attractiveness refers
to a buyer's on-going attractiveness within an existing relationship and
thus determines the supplier's decisions as to whether to maintain or
develop the relationship further (Dwyer, Schurr, & Oh, 1987;
Mortensen, 2012; Tth et al., 2015). A rm's reputation is an important
signal in conveying ex-ante attractiveness (Eisenhardt & Schoonhoven,
1996), and according to Hald, Cordn, and Vollmann (2009) rms can
deliberately shape their attractiveness by creating an image of being a
valuable and trustworthy exchange partner.
MP2015 cover only the sub-component of attraction as part of their
focal concept, i.e. SRM capability in the present study, and use the sub-
component of selection as an antecedent construct to all capability com-
ponents. In contrast, in the present study we adhere to the original con-
ceptualization of Mitrega et al. (2012) and treat selection and attraction
as two independent sub-components of supplier relationship initiation
capability.
We consequently argue that supplier relationship initiation capabil-
ity is necessary for rms to successfully access the various critical re-
sources embedded within potential suppliers, i.e. their knowledge and
skills related to the provision of certain products or services important
for the rm's offering. The performance of existing suppliers in provid-
ing them can decline over time in relation to suppliers outside of the
current supply base. Also, technological advances, government regula-
tions or changing customer needs require an extension of the resource
pool if the necessary skills, technology or know-how are missing within
the current supply base. New suppliers can also be the source for fresh
ideas regarding product or process improvements. Supplier relationship
initiation capability allows rms to actively shape their supply base by
adding new suppliers and thereby continuously develop the supply
base to better meet their specic requirements along operational and
strategic dimensions (Johnston, McCutcheon, Stuart, & Kerwood,
2004). In addition, supplier relationship initiation capability allows
rms to seize relationships with suppliers that have the potential to
be well-functioning partners (i.e. hedging of future relationship quality)
and thus serve as an important ex-ante mechanism to minimize risk and
the associated transaction costs. Therefore, we expect supplier relation-
ship initiation capability to positively affect the long-term performance
of the supply base, i.e. its continuous improvement over time, and we
hypothesize:
Hypothesis 1. (H1): Supplier relationship initiation capability is posi-
tively related to the rm's continuous supply base performance
improvement.
2.3. Supplier relationship development capability
In line with the empirical ndings of Mitrega et al. (2012) we con-
ceptualize supplier relationship development capability (SRDC) as a build-
ing block of SRM capability and dene it as the rm's organizational
processes and routines developed and implemented to build and manage
supplier relationships at both the (1) inter-company level and (2) inter-
personal level. This is based on empirical results which show that the
previously conceptualized third sub-component of relationship devel-
opment capability, i.e. conict management, conates with inter-
company relationship development capability for managing supplier re-
lationships (Mitrega et al., 2012).
While supplier relationship initiation capability is important for
kick-starting supplier relationships that offer access to new ideas, tech-
nologies and other important resources, to fully leverage them requires
rms to develop supplier relationships on an on-going basis. This inter-
company aspect of supplier relationship development capability relates
to forging close and collaborative supplier relationships, which have
been shown to positively affect buyer performance, such as continuous
 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
supply base performance improvement (Carr & Pearson, 1999). In par-
ticular, with the increasing strategic importance of supplier relation-
ships, the relationship development approach has shifted from arms-
length to one that is characterized by increased inter-company commu-
nication, cooperation and coordination (Carr & Pearson, 1999). Johnston
et al. (2004) found that cooperative relationship development (i.e.
shared planning and exibility in coordination activities) positively in-
uences relationship and buyer satisfaction. Mohr and Spekman
(1994) show that inter-company communication as well as joint con-
ict resolution are important factors for partnership success. As such,
dealing with problems in supplier relationships constitutes an impor-
tant aspect of managing ongoing business relationships (Mitrega et al.,
2012). Overall, Chen and Paulraj (2004) posit the relationships with
suppliers as a central focus of supply chain management.
While inter-company factors of relationship development are im-
portant (e.g. joint technological investments, mutual training, sharing
of demand data), such development usually comes at the price of in-
creased dependence on partners, with an increased threat of opportu-
nistic behavior (Williamson, 1985). Therefore, rms must support
relational development through mechanisms that mitigate this threat.
We follow some prior studies, which propose various aspects of social
and relational capital (e.g. socialization, relational norms) as an effective
strategy to minimize relationship opportunism (Brown, Dev, & Lee,
2000; Wathne & Heide, 2000). In line with Mitrega et al. (2012), we
therefore posit inter-personal development capability as an additional
sub-component of supplier relationship development capability.
Cousins, Handeld, Lawson, and Petersen (2006) stress the importance
of inter-personal relational capital for better supplier relationship de-
velopment. According to them, relational capital is a result of both for-
mal and informal socialization processes. While Cousins et al. (2006)
refer to specic structural formats for engagement, such as cross-
functional teams, co-location, regularly scheduled meetings and confer-
ences, or matrix-style reporting (p. 854), informal processes refer to so-
cial events, workshops, off-site meetings, communication guidelines (e.g.
we have an open door policy), joint improvement projects on-site involv-
ing line staff and engineers, or even casual meals at a local restaurant
(p. 855). We argue that both formal and informal mechanisms are re-
quired to establish cross-boundary ties. While formal mechanisms facil-
itate exchange of knowledge, values, beliefs and cultural systems
between the buyer and the supplier, informal mechanisms foster soli-
darity, reciprocity, and trust and dis-incentivize opportunistic behavior
(Cousins et al., 2006).
MP2015 does not use the original conceptualization by Mitrega et al.
(2012) in the context of supplier relationship development capability,
but adapts the concept of partner development for handling decient
suppliers based on Wagner (2006), conning the concept denition to
partner monitoring. In the interest of a coherent and rigorous nomolog-
ical framework in the present study, we use the original and more com-
prehensive conceptualization by Mitrega et al. (2012), which treats
inter-company and inter-personal capabilities as two independent
sub-components of supplier relationship development capability. We
consequently argue that the relational glue that is formed through
the development of relationships reduces transaction costs and de-
creases risks of opportunistic behavior (Dyer & Singh, 1998; Watson,
2004; Williamson, 1985). For this, both inter-company and inter-
personal integration between supplier and buyer are important as
they build mutual trust (Handeld & Bechtel, 2002; Cousins et al.,
2006; Mitrega et al., 2012). Capabilities aimed at developing supplier re-
lationships capture rms' organizational processes and routines related
to inter-personal and inter-organizational management of supplier rela-
tionships within their supply base. Resources embedded within rms'
existing supply base are important in continuing to deliver their value
propositions to customers as well as to react to changing customer de-
mands. Such resources are not always available outside of the existing
supply base (so-called dedicated relational rent), or the available alter-
natives are sub-optimal. Well-functioning relationships with suppliers
189
in the existing supply base therefore secure access to those resources
(through relational norms such as enhanced trust and commitment), fa-
cilitate their efcient and effective deployment, as well as foster their
continuous improvement, e.g. intensive communication in the supply
chain with regard to changing market expectations (Dyer & Singh,
1998; Carr & Pearson, 1999). Furthermore, relational exchanges, typical
for developed supplier relationships, decrease transaction costs (i.e.
streamlined information ows and enhanced alignment between a
rm's specic needs and its suppliers' performance). In sum, supplier
relationship development capability helps rms to manage their supply
base and improve it continuously along various dimensions (e.g. opera-
tional efciencies, product/service quality, delivery performance)
(Johnston et al., 2004). Therefore, we hypothesize:
Hypothesis 2. (H2): Supplier relationship development capability is
positively related to the rm's continuous supply base performance
improvement.
2.4. Supplier relationship ending capability
In line with the empirical ndings of Mitrega et al. (2012) as well as
MP2015 we conceptualize supplier relationship ending capability (SREC)
as a building block of SRM capability and dene it as the rm's organiza-
tional processes and routines developed and implemented to identify and to
end non-performing supplier relationships.
While the initiation and development of supplier relationships is
commonly perceived as core to managing the supply base, the ending
of supplier relationships has received much less attention (Tahtinen &
Halinen, 2002; Moeller, Fassnacht, & Klose, 2006; Wagner & Friedl,
2007; Gedeon, Fearne, & Poole, 2009). In prior research on non-
