© 2016, American Marketing Association

Journal of Marketing Research

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THE INFLUENCE OF THE STRUCTURE OF INTERDEPENDENCE ON THE

RESPONSE TO INEQUITY IN BUYER-SUPPLIER RELATIONSHIPS

David A. Griffith
Iacocca Chair
Professor of Marketing
Department of Marketing
College of Business and Economics
Lehigh University
Bethelehem, PA 18015
(t): 610.758.6530
(e): david.a.griffith@lehigh.edu

Jessica J. Hoppner
Assistant Professor of Marketing
Department of Marketing
George Mason University
School of Management
Fairfax, VA 22030
(t): 703.993.1796
(e): jhoppner@gmu.edu

Hannah S. Lee
Assistant Professor of Marketing
Department of Marketing
Miami University
Farmer School of Business
Oxford, OH 45056
(p): 513.529.3363
(e) leehs@miamioh.edu

Tobias Schoenherr
Associate Professor of Supply Chain Management
Michigan State University
Department of Supply Chain Management
Michigan State University
The Eli Broad Graduate School of Management
East Lansing, MI 48824-1122
(t): 517.432.6437
(e): schoenherr@bus.msu.edu

The authors would like to thank Ruth N. Bolton and William T. Ross Jr. for their thoughtful comments on previous
versions of this manuscript. The authors would also like to thank the JMR editors, AE and reviewers for their
guidance and support of this manuscript throughout the review process.
 THE INFLUENCE OF THE STRUCTURE OF INTERDEPENDENCE ON THE
RESPONSE TO INEQUITY IN BUYER–SUPPLIER RELATIONSHIPS

ABSTRACT

This research investigates the conditions under which inequity in a buyer–supplier relationship

influences a supplier’s resource sharing with its buyer. More specifically, the authors examine

the effects of both positive inequity and negative inequity under varying levels of

interdependence magnitude and relative dependence. They further examine the effect of inequity

on perceived relationship performance. The study includes a longitudinal survey design, with

perceived relationship performance reported by a second informant. The study, conducted within

the context of Japanese suppliers reporting on their relationship with U.S. buyers, takes a

nuanced view of both inequity and relative dependence by employing spline variables to

disentangle potentially different effects of positive and negative inequity and relative dependence

of the supplier and buyer, respectively. The results reveal that firms’ reactions to positive and

negative inequity vary depending on the nature of the interdependence structure and that positive

and negative inequity differentially influence perceived relationship performance. The findings

are important for both further research and managerial action.

Keywords: positive/negative inequity, magnitude of interdependence, relative dependence,

buyer–supplier relationships, business-to-business

2
Tension in ongoing buyer–supplier relationships can arise from each partner’s efforts to claim its

“fair share” of the jointly created value (e.g., Cui, Raju, and Zhang 2007; Jap 1999). This

tension, caused by perceptions of positive inequity (i.e., when the party perceives its own ratio of

outputs to inputs as greater than that of its partner) or negative inequity (i.e., when the party

perceives its own ratio of outputs to inputs as less than that of its partner), can have deleterious

effects on the relationship. For example, research has found that inequity can lower trust among

partners (Scheer, Kumar, and Steenkamp 2003) and diminish cooperation (Samaha, Palmatier,

and Dant 2011). Building on that research, we argue that inequity can influence both the sharing

of resources1 in a relationship and the relationship’s performance. Curiously, many firms in a

position of positive inequity do not attempt to restore their relationship to equity, even though

such relationships tend to operate more effectively (Samaha, Palmatier, and Dant 2011). The

failure to work toward equity is contrary to equity theory (see Adams 1965), which argues that

maintaining equity between parties is the most important goal for the effective functioning and

continuation of a relationship.

In one of the few works focused on positive and negative inequity in buyer–supplier

relationships, Scheer, Kumar, and Steenkamp (2003) find that firms from the United States

report greater hostility, lower trust, and lower relationship continuity as negative inequity

increases but do not report greater guilt or hostility as positive inequity increases. They theorize

that the acceptance of positive inequity may derive from a cultural orientation of competitive

achievement (i.e., high on masculinity) in which people are socialized to view the world as

consisting of winners and losers (Hofstede 2001; Steensma et al. 2000). This suggests that firms

1
We focus on resource sharing because of its importance as an input to value creation in interorganizational
relationships (e.g., Ghosh and John 1999; Srivastava, Shervani, and Fahey 1998), as well as the call to investigate
relational investments as an outcome of inequity (Scheer, Kumar, and Steenkamp 2003).