performing supplier relationships, the main focus has been on improv-
ing supplier relationships through means of relationship and supplier
development (Mohr & Spekman, 1994; Krause et al., 1998). However,
supplier development programs, though valuable, are ultimately lim-
ited (Mitrega & Zolkiewski, 2012). In line with the DC view (Augier &
Teece, 2009; Eisenhardt & Martin, 2000), supply base management en-
courages the systematic assessment of the resources gained via existing
suppliers, and the necessity of ending non-performing relationships in
order to free resources for the initiation of new supplier relationships,
or for further development of current supplier relationships. Managing
the dissolution of a supplier relationship is far from trivial, as misman-
agement can have far-reaching consequences. According to
Alajoutsijrvi, Mller, and Thtinen (1998), inappropriate relationship
ending can lead to substantial reputation and image loss of the
disengaging rm within the broader business network, which may cre-
ate difculties for rms to initiate relationships with important sup-
pliers in the future. Firms being disengaged may try to object to the
dissolution of the relationship with legal actions or by making the disso-
lution for the disengaging rm as costly and complicated as possible
(Blois, 2003). Therefore, ending supplier relationships constitutes an
important component of the SRM capability (e.g. Wagner & Krause,
2009; Dries, Gorton, Urutyan, & White, 2014).
While close relationships with suppliers generally serve as safe-
guards against supplier opportunism and are associated with increased
relationship and rm performance, there is evidence of a social capital
threshold that, when exceeded, has negative effects on buyer perfor-
mance (Anderson & Jap, 2005; Villena, Revilla, & Choi, 2011). Such ef-
fects originate from reduced levels of monitoring associated with
closer supplier relationships, which allow room for calculated oppor-
tunism and complacency of the supplier. Due to this reduced relation-
ship monitoring, which is prevalent in most advanced supply
partnerships, rms are less likely to notice supplier opportunism and
complacency within their supply base, and are less likely to end such a
relationship (Villena et al., 2011). Li, Madhok, Plaschka, and Verma
(2006b) refer to this phenomenon as supplier-switching inertia.
190 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
Overcoming this inertia requires adequate and objective supplier evalu-
ation (Carr & Pearson, 1999; Narasimhan & Das, 2001) as well as appro-
priate relationship ending routines and processes (Zaefarian et al.,
2015). While the existing supply base may still provide the rm with ac-
cess to the required resources, complacency within the supply base may
have led to sub-optimal performance in relation to available alternatives
outside of the current supply base or resources may have simply be-
come obsolete due to changing customer demands, technologies or gov-
ernment regulations. Successfully identifying obsolete resources
provided by suppliers or non-performing supplier relationships that
can be replaced, and ending those relationships will positively affect
the improvement of the performance of the supply base in the long-
run, e.g. through continuous elimination of non-performing supplier re-
lationships. Firms with advanced supplier relationship ending capability
consider relationship ending as a viable strategic option, which has been
shown to positively affect the percentage of unwanted partners (Ritter
& Geersbro, 2011) as well as innovation success (Zaefarian et al.,
2015). We argue that this mechanism is very relevant for managing
the supply base as it also motivates the purchasing department to stay
more alert towards relationship improvement as well as signals to the
supply base that ending is a viable option and therefore motivating
them to engage in continuous improvement. We therefore hypothesize:
Hypothesis 3. (H3): Supplier relationship ending capability is posi-
tively related to the rm's continuous supply base improvement.
2.5. Moderation effects: Demand uncertainty
Environmental uncertainty, in particular demand uncertainty, con-
stitutes an important factor in supply chain management (Lee, Yeung,
& Cheng, 2009; Huang, Yen, & Liu, 2014). Demand uncertainty generally
refers to the extent to which the quantity demanded as well as customer
preferences are unpredictable (Chen & Paulraj, 2004). The speed and ac-
curacy of reacting to demand changes have far-reaching implications for
rms' overall performance, e.g. the inability to meet demand may lead
to loss of market share to competition or provide opportunities for
new entrants. This rationale is also included in MP2015 where it is re-
ferred to as environmental uncertainty, based on the concept of demand
uncertainty by Sheng, Zhou, and Li (2011) adapted from Jaworski and
Kohli (1993).
Equivocal evidence exists as to the role of close supplier relation-
ships for a rm operating under demand uncertainty. Some studies sug-
gest that closer relationships are benecial for the continuous
improvement of the supply chain performance under conditions of de-
mand uncertainty (Fynes, de Brca, & Marshall, 2004), while others nd
that close supplier alliances may restrict the strategic exibility of rms
to react to demand uncertainty (Lee et al., 2009; Huang et al., 2014).
Eisenhardt et al. (2010, p. 1271) argue that superior performance in dy-
namic environments depends on effectively balancing efciency and
exibility.
Changes in customer needs often require changes to the offering,
which for rms to address may require altered or different resources
in form of products or service for which new technologies, skills or
knowledge are required. Such new resource requirements can either
be accessed or developed within the existing supply base (e.g. via sup-
plier development programs) or if not available, by altering the supply
base through effective utilization of SRM capability components aimed
at ending and initiating supplier relationships.
We hypothesize positive interactions between volatile market envi-
ronments and SRM capability in line with MP2015. Firms in uncertain
market environments are motivated to develop and implement a SRM
capability within their organization. Implementing a SRM capability is
a resource and time intensive process (Winter, 2003) and we argue
that the benets of a SRM capability become greater as demand uncer-
tainty in the market increases and thus the net benets of this dynamic
capability increasingly outweigh the associated costs (Schilke, 2014).
This is in line with Drnevich and Kriauciunas (2011) who nd empirical
support for a positive effect of environmental dynamism on the rela-
tionship between dynamic capabilities and rm performance. Thus,
we hypothesize:
Hypothesis 4a. (H4a): Demand uncertainty positively moderates the
relationship between supplier relationship initiation capability and the
rm's continuous supply base performance improvement.
Hypothesis 4b. (H4b): Demand uncertainty positively moderates the
relationship between supplier relationship development capability
and the rm's continuous supply base performance improvement.
Hypothesis 4c. (H4c): Demand uncertainty positively moderates the
relationship between supplier relationship ending capability and the
rm's continuous supply base performance improvement.
2.6. Continuous supply base performance improvements and rm
performance
As rms increasingly rely on supplier relationships, their overall per-
formance is to a considerable extent contingent on the improvements in
performance of their supply base. A well performing and continuously
improving supply base that enables rms to access and develop relevant
resources positively impacts the overall performance of a rm through a
range of mechanisms such as operational efciencies, product/service
quality, delivery performance, etc. (Johnston et al., 2004). In line with
this argument, there exists a signicant body of literature that suggests
that rm performance is positively impacted by the performance of the
supply base (e.g. Carr & Pearson, 1999; Chen & Paulraj, 2004). Thus, we
hypothesize:
Hypothesis 5. (H5): The rm's continuous supply base performance
improvements are positively related to the rm's overall performance.
3. Research design
3.1. Sample
The research design mirrors the design choices by MP2015, but was
implemented in the context of the UK. A web-based questionnaire using
Qualtrics was sent via email to 5400 managers who are members of a
panel that is managed by a commercial panel provider. We received
764 responses, yielding an initial response rate of 14.2%. To verify re-
spondents' knowledegability and to increase the validity of our ndings
(Kumar, Stern, & Achrol, 1992) we followed a three-step process. First,
at the beginning we used a seven-point bi-polar scale ranging from
poor (1) to excellent (7) to assess the informant's knowledgeability
with respect to their rm's supply base. Respondents indicating knowl-
edge levels below the midpoint of 4 were screened out from the remain-
der of the questionnaire. Secondly, at the end of the questionnaire we
asked respondents to assess their overall knowledgeability with respect
to the survey questions. Respondents who indicated less than medium
knowledge (again below the mid-point of 4 on the 7-point scale)
were removed from further analyses. Finally, we controlled for the re-
sponse time of informants. We pre-tested the minimum time it would
take to complete the entire questionnaire and then removed all respon-
dents who took less time than the pre-test minimum. We arrived at a
nal sample size of 261, yielding a nal response rate of 4.8%, with an
average informant knowledegability of 5.94.
According to Table 1, more than three quarters of our respondents
have been with their company as well as in their current position for
more than 2 years. More than one third are in senior-level positions
while more than half are middle level managers. In terms of rm char-
acteristics, our sample equally represents SMEs (50.2%) and large rms
 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200 191

Table 1 anonymity, and data condentiality. In addition to these preventive

Firm and respondent characteristics. procedures, we took several steps to ex-post assess whether and to
Count Share what extent CMV constitutes a serious issue within our data. As a rst
Firm characteristics
step, we used Harman's single factor test. CMV can be detected with
Number of employees the help of an unrotated exploratory factor analysis (EFA). If a single fac-
110 8 3.1% tor emerges in the EFA or if a single factor accounts for the majority of
1125 12 4.6% the explained variance, CMV is problematic (Podsakoff et al., 2003;
2650 27 10.3%
Podsakoff, MacKenzie, & Podsakoff, 2012). According to the results of
51250 84 32.2%
251750 33 12.6% the unrotated EFA, the biggest factor explains only 38.83% of the vari-
7515000 44 16.9% ance, while all factors with Eigenvalues above one together account
5001 or above 53 20.3% for 75.31% of the variance. In a second step, we followed Chang, van
Firm Age Witteloostuijn, and Eden (2010) and restrained all items to load on
0b2 5 1.9%
2b5 9 3.4%
only one factor in a conrmatory factor analysis (CFA). The t statistics
5b10 38 14.6% (RMSEA (b 0.08) = 0.16; NFI (N0.9) = 0.86; CFI (N 0.9) = 0.88; IFI
10b20 80 30.7% (N 0.9) = 0.88; 2 = 6238.57; 2/DF (b 2) = 8.01) did not show good
20b50 74 28.45% t, indicating that a single factor does not account for all the variance
50 or more 55 21.1%
in the data (Podsakoff et al., 2012). Thirdly, we included a marker vari-
Business type
Service company 172 65.9% able in the questionnaire, which is a variable that theoretically should be
Manufacturing company 64 24.5% unrelated to the dependent constructs in the model (Lindell & Whitney,
Reselling company 25 9.6% 2001). As CMV assumes that systematic bias is introduced to the results
Respondent characteristics based on the same informants responding to dependent as well as inde-
Years with the company
pendent variables, showing that a theoretically unrelated variable is not
0b2 37 14.2%
2b5 57 21.8% signicantly related to the dependent constructs would reduce such
5b10 83 31.8% concerns of common method. We used a bi-polar scale to assess respon-
10b20 62 23.8% dents' commuting time to their ofce (My normal commuting time
20 or more 22 8.4%
from home to the ofce is: (1) very short(7) very long) as a marker
Position within the company
CEO 6 2.3%
variable and placed it among the survey items. When analyzed, it
Owner or co-owner 18 6.9% showed no signicant correlations to our dependent constructs (rm
Managing director 31 11.9% performance, and continuous supplier performance improvement). Fi-
Other top-level director 42 16.1% nally, following Lindell and Whitney's (2001) approach, we corrected
Middle-level Manager 144 55.2%
the correlations between the independent and dependent variables in
Other 20 7.7%
Years of employment in current position our model by the amount of CMV that was indicated by the marker var-
0b1 57 21.8% iable. After correcting for that factor, all correlations between indepen-
2b5 88 33.7% dent and dependent constructs in our model remained signicant. In
5b10 85 32.6%
light of concerns associated with the single-informant research design,
10 or more 31 11.9%
these procedures provide condence that associations between depen-
dent and independent variables are not the result of common method
variance.
(49.8%). The ratio between manufacturing and service companies also
provides a fair representation of that of most industrialized countries. 3.3. Construct operationalization
Finally, rms show indications of being well established in the market,
with over 80% being in operation for more than 10 years. The properties For the operationalization and dimensionality of the SRM capability
of our sample largely correspond with that of MP2015. components we follow the empirical results of Mitrega et al. (2012).
Supplier relationship initiation and supplier relationship development
capabilities were operationalized as second order formative constructs
3.2. Non-response and common method bias (Diamantopoulos & Winklhofer, 2001; Diamantopoulos, Rieer, &
Roth, 2008), in particular as reective-formative hierarchical latent var-
To assess potential non-response bias within our sample, we follow iable models (Becker, Klein, & Wetzels, 2012), and supplier relationship
Armstrong and Overton (1977) and compared early versus late respon- ending capability as a reective rst order construct. Supplier relation-
dents across various rm and respondent characteristics. The rst 25% ship initiation capability was constructed from the two conceptually
of responses were treated as early respondents, and the last 25% as distinct but inter-connected dimensions of selection and attraction.
late. Chi-square tests did not reveal any signicant difference between In other words, selection and attraction are conceptually non-
the two groups. While our rigorous response screening regarding overlapping and independent elements of relationship initiation capa-
knowledgeability and minimum response time allows us to increase bility (Jarvis, Mackenzie, & Podsakoff, 2003; Mackenzie, Podsakoff, &
the validity of our results, we realize that this process also compromises Jarvis, 2005). That means that relationship initiation capability is opera-
our effective response rate. To address this trade-off and increase con- tionalized as a composite variable and an increase or decrease could
dence that our nal sample still constitutes a representation of the over- be caused by either element independently or by both jointly
all survey population, we gathered data on company size in terms of (Diamantopoulos & Winklhofer, 2001). Similarly, supplier relationship
numbers of employees for the entire survey population. When compar- development capability was composed from the two distinct sub-
ing the overall population with our nal sample we did not nd any sig- components of inter-organizational and inter-personal supplier rela-
nicant differences. tionship management. The items used for all rst order constructs of
As the independent and dependent variables in the model are all supplier relationship initiation, development, and ending capabilities
measured from the same key informant, we used various procedures were adapted from Mitrega et al. (2012). Our operationalization thus
suggested by Podsakoff, MacKenzie, Lee, and Podsakoff (2003) in qualies that of MP2015 in several ways: While MP2015 use partner de-
order to ex-ante reduce the risk of common method variance (CMV): velopment scales adapted from Wagner (2006) for a construct equiva-
random question order, neutral wording, assurance of respondent lent to supplier relationship development capability, and additionally
192 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200

Table 2
Measurement models of latent constructs after purication.