3
from such a cultural orientation may not be motivated to restore equity when in a positive

inequity position, but rather may work to strengthen their inequity position. Extending this

research and building on dependence literature (e.g., Gundlach and Cadotte 1994; Kumar,

Scheer, and Steenkamp 1995a; Scheer, Miao, and Palmatier 2015), we question how firms from

a cultural orientation of competitive achievement would operate in various relationship contexts.

Specifically, we examine whether the influence of positive and negative inequity on a supplier’s

resource sharing (i.e., the supplier’s willingness to make resources and information available to

its buyer) is conditional on the structure of interdependence (i.e., magnitude of interdependence

and relative dependence). Furthermore, we incorporate performance effects by examining the

differential influence of positive and negative inequity on perceived relationship performance.

Given the lack of research on behavioral responses and performance outcomes of

different positions of inequity, this study contributes to the literature in three ways. First, the

work extends the literature on positive and negative inequity (e.g., Coley, Lindemann, and

Wagner 2012; Scheer, Kumar, and Steenkamp 2003; Wangenheim and Bayon 2007) by

employing a spline variable to disentangle the different effects of positive and negative

deviations from equity and demonstrating that behavioral responses to different inequity

positions can be contingent on the magnitude of interdependence (i.e., the sum of the dependence

in an exchange [Gundlach and Cadotte 1994]) of the relationship. This is important because

many studies continue to draw on equity theory as an implicit or explicit mediating (but

unexamined) explanation for observed relationships, given the generally accepted notion that

equity is more stable and preferable than inequity. However, this work demonstrates specific

cases in which equity theory does not hold true.

4
 Second, we demonstrate how responses to positions of inequity, under varying

magnitudes of interdependence, are influenced separately by the relative dependence of the

supplier and buyer firms. We distinguish, again through the use of a spline variable, between two

groups of observations: those in which the supplier is relatively more dependent and those in

which the buyer is relatively more dependent. As such, the approach undertaken here is distinct

from much of the extant literature, which conceptualizes relative dependence as a continuum

from a firm’s own relative dependence, through symmetry, to a partner’s relative dependence

(Anderson and Narus 1990; Gundlach and Cadotte 1994).2 By analyzing buyer and supplier

relative dependence separately, we can better show how an increase in either party’s relative

dependence (which always signifies greater asymmetry) influences the effect of inequity

positions on a supplier’s resource sharing.

Third, we demonstrate that positive and negative inequity influence perceived

relationship performance (i.e., the extent to which the buyer–supplier relationship has met

expectations) differently. By focusing on the relationship between differing inequity positions

and perceived performance, a heretofore unexplored relationship in the literature, this work

extends research that finds a differential influence of positions of inequity on intermediate

evaluations of buyer–supplier relationships, such as attitudes (Scheer, Kumar, and Steenkamp

2003), and on the willingness to collaborate (Coley, Lindemann, and Wagner 2012).

Furthermore, the results complement the work of Wangenheim and Bayon (2007), who find that

negative inequity decreases while positive inequity increases consumer transactions with a

service provider.

2
Research has also referred to “relative dependence” as “interdependence asymmetry” or “asymmetry of
dependence.” For a broader review, see Scheer, Miao, and Palmatier (2015).

5
 We begin with a brief review of the theoretical literature underlying our model. Then,

we develop a series of hypotheses that examine the influence of the structure of interdependence,

assessed through the moderating effects of magnitude of interdependence, supplier relative

dependence, and buyer relative dependence, on the resource-sharing response to positions of

positive and negative inequity. We also hypothesize a direct effect of inequity on perceived

relationship performance. Next, we discuss the data collection procedure and test the hypotheses

through spline regression analysis using two-wave survey data from a sample of 296 Japanese

suppliers (firms from a cultural orientation of competitive achievement; i.e., high masculinity).

Finally, we discuss the theoretical and managerial implications of the study, along with its

limitations, and provide directions for further research.