Construct Items Loadings

Supplier relationship initiation capability To what extent do you agree with the following statements (completely disagree (1)completely agree (7)):
(SRIC) Selection Our company has a formal system for identifying which of the potential supply partners are attractive to us. .85
Mitrega et al. (2012) (adapted) We rank order and short-list potential supply partners based on their potential benets to us. .87
VE = 73.83 We develop a formal list of preferred features of potential supply partners. .89
= .88 We formally evaluate the resources and capabilities of potential supply partners. .83
Mean = 5.18 We systematically gather and review publicly available information to identify potential Supply partners.
Std. Dev. = 1.10
Supplier relationship initiation capability To what extent do you agree with the following statements (completely disagree (1)completely agree (7)):
(SRIC) Attraction We communicate our rm's relational success with supply partners widely. .89
Mitrega et al. (2012) (adapted) We routinely build the image of our company as a reliable business partner for Suppliers. .84
VE = 74.21 We routinely inform potential supply partners about our company's offering. .90
= .88 We communicate our relationship expectations to potential supply partners. .83
Mean = 5.23 We routinely use recommendations from our existing Supply partners to attract new ones.
Std. Dev. = 1.12
Supplier relationship development capability To what extent do you agree with the following statements (completely disagree (1)completely agree (7)):
(SRDC) Inter-company We try to lock-in our Supply partners in collaborating with us. .70
Mitrega et al. (2012) (adapted) We provide our supply partners with valuable information that can help them better serve their customers. .76
VE = 64.27 We work closely with our supply partners when developing our offerings. .81
= .90 We continuously communicate with our supply partners regarding mutual expectations. .84
Mean = 5.42 We work closely together with our supply partners and offer support to solve any problematic issues. .84
Std. Dev. = 0.88 We use our inuence to solve problems with our supply partners. .81
We try to develop an understanding of the reasons why the relationship with our supply partners is being negatively affected. .84
Supplier relationship development capability To what extent do you agree with the following statements (completely disagree (1)completely agree (7)):
(SRDC) Inter-personal Our company regularly organizes social events involving representatives from our Supply partners. .92
Mitrega et al., 2012 (adapted) Our company motivates its employees to create close social ties with representatives from its supply partners. .93
VE = 84.51 Our company motivates its employees to socialize with representatives from its supply partners at networking .91
= .94 events (e.g. trade shows, professional training conferences).
Mean = 4.30 Our company encourages its employees to establish inter-personal relationships with multiple stakeholders from .93
Std. Dev. = 1.57 different functional areas within its Supply partners.
Supplier relationship ending capability (SREC) To what extent do you agree with the following statements (completely disagree (1)completely agree (7)):
Mitrega et al. (2012) (adapted) If we have to end a relationship with a supply partner, we make sure they understand the reasons for this decision. .78
VE = 69.14 Our company has established procedures for how to slowly discontinue (phase out) business relationships with .86
= .78 supply partners that are not desirable any more.
Mean = 5.20 We systematically minimize collaboration with supply partners that are not benecial to us anymore. .86
Std. Dev. = 1.14 Our company has established a formal system to identify supply partner relationships where key performance
indicators or agreed milestones are not met.
Our company has a formal system in place to assess the prot and cost associated with existing supply partner
relationships.
We systematically rank our supply partners according to their performance in the business relationship with us.
We analyze the direct and indirect costs involved in ending a business relationship with our Supply partners (e.g.
searching for new supply partners, new investments, penalties, etc.).
Our company formalizes termination conditions within the contracts between us and our supply partners.
Supply base relationship stability (SBRS) The majority of relationships in your rm's portfolio of supply partners can be classied as (1 to 7 bi-polar scales):
Johnson et al. (2004) (adapted) Stableunstable (R) .84
VE = 71.38 Long-termshort-term (R) .77
= .86 Insecuresecure .89
Mean = 5.42 Unsteadysteady .87
Std. Dev. = 1.04
Continuous supply base performance To what extent do you agree with the following statements regarding the performance of the majority of your Suppliers (strongly
improvement (CSBPI) disagree (1)strongly agree (7)):
Joshi, 2009 (adapted) Our supply partners' product quality has improved over time. .85
VE = 73.85 Our supply partners' delivery performance has improved over time. .85
= .95 Our supply partners' performance on service and/or technical support has improved over time. .87
Mean = 5.30 The total value (i.e. benets) we receive from our supply partners has improved over time. .90
Std. Dev. = 0.97 Our supply partners' ability to meet our needs has improved over time. .90
Our supply partners' have done more for us over time. .86
Overall, our satisfaction with our Supply partners has increased over time. .88
Our supply partners' performance has been consistent over time. .78
Firm Performance (FP) Evaluate how your company performs concerning the following statements relative to your rm's competitors (much worse
Reinartz et al. (2004) (adapted) (1)much better (7)):
VE = 84.36 Achieving overall performance .91
= .94 Attaining market share .91
Mean = 4.98 Attaining growth .92
Std. Dev. = 1.15 Current protability .93
Demand Uncertainty (DU) To what extent do you agree with the following statements about the market your rm is serving (completely disagree
Sheng et al. (2011); Jaworski and Kohli (1)completely agree (7)):
(1993) (adapted) In our business, customers' product/service demands and preferences change a lot over time. .85
VE = 68.37 Our customers tend to look for new products/services all the time. .86
= .77 It is difcult to predict changes in the market. .77
Mean = 4.92
Std. Dev. = 1.08

Note: The original item list before purication from Mitrega et al. (2012) was used as the basis for the supplier relationship management capability component constructs.
SRDC Inter-company & Inter-personal development: uses items from Mitrega et al.'s (2012) relationship development capability construct, i.e. the social, management, and conict
management sub-components.
: indicates item has been eliminated after purication.
 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
neglects the multi-dimensionality of supplier relationship initiation and
development capabilities, we closely follow the foundational study of
Mitrega et al. (2012).
The mediating construct of continuous supply base performance im-
provement was adapted from Joshi (2009), analogously to MP2015.
Firm performance was measured using scales adapted from Reinartz
et al. (2004). The moderating construct of demand uncertainty was
measured, similarly to MP2015, according to Sheng et al. (2011)
adapted from Jaworski and Kohli (1993). All model constructs were
measured with multi-item reective measurement models using
7-point Likert scales ranging from (1) strongly disagree to (7) strongly
agree.
Several control variables were included, mostly mirroring those of
MP2015: rm size (number of employees), rm age (years of operation
of the company), as well as availability of alternative supply chain part-
ners (Compared to other rms in our industry we can more easily nd
alternative Supply Chain partners.; measured on a 7-point scale rang-
ing from strongly disagree (1) to strongly agree (7)). Additionally to
MP2015, we included two important control variables further charac-
terizing the supply base: the size of the rm's supply base (Compared
to other rms in our industry, we have more Supply Chain partners;
measured on a 7-point scale ranging from strongly disagree (1) to
strongly agree (7)), and supply base relationship stability (Johnson,
Sohi, & Grewal, 2004; measured on a 7-point bipolar scale), which
was included in order to control for the potential negative effects of dy-
namic SRM capability. In contrast to MP2015, we did not control for
company exibility in business relationships nor did we use business
personal ties as we include the sub-component of inter-personal devel-
opment capability as part of our conceptualization of supplier relation-
ship development capability, in line with Mitrega et al. (2012).
Table 2 provides an overview of the puried measurement models of
the latent constructs.
3.4. Measurement models
Before estimating the overall structural model, we rst test the mea-
surement models and assess their reliability and validity (i.e. conver-
gent and discriminant validity). Table 3 shows the VARIMAX results of
an EFA performed in SPSS version 17.0 for all relevant constructs. Ac-
cording to Table 3, all items load on their respective factor, with loadings
consistently above 0.6 (except for one item with 0.53) and virtually no
cross-loadings above 0.3 exist (highest cross loading 0.34). According
to table 4, both the average variance extracted (AVE) as well as the
scale composite reliabilities (SCR) for all constructs are above 0.5 and
0.6 respectively in support of convergent validity. Also, according to
Table 4, the square root of the AVE for each construct (displayed along
the diagonal in table 4) is larger than their respective correlations
with the other constructs in the model in support of discriminant valid-
ity (Fornell & Larcker, 1981; Hair, Sarstedt, Ringle, & Mena, 2012). Fi-
nally, a CFA of the overall measurement model was performed in
LISREL 8.80 (Jreskog & Srbom, 2006). The CFA results indicate ade-
quate t (RMSEA (b0.08) = 0.06; NFI (N 0.9) = 0.96; CFI (N 0.9) =
0.98; IFI (N 0.9) = 0.98; 2 = 743; 2/DF ( 2) = 1.995). Table 5
shows the CFA results for the overall measurement model.
4. Analysis and ndings
4.1. Analytical design
To test our model, we use partial least squares structural equation
modeling (PLS-SEM) in SmartPLS 3.0 (Ringle, Wende, & Becker, 2014)
in line with the analysis design of MP2015. Recent application of PLS
in operations and supply chain management research as well as in the
context of this study can be found in Johnston et al. (2004);
Braunscheidel and Suresh (2009), and Chiang, Kocabasoglu-Hillmer,
and Suresh (2012). As a variance-based structural equation approach,
193
PLS-SEM is particularly useful for predictive purposes when theory is
still under development (Johnston et al., 2004; Hair et al., 2012). PLS-
SEM allows testing models that simultaneously employ formative as
well as reective measures (Johnston et al., 2004), making it applicable
for our model with its reective rst order and formative second order
constructs.
Following Hair et al. (2012), we test our model using the path-
weighting scheme with a maximum of 300 iterations. As part of apply-
ing a bootstrapping procedure 5000 bootstrap samples were used to
compute t-statistics. The reective-formative second order constructs
of supplier relationship initiation and development capabilities have
been operationalized using the repeated indicator approach with
Mode A as the mode of measurement on the second order construct
and by applying the path weighting scheme. The rst order constructs
show strong and highly signicant relationships with their higher
order constructs. The path coefcients for selection and attraction on
supplier relationship initiation capability are 0.54 (t-value = 28.71)
and 0.57 (t-value = 26.48) respectively. The path coefcients for
inter-organizational and inter-personal supplier relationship develop-
ment capabilities on their higher order construct are 0.76 (t-value =
22.85) and 0.41 (t-value = 16.12) respectively. This suggests that the
higher order constructs are appropriately measured by their respective
sub-dimensions. Finally, as recommended for formative measurement
models, we assess multi-collinearity (Diamantopoulos & Winklhofer,
2001). The variance ination factors (VIF) for all constructs show values
below 5, indicating that multi-collinearity is not an issue (Hair et al.,
2012).
4.2. Hypothesis testing
Table 6 summarizes the PLS-SEM results for the hypothesized main
model. In support of H1, H2, and H3 the results show that supplier rela-
tionship initiation ( = 0.22, t-value = 2.69), development ( = 0.31,
t-value = 3.44), and ending capabilities ( = 0.17, t-value = 2.80) all
have positive and signicant effects on continuous supply base perfor-
mance improvement. Further, in support of H5, rm performance is sig-
nicantly and positively affected by continuous supply base
performance improvement ( = 0.40, t-value = 5.60). We contrast
this initial model with one that directly links supplier relationship initi-
ation, development, and ending capabilities with rm performance and
found only SRDC on rm performance to be statistically signicant
(table 6; model 2). Therefore, the effect of SRM capability on rm per-
formance is mostly mediated. The hypothesized main model explains
57% and 31% of the variance in continuous supply base performance im-
provement and rm performance respectively (i.e. in-sample predic-
tion). Stone-Geisser's Q2 indicates good predictive validity of the
model (i.e. out-of-sample prediction) for both continuous supply base
performance improvement (0.42) and rm performance (0.26); a
blindfolding procedure with an omission distance of 7 (to ensure that
the number of observations divided by omissions distance is not an in-
teger) was used to compute the cross-validated redundancies (Hair
et al., 2012).
Table 6 (models 35) summarizes the PLS-SEM results for the hy-
pothesized interaction effects models. To test the moderation hypothe-
ses, we mean-centered the data and followed the product-indicator
approach (Chin, Marcolin, & Newsted, 2003; Henseler & Chin, 2010)
embedded in SmartPLS 3.0 (Ringle et al., 2014). The results provide ev-
idence in support of H4a, H4b, and H4c that demand uncertainty posi-
tively moderates the relationship between supplier relationship
initiation ( = 0.08, t-value = 2.63), development ( = 0.06, t-
value = 1.90), and ending capabilities ( = 0.06, t-value = 2.33) and
continuous supply base performance improvement. However, while
the interaction effect of demand uncertainty with supplier relationship
initiation and ending capabilities on continuous supply base perfor-
mance improvement are signicant, the interaction effect of demand
uncertainty and supplier relationship development capability on
194 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200

Table 3 Table 4
Exploratory factor analysis (VARIMAX). AVE, SCR and correlations.

Construct 1 2 3 4 5 6 7 8 9 10 Construct AVE SCR 1 2 3 4 5 6 7 8 9

1. Supplier relationship 1. SRIC Selection .65 .88 .81

initiation capability (SRIC) 2. SRIC Attraction .66 .89 .68 .81
Selection 3. SRDC Inter-company .59 .91 .62 .74 .77
SRICSelect 1 .78 4. SRDC Inter-personal .79 .94 .36 .58 .45 .89
SRICSelect 2 .82 5. SREC .55 .78 .65 .64 .66 .48 .74
SRICSelect 3 .73 6. SBRS .62 .86 .25 .32 .39 .13 .28 .79
SRICSelect 4 .67 7. CSBPI .70 .95 .60 .65 .69 .46 .63 .49 .84
2. Supplier relationship 8. FP .79 .94 .36 .51 .50 .41 .38 .41 .54 .89
initiation capability (SRIC) 9. DU .54 .77 .38 .58 .56 .52 .50 .21 .42 .47 .73
Attraction
AVE: average variance extracted; SCR: scale composite reliability; square root of the AVE
SRICAttract 1 .63
along the diagonal.
SRICAttract 2 .68
SRICAttract 3 .67 .34
SRICAttract 4 .62 .33 supply base relationship stability might be compromised by a too dy-
3. Supplier relationship namic approach to managing the supply base. According to our results
development capability
(Table 6, model 1), supply base relationship stability is an important fac-
(SRDC) Inter-company
SRDCIC1 .53 .31 tor for both continuous supply base performance improvement ( =
SRDCIC2 .60 .31 0.23, t-value = 4.98) as well as rm performance ( = 0.21, t-
SRDCIC3 .70 value = 3.33). Thus, we investigate the potential trade-off between sup-
SRDCIC4 .73 ply base dynamism and stability to demonstrate that SRM capability
SRDCIC5 .73
does not come at the expense of relationship performance within the
SRDCIC6 .68
SRDCIC7 .71 supply base. According to our analyses, supplier relationship initiation
4. Supplier relationship ( = 0.18, t-value = 1.66) and development ( = 0.19, t-value =
development capability 1.87) capabilities show weakly signicant positive effects on supply
(SRDC) Inter-personal
base relationship stability, while the effect of supplier relationship end-
SRDCIP1 .86
SRDCIP2 .86
ing capability is not signicant ( = 0.04, t-value = 0.51). This provides
SRDCIP3 .83 further condence that the benecial effects of SRM capability on rms'
SRDCIP4 .87 supply base performance improvement and ultimately on overall rm
5. Relationship ending performance is not compromised by negative effects on supply base re-
capability (SREC)
lationship stability.
SREC1 .63
SREC2 .70
SREC3 .71 4.4. Latent class analysis
6. Supply base relationship
stability (SBRS)
In a nal analytical step, and in extension of MP2015, we follow Hair
SBRS1 .77
SBRS2 .75
et al. (2012) and conduct an exploratory latent class analysis using nite
SBRS3 .85 mixture modeling (FIMIX PLS; Hahn, Johnson, Herrmann, & Huber,
SBRS4 .80 2002; Sarstedt, Becker, Ringle, & Schwaiger, 2011) in SmartPLS 3.0
7. Continuous supply base (Ringle et al., 2014). The objective is to ascertain whether the results
performance improvement
are homogenous across our sample, i.e. determine whether clusters
(CSBPI)
CSBPI1 .73 exist within the sample for which strength, direction, as well as statisti-
CSBPI2 .73 cal signicance of the path model differ in a meaningful way. Hair et al.
CSBPI3 .72 (2012) argue for such a procedure to be employed routinely as an im-
CSBPI4 .76
portant test of rigor. Determining the appropriate number of clusters
CSBPI5 .79
CSBPI6 .80
is guided by several indices provided by FIMIX PLS. The Akaike's Infor-
CSBPI7 .79 mation Criterion (AIC) and the Bayesian Information Criteria (BIC)
CSBPI8 .68 .30 should be minimized, while the entropy statistic, which measures the
8. Firm performance (FP) degree of separation regarding the estimated individual cluster proba-
FP1 .83
bilities, should be maximized (Hair et al., 2012; Ringle, Wende, & Will,
FP2 .82
FP3 .83 2008; Sarstedt et al., 2011). Table 7 displays the different indices for
FP4 .86 the 2 and 3 cluster solutions. These are ambiguous regarding which so-
9. Demand uncertainty (DU) lution is better, for example, entropy and AIC favor a three cluster solu-
DU1 .70 tion while BIC and Consistent AIC suggests a two cluster solution.
DU2 .78
DU3 .71
However, with two large balanced clusters and one very small cluster
(n = 15), the three cluster solution also seems to be indicative of two
Note: Loadings below 0.30 are not shown.
dominating clusters, in line with Sarstedt and Ringle's (2010) recom-
mendations. As for our hypothesized model, this suggests that our sam-
continuous supply base performance improvement is only weakly sig- ple shows characteristics of two clusters with n = 100 and n = 161
nicant (p b 0.10). respectively.
In order to explore these latent class differences, we conduct a multi-
4.3. Controlling for supply base relationship stability group analysis in SmartPLS 3.0 (Ringle et al., 2014) for our hypothesized
main effects model. Table 8 provides an overview of the results. While
Although our results demonstrate the positive effect of SRM capabil- the impact of supplier relationship development capability on continu-
ity on continuous supply base performance improvement in line with ous supply base performance improvement is positive, strong, and sig-
the DC approach, the dynamism associated with the SRM capability nicant for cluster one ( = 0.42, t-value = 3.19), it is insignicant
might introduce a potential negative interfering effect. In particular, for cluster two ( = 0.11, t-value = 1.63). On the other hand, cluster
 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200 195