THEORETICAL BACKGROUND

Equity, defined as a party’s perception that its ratio of outputs to inputs is equivalent to its

partner’s, is a cornerstone of successful relationships (e.g., Adams 1965; Samaha, Palmatier, and

Dant 2011).3 Equity theory posits that when perceiving inequity, parties of an ongoing

relationship are motivated to restore equity by responding in a way that might reduce inequity

(e.g., Ariño and Ring 2010; Huppertz, Arenson, and Evans 1978). Multiple behavioral responses4

exist, but the most actionable response, and therefore the most likely to be used, is to adjust

individual inputs by either augmenting or curtailing the amount of resources invested in the

3
Two streams of research on equity exist. The first focuses on comparing the outputs-to-inputs ratio between the
focal party and its partner (e.g., Scheer, Kumar, and Steenkamp 2003); the second focuses on the focal party’s
evaluation of its own outputs given its inputs (e.g., Samaha, Palmatier, and Dant 2011). The current research is
based on the first approach.
4
To reduce inequity, a party can adjust its own inputs into and/or outputs from the relationship, attempt to have its
referent adjust its inputs into and/or outputs from the relationship, change the party used as a referent, or exit the
relationship (Huppertz, Arenson, and Evans 1978). To examine the potential behavioral responses to inequity given
the structure of interdependence of the buyer–supplier relationship, we conducted an experimental study with
Japanese managers. Web Appendix A provides a detailed description of the experiment and an analysis of the
responses.

6
relationship. Specifically, in the context of an ongoing buyer–supplier relationship, equity theory

argues that a supplier in a position of positive inequity will attempt to rebalance the relationship

by increasing its level of resource sharing with its buyer, while a supplier in a negative inequity

position will attempt to rebalance the relationship by decreasing the level of resources.

Although equity may be the ideal, research and practice suggest that inequity continues

to exist in ongoing buyer–supplier relationships (e.g., Casemore 2012; Coley, Lindemann, and

Wagner 2012). Scheer, Kumar, and Steenkamp (2003, p. 312) note that “one should not presume

that firms behave in line with the predictions of classic equity theory,” particularly when

considering firms in a cultural orientation of competitive achievement. Although cultural

orientation plays a significant role in shaping responses to inequity positions, research indicates

that the structure of the relationship also influences relationship partner behaviors. For example,

Benson (1975) argues that relationships are characterized by a continual struggle for money and

authority and that the actions taken to achieve these aims rely on the relationship’s structure.

In general, the literature on ongoing buyer–supplier relationships conceptualizes the

structure of relationships using a framework of interdependence (e.g., Frazier and Summers

1984; Gundlach and Cadotte 1994; Mallapragada et al. 2015). This framework is founded on the

theory of power dependence (Emerson 1962), which argues that a party’s dependence on another

forms the other party’s power over them and that power gained from dependence increases a

party’s use of influence and control to achieve its goals (Frazier, Gill, and Kale 1989). To better

explain the actions taken in buyer–supplier relationships, researchers have examined magnitude

of interdependence and relative dependence as elements comprising the structure of

interdependence (e.g., Gundlach and Cadotte 1994; Heide and John 1988; Kumar, Scheer, and

Steenkamp 1995a; Mallapragada et al. 2015; Scheer, Miao, and Palmatier 2015).

7
 Magnitude of interdependence refers to the sum of the dependence in an exchange

(Gundlach and Cadotte 1994) and denotes the importance of the relationship to the exchange

partners by the amount of “attention” given to their relationship (Frazier and Summers 1984;

Gundlach and Cadotte 1994; Scheer, Miao, and Palmatier 2015). As magnitude of

interdependence increases, the parties increasingly view the relationship as important and, as

such, not only invest in the relationship but also avoid taking actions likely to instigate conflict

or jeopardize the relationship (Kumar, Scheer, and Steenkamp 1995a; Scheer, Miao, and

Palmatier 2015). Alternatively, as magnitude of interdependence decreases, a firm is less

concerned about the long-term viability of the relationship and becomes more focused on

benefiting from short-term interactions with its partner. These relationships tend to be more

competitive, with each party working to get the most from the relationship with as little effort as

possible (Macneil 1981). Consistent with this argument, research has found that relationships

with lower magnitude of interdependence experience increased conflict (Kumar, Scheer, and

Steenkamp 1995a) and decreased cooperation (Samaha, Palmatier, and Dant 2011).