Table 5 differ with respect to their R2 values (t-valueCSBPI = 8.54, t-valueFP =

Conrmatory factor analysis. 7.82). For cluster two the model explains 84% of the variance of continuous
Construct 1 2 3 4 5 6 7 8 9 supply base performance improvement, and 61% of rm performance,
1. Supplier relationship initiation
while for cluster one 24% and 5% respectively are explained.
capability (SRIC) We carried out an ex-post analysis to provide further insight into the
Selection two clusters. First, we explore their consequence with respect to our
SRICSelect 1 .80 focal constructs, i.e. continuous supply base performance improvement
SRICSelect 2 .79
and rm performance. Secondly, we investigate several explanatory
SRICSelect 3 .87
SRICSelect 4 .76 variables, in particular with respect to the characteristics of the supply
2. Supplier relationship base, and the business environment. According to our results, cluster
development capability (SRDC) two (meanCSBPI = 5.41; meanFP = 5.11) shows signicantly higher con-
Attraction tinuous supply base performance improvement (t-valueCSBPI = 2.41)
SRICAttract 1 .84
SRICAttract 2 .76
and rm performance (t-valueFP = 2.27) compared to cluster one
SRICAttract 3 .87
SRICAttract 4 .78 Table 6
3. Supplier relationship PLS-SEM estimation of structural model.
development capability (SRDC)
Inter-company Main Direct Interaction effects
SRDCIC1 .63 model effects models
SRDCIC2 .70 model
SRDCIC3 .77
Model 1 Model 2 Model 3 Model 4 Model 5
SRDCIC4 .80
SRDCIC5 .83 Direct effects
SRDCIC6 .79 SRIC CSBPI 0.22a, 0.22 0.27 0.21 0.21
SRDCIC7 .82 (2.69)b (2.67) (3.11) (2.69) (2.46)
4. Supplier relationship SRDC CSBPI 0.31 0.31 0.30 0.32 0.33
development capability (SRDC) (3.44) (3.37) (3.27) (3.63) (3.61)
Inter-personal SREC CSBPI 0.17 0.17 0.15 0.17 0.18
SRDCIP1 .88 (2.80) (2.76) (2.40) (2.76) (2.96)
SRDCIP2 .91 SRIC SBRS 0.18 0.18 0.18 0.18 0.18
SRDCIP3 .87 (1.66) (1.70) (1.62) (1.62) (1.66)
SRDCIP4 .90 SRDC SBRS 0.19 0.19 0.19 0.19 0.19
5. Relationship ending capability (1.87) (1.84) (1.89) (1.89) (1.88)
(SREC) SREC SBRS 0.04 0.04 0.04 0.04 0.04
SREC1 .65 (0.51) (0.41) (0.50) (0.49) (0.49)
SREC2 .79 SBRS CSBPI 0.23 0.24 0.22 0.23 0.23
SREC3 .77 (4.98) (4.96) (4.78) (5.16) (4.89)
6. Supply base relationship stability CSBPI FP 0.40 0.22 0.40 0.40 0.40
(SBRS) (5.60) (2.27) (5.50) (5.72) (5.61)
SBRS1 .69 SBRS FP 0.21 0.19 0.21 0.21 0.21
SBRS2 .59 (3.33) (3.08) (3.29) (3.29) (3.30)
SBRS3 .91 SRIC FP 0.07
SBRS4 .91 (0.81)
7. Continuous supply base SRDC FP 0.27
performance improvement (2.73)
(CSBPI) SREC FP 0.06
CSBPI1 .83 (0.86)
CSBPI2 .83 DU CSBPI 0.04 0.03 0.05
CSBPI3 .85 (0.76) (0.52) (0.94)
CSBPI4 .89 Interaction effects
CSBPI5 .89 DU SRIC CSBPI 0.08
CSBPI6 .83 (2.63)
CSBPI7 .85 DU SRDC CSBPI 0.06
CSBPI8 .74 (1.90)
8. Firm performance DU SREC CSBPI 0.06
FP1 .88 (2.33)
FP2 .87 Control variables
FP3 .90 Firm size FP 0.11 0.07 0.11 0.11 0.11
FP4 .92 (2.21) (1.32) (2.10) (2.13) (2.20)
9. Demand uncertainty Firm age FP 0.08 0.02 0.08 0.08 0.08
DU1 .81 (1.57) (0.48) (1.58) (1.57) (1.56)
DU2 .78 Firm size CSBPI 0.02 0.02 0.01 0.02 0.02
DU3 .59 (0.36) (0.35) (0.31) (0.49) (0.38)
Firm age CSBPI 0.01 0.01 0.03 0.03 0.02
(0.32) (0.34) (0.57) (0.61) (0.36)
two shows strong positive effects of supplier relationship initiation Supply base size CSBPI 0.02 0.02 0.03 0.04 0.01
(0.26) (0.30) (0.54) (0.60) (0.17)
( = 0.62, t-value = 9.01) and ending capabilities ( = 0.26, t-value =
Availability of alternative 0.06 0.06 0.08 0.07 0.07
4.84) on continuous supply base performance improvement, while those supply partners CSBPI (0.96) (0.96) (1.18) (1.11) (1.03)
of cluster one are insignicant ( = 0.05, t-value = 0.39, and = 0.07,
R2(CSBPI) 0.57 0.57 0.59 0.58 0.58
t-value = 0.70 respectively). The effect of continuous supply base perfor-
R2(SBRS) 0.14 0.14 0.14 0.14 0.14
mance improvement on rm performance for both clusters is positive R2(FP) 0.31 0.36 0.31 0.31 0.31
and signicant (cluster 1: = 0.22, t-value = 1.97; cluster 2: = 0.78, Q2(CSBPI) 0.42 0.42 0.43 0.42 0.42
t-value = 25.67), in line with the ndings for the overall sample. However, Q2(SBRS) 0.09 0.09 0.09 0.09 0.09
the size of this effect is weaker for cluster 1 compared to cluster 2 (t- Q2(FP) 0.26 0.29 0.26 0.26 0.26

value = 4.73), as is the strengths of its signicance. The two clusters also a
-coefcient; b t-value; p b 0.01; p b 0.05; p b 0.10.
196 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200

Table 7
FIMIX-PLS Evaluation Criteria.

Clusters lnL Akaike's Bayesian Consistent Modied Normed Cluster size

information information AIC AIC entropy
Cluster 1 Cluster 2 Cluster 3
criterion criterion (CAIC) (AIC3) statistics (EN)
(AIC) (BIC)

2 1687.37 3324.74 3235.63 3210.63 3299.74 0.56 100 161

3 1722.60 3369.20 3233.75 3195.75 3331.20 0.66 103 143 15

(meanCSBPI = 5.11; meanFP = 4.78). As for explanatory variables re-
garding the characteristics of the supply base, we found that cluster
one had a signicantly smaller (t-valueSupplyBaseSize = 3.60) supply
base compared to their industry (meanSupplyBaseSize = 4.04) than cluster
two (meanSupplyBaseSize = 4.59). Furthermore, cluster one had signi-
cantly less (t-valueAvailabilitySupplyPartners = 3.16) available alternative
supply partners (meanAvailabilitySupplyPartners = 4.38) compared to cluster
two (meanAvailabilitySupplyPartners = 4.86). Regarding the characteristics of
the business environment, our results show that rms in cluster one
(meanTechTurbulence1 = 4.78; meanDU = 4.78) perceive their business en-
vironment as signicantly less turbulent and marginally less uncertain (t-
valueTechTurbulence = 2.63; t-valueDU = 1.69) compared to rms in cluster
two (meanTechTurbulence = 5.10; meanDU = 5.01). We also performed Chi-
square tests, which show that the two clusters do not differ in terms of
rm characteristics such as rm size, rm age, or business type.
The results are indicative of two different SRM capability strategies.
The results of cluster one point to rms that have access to fewer sup-
pliers, perhaps because of the availability of appropriate suppliers in
their industry or the rms' strategic focus. The associated increased de-
pendence on those suppliers in turn is reected in the importance of
on-going relationship development. On the other hand, access to more
suppliers provides exibility and allows for a more dynamic supply base
management strategy to be effective, thus making initiation and ending
capabilities more important (see in cluster two). Furthermore, the results
show that rms in cluster two perceive their business environment as
more dynamic and uncertain, suggesting that the effectiveness of the
two supply base strategies is contingent on such factors within the busi-
ness environment. SRM capability strategies aimed at developing the
existing supply base are more effective in stable business environments,
while those aimed at initiation and ending become more effective with
increasing dynamism and uncertainty. However, our results show that
cluster two performs signicantly better than cluster one, which suggests
that both supply base management strategies are not equally successful
(i.e. equinality does not exist). This is in line with the dynamic capability
argument that dynamic business environments provide opportunity for
those rms that have the ability to seize them (Teece et al., 1997).
SRM capability strategies. In so doing we employ similar theoretical
grounding and research design choices to MP2015. In particular, we fol-
low a DC approach as well as the original conceptualization of NC by
Mitrega et al. (2012). Furthermore, we focus on the same focal phenom-
enon, i.e. the supply base, and utilize a similar sample as well as analysis
method.
We ground the importance of SRM capability in the resource-based
view of the rm (Wernerfelt, 1984; Barney, 1991) and conceptualize
it as a dynamic capability (Teece et al., 1997; Eisenhardt & Martin,
2000). As rms rely on suppliers to access and develop a variety of crit-
ical resources, such a capability is of increasing managerial importance.
We follow Reinartz et al. (2004) and Mitrega et al. (2012) who distin-
guish between important capability components relating to relation-
ship initiation, development, and ending, and thereby provide the
basis for a framework that combines SRM capability components to dy-
namically manage a rm's supply base. The results of our empirical
study demonstrate the net importance of all three components with re-
spect to rms' supply base performance improvement. Among the three
investigated SRM capability components, those devoted to the develop-
ment of existing supplier relationships have the strongest positive im-
pact on the continuous performance improvement of the supply base.
This qualies the results from MP2015, who could not corroborate a sig-
nicant relationship between partner development and continuous
performance improvement. We attribute the difference of our results
to the fact that MP2015 uses a conceptualization and operationalization
conned to merely the aspect of partner monitoring and therefore does
not capture the comprehensive and multi-dimensional nature of sup-
plier relationship development capability as posited in Mitrega et al.
(2012). By staying true to the original conceptualization of networking
Table 8
PLS-SEM estimation direct effects model: two clusters results.
Overalla FIMIX
Cluster 1 Cluster 2 t[W-S]/t
(N = 100) (N = 161)

Direct effects
5. Implications for theory and practice SRIC CSBPI 0.27b, 0.05 0.62 4.29
(3.36)c (0.39) (9.01)
SRDC CSBPI 0.37 0.42 0.11 2.08
5.1. Qualication and extension of MP2015 and theoretical implications (4.27) (3.19) (1.63)
SREC CSBPI 0.18 0.07 0.26 1.63
We set out to qualify and extend the insights gained from MP2015. (2.80) (0.70) (4.84)
In particular, we provide a qualication through a rigorous conceptual- CSBPI FP 0.52 0.22 0.78 4.73
(9.65) (1.97) (25.67)
ization, nomological model, and operationalization relating to the issue
R2(CSBPI) 0.52 0.24 0.84 7.82
of SRM capability by maintaining the integrity of the original NC concept R2(FP) 0.27 0.05 0.61 8.54
(Mitrega et al., 2012) based on DC (Teece et al., 1997; Eisenhardt &
Descriptives
Martin, 2000). In addition, we provide an extension through an explor-
Supply base size 4.38d 4.04 4.59 3.60
atory latent class analysis which reveals the existence of two distinct Availability of alternative 4.67 4.38 4.86 3.16
supply partners
Technological turbulence 4.98 4.78 5.10 2.63
1
DU 4.92 4.78 5.01 1.69
Technological Turbulence (Sheng et al., 2011; Jaworski & Kohli, 1993), item wordings: CSBPI 5.30 5.11 5.41 2.41
1) The technology in our industry is changing rapidly; 2) It is very difcult to forecast the FP 4.98 4.78 5.11 2.16
technology development in our industry; 3) Most technological developments in our in-
dustry are radical changes to existing techniques; 4) The technological changes in our in- t[W-S] = WelchSatterthwait t-value for multi-group comparison test; a Refers to the
dustry can bring many opportunities for rms. Measured on seven point Likert scale, hypothesized direct effects model; b -coefcient; c t-value; c mean; p b 0.01; p
anchored in Strongly Disagree (1) and Strongly Agree (7). b 0.05; p b 0.10.
 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
capability from which SRM capability is derived, we develop a nomolog-
ical model, which achieves in empirical tests considerably higher ex-
planatory power. While MP2015's main model including controls
achieves an R2 for the focal dependent construct of continuous perfor-
mance improvement of 24%, our comparable model explains 57% of
the variance of the equivalent construct. In line with DC theory we
also add rm performance as a nal dependent construct to the
model, of which 31% is explained. Overall, our results are in line with
and extend the supply chain management literature, which focuses on
supplier development programs and supply chain integration (Rai
et al., 2006; Wagner & Krause, 2009; Danese & Romano, 2011) as the
main mechanisms to improve decient supplier relationships.
Our analysis also shows that positive effects of certain SRM capabil-
ity components on supply base performance improvement are ampli-
ed as demand uncertainty increases. In particular, this study provides
evidence of increased importance of SRM capability components ori-
ented at supplier relationship initiation and supplier relationship end-
ing, when rms operate in more volatile business environments. We
thereby extend MP2015 who do not test the effectiveness of these capa-
bility components contingent on demand uncertainty. However, the
moderation effect of demand uncertainty on supplier relationship de-
velopment capability is only marginally signicant in our study. This
qualies MP2015 who report a strong signicant moderation effect of
environmental uncertainty for the effectiveness of partner develop-
ment. Overall our ndings are aligned with the theory of dynamic capa-
bilities (Teece et al., 1997; Helfat et al., 2007; Drnevich & Kriauciunas,
2011), which suggest the development of organizational capabilities
oriented at the constant revision of companies' resource base to handle
increasingly volatile and uncertain business environments.
One intended contribution of our study was aimed at extending the
insights of MP2015 by understanding heterogeneities regarding how
SRM capability affects performance outcomes. Thus, we employed an
exploratory latent class analysis, which extends MP2015 and qualies
our ndings further by revealing two clusters that can be tentatively
interpreted as reecting distinct SRM capability strategies, i.e. different
ways to employ a company's SRM capability. One group of rms deploys
an SRM capability strategy where the relationship development of
existing supplier relationships shows an optimizing effect on supply
base performance improvement (a status-quo optimization strategy),
while the other group of rms is more exibly oriented and achieves re-
sults via capability components of initiation and ending (a dynamic op-
timization strategy). These two SRM capability strategies can be
initially explained through the general concept of exploitation and explo-
ration strategies developed and popularized in organization theory
(March, 1991; Hoffmann, 2007). In the context of SRM capability, ex-
ploitation strategies would refer to leveraging and developing existing
supplier relationships, while exploration strategies would focus on nd-
ing and forming new supplier relationships to gain access to and to de-
velop new resources, and ending those that are non-performing. In
doing so, non-performing supplier relationships are ended to free
resources.
We found that rms that follow a dynamic optimization strategy
had signicantly better access to suppliers compared to those that
employed a status-quo optimization. Furthermore, they operate in
more changeable business environments in line with DC assumptions
(Teece et al., 1997; Drnevich & Kriauciunas, 2011). Thus, the strategic
focus of both SRM capability strategies with respect to managing the
supply base relates to the characteristics of the industry or rms' posi-
tion within their supply chain. Our ndings contradict suggestions by
MP2015 that status-quo optimization, such as partner development,
are more important in volatile business environments. This can be at-
tributed to the fact that MP2015 does not test for possible heterogeneity
in the data set, which could mask co-existing, but different causal mech-
anisms (Hair et al., 2012).
When comparing both SRM capability strategies in terms of contin-
uous supply base improvement and rm performance, the dynamic
197
optimization strategy performed signicantly better, in line with as-
sumptions of the literature on dynamic capabilities (Teece et al.,
1997). This is due to the fact that the effect of continuous supply base
performance improvement on rm performance weakens considerably
for status-quo optimization SRM capability strategies. This nding ex-
tends the extant literature on the importance of supply chain manage-
ment in stable versus dynamic environments.
Finally, addressing the potential concern that dynamic SRM capabil-
ity may come at the expense of supply base relationship stability, we
controlled for this effect. We rst show empirically the importance of
supply base relationship stability for supply base performance improve-
ment as well as for rm performance, and secondly demonstrate that
SRM capability did not negatively affect this stability. As argued, all
three components of the SRM capability aim at simultaneously address-
ing current resource needs of the rm while considering also relation-
ship instabilities and relationship opportunity costs. Thus, in order to
achieve resource advantages, the SRM capability does not compromise
the relationship, but rather explicitly considers the other party involved,
be it during the initiation, development, or ending of supplier relation-
ships. This explains why we did not nd any negative effects of SRM ca-
pability on supply base relationship stability. Instead our results suggest
a positive effect.
5.2. Managerial implications
Our framework of SRM capability offers ways of operationalizing
and implementing concrete organizational processes and routines help-
ing rms to shape and restructure their supply base. As structural sup-
ply base reconguration provides important benets, the mechanisms
to achieve this objective become important. Thus, to fully seize these
benets through the use of SRM capability without negative side effects
(e.g. partner opportunism, or unstable supply relationships), it is impor-
tant that managers realize such recongurations as relational processes.
All three components of SRM capability (initiation, development, and
ending) as well as their sub-components are important in this context.
We thus contribute to better managerial practice by outlining the com-
plementary importance of different SRM capability components. For in-
stance, the positive effect of supplier relationship initiation capability
can only be achieved by developing organizational processes and rou-
tines for selecting as well as attracting supply partners. While rms rou-
tinely focus more on the selection processes, our results point to the
practical importance of signaling their attractiveness to possible sup-
pliers. Managers also need to proactively address the issue that in
order to improve their supply base performance, they have to tackle
non-performing supplier relationships. Often such relationships can be
turned around through supplier relationship development capability,
however, there exist situations where this is not possible or sub-
optimal. Consequently, our results suggest that management practice
needs to have a capability in place to end supplier relationships when
necessary. We nd that this relates to building a capability, which al-
lows for a constant monitoring as well as a managed ending process
with regard to such supplier relationships.
Contingent on rms' position within their supply chain as well as the
characteristics of their business environment, purchasing managers
need to consider different SRM capability strategies, i.e. to follow either
a status-quo optimization strategy or a dynamic optimization strategy
and therefore focus resources on different aspects managing supplier
relationships. Firms' situation and market characteristics should be
aligned with these strategic choices, e.g. if there are not many alterna-
tive suppliers available and/or the rm has a small supply base, a
'status-quo optimization strategy' regarding the deployment of the
SRM capability is most appropriate. As the moderation and post-hoc la-
tent class analyses demonstrate, a focus on initiation and ending as part
of supplier relationship management is pivotal for continuous supply
base performance improvement in cases of less predictable market con-
ditions. Thus, a dynamic optimization may be especially useful for
198 S. Forkmann et al. / Industrial Marketing Management 57 (2016) 185200
companies operating in industries with fast changing consumer prefer-
ences (e.g. mobile software and hardware, fashion clothing) or other
continuous external turbulences, such as technological changes (e.g. en-
tertainment, computer, communication, and pharmaceuticals). How-
ever, given that more and more industries are becoming increasingly
turbulent (Christopher & Holweg, 2011), developing an appropriate
SRM capability as a valuable strategic option for rms may become a
general necessary condition for rm success.
5.3. Limitations and future research
As with any research, this study is not without its limitations. These
limitations refer to both our survey design and nomological model. First,
this study employs a single informant research design, which causes
concerns with respect to common method variance. CMV can be best
addressed when data for independent and dependent variables are ob-
tained from different sources, for example multiple informants or
complementing survey data with secondary data. As we used a survey
panel to collect our data, we were restricted in our research design.
Being aware of these concerns, we addressed and controlled for CMV
as best as possible by using both ex-ante and ex-post approaches sug-
gested by the literature. Although we arrive at the conclusion that com-
mon method variance is not a particular problem in our data, we
suggest that future studies consider multiple data sources in their re-
search design.
Secondly, our study concentrated on only some factors associated
with the SRM capability in line with our grounding in NC (Mitrega
et al., 2012) and neglected other variables that could be considered in
the future. As the SRM capability is conceptualized according to a dy-
namic capabilities approach (Teece et al., 1997) further studies may
test the contingencies between a SRM capability and some variables
characterizing dynamic supply chains, e.g. supply chain agility (e.g.
Christopher, 2000; Swafford et al., 2006). Furthermore, it is suggested
to juxtapose supplier exibility (i.e. exibility sourced from within the
existing supply chain) and sourcing exibility (i.e. exibility sourced
by going beyond the rm's existing supply chain) for different levels
of demand uncertainty.
Thirdly, verifying the explored SRM capability strategies (i.e. dy-
namic optimization strategy vs. status-quo optimization strategy)
and explaining them with the help of the exploration and exploitation
concepts (March, 1991) provides a promising area of future research.
The circumstances under which various SRM capability strategies are
benecial should be examined further, possibly by controlling for the in-
dustry type, the strategic importance of products purchased, or a rm's
supply chain/network position. One can hypothesize that in certain in-
dustries (e.g. rst-tier suppliers in the automotive industry) more stra-
tegic and long-term supplier alliances are important to reduce costs,
streamline delivery and achieve quality and innovation objectives
(Helper & Sako, 1995; Dyer, 1996). In addition, the potential risk associ-
ated with the success traps of exploitation strategies and failure traps
of exploration strategies (Levinthal & March, 1993) pose important
questions. Both exploitation and exploration certainly constitute ex-
treme points on a continuum, and it has to be understood if and how
rms can achieve an appropriate level of ambidexterity (Raisch &
Birkinshaw, 2008; Jansen, Tempelaar, van den Bosch, & Volberda,
2009; Simsek, 2009), specically the possibility of keeping a balance be-
tween organizational processes and routines oriented at supply chain
efciency and supply chain exibility (Huang et al., 2014). This can be
done by considering contingencies, for example the level of volatility
of the business environment, the competitive situation, or the general
availability of appropriate supply partners.
Acknowledgments
The authors gratefully acknowledge the funding received from Man-
chester Business School that helped to fund this research.
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