Relative dependence refers to a firm’s perception of its dependence on the relationship

in comparison with the level of dependence of its partner (Anderson and Narus 1990; Gundlach

and Cadotte 1994). Asymmetry in relative dependence, in which either the buyer or the supplier

is relatively more dependent than its partner, generates greater conflict, lower trust, and lower

commitment (Mentzer, Min, and Zacharia 2000). This occurs because a firm that is relatively

less dependent on its partner is less motivated to cooperate. Research shows that a firm that is

relatively less dependent on its partner makes more normative statements, uses more coercive

tactics, and puts greater demands on its more dependent partner (Frazier, Gill, and Kale 1989;

Gundlach and Cadotte 1994). Although firms that have more relative dependence can be

8
receptive to their partners’ requests to maintain the continuity of the relationship (Anderson and

Narus1990), there is a limit to the influence attempts they are willing to accept before

terminating the relationship (Bucklin 1973).

A supplier’s sharing of resources is one outcome of differential positions of inequity, but

it is also important to consider how differing inequity positions influence perceived relationship

performance (i.e., the extent to which the buyer–supplier relationship has met expectations).

Building on research that finds a differential influence of positions of inequity on attitudes

(Scheer, Kumar, and Steenkamp 2003) and behaviors, such as the willingness to collaborate

(Coley, Lindemann, and Wagner 2012), we theorize that differences in inequity positions

influence the effective functioning of the relationship, over and above the sharing of resources,5

which results in differential performance consequences of positive and negative inequity.

HYPOTHESES

The Case of Positive Inequity

Equity theory suggests that a supplier in a position of positive inequity will work to rebalance its

relationship by increasing its level of resource sharing with its buyer (i.e., increasing its inputs).

Contrary to equity theory, we contend that a supplier from a culture of competitive achievement

will not willingly take action to reduce its favorable outputs-to-inputs ratio or work to rebalance

the ongoing relationship. The logic underlying this position is that these suppliers are

enculturated to accept the world as consisting of winners and losers (Steensma et al. 2000).

Research reports that firms originating from a cultural orientation of competitive achievement in

a positive position of inequity (i.e., a winning position in the relationship) have limited guilt

(Scheer, Kumar, and Steenkamp 2003) and are unwilling to collaborate with their partners

5
The positive effect of resource sharing on relationship performance is well established in literature, and therefore
we provide no formal hypothesis herein.

9
(Coley, Lindemann, and Wagner 2012). Building on this notion, we argue that such suppliers

will not engage in increased resource sharing, but rather maintain the status quo. However, the

response to differing positions of inequity will likely change in the context of interdependence in

the buyer–supplier relationship.

We argue that a supplier in a position of positive inequity in a high-magnitude

relationship will operate in accordance with equity theory and be motivated to increase its level

of resource sharing with its buyer. This behavioral response is due to the importance of the

ongoing relationship. Specifically, because a high magnitude of interdependence denotes a

relationship of significant importance, the supplier will want to continue the relationship and

therefore invest additional resources to restore equity, as the longevity of the relationship is

threatened by the supplier benefiting more than its buyer due to its position of positive inequity.

More formally:

H1a: There is a positive interaction effect of magnitude of interdependence and positive

inequity on a supplier’s level of resource sharing.

Furthermore, we contend that the joint effect of magnitude of interdependence and

positive inequity on a supplier’s resource sharing with its buyer will be contingent on the relative

dependence of each party in the buyer–supplier relationship. Specifically, we argue that the

supplier’s relative dependence will negatively moderate the positive effect of magnitude of

interdependence and positive inequity on a supplier’s resource sharing. The underlying logic is

that as a supplier’s relative dependence increases, the supplier is motivated to reduce its

asymmetric dependence on its buyer to reduce its vulnerability to potential exploitation. The

validity of this perceived threat (i.e., the potential for its vulnerability to be exploited) is

consistent with research demonstrating that a firm that is relatively less dependent on its

exchange partner often uses more coercive influence tactics and puts greater demands on its

10
more dependent partner in an attempt to tailor the relationship to its individual goals (e.g.,

Frazier, Gill, and Kale 1989; Gundlach and Cadotte 1994). More formally:

H1b: The supplier’s relative dependence negatively moderates the positive interaction
effect of magnitude of interdependence and positive inequity on a supplier’s level
of resource sharing.

Conversely, we argue that changes in the buyer’s relative dependence will not moderate

the positive effect of magnitude of interdependence and positive inequity on a supplier’s

resource sharing with its buyer. The underlying logic is that a supplier in a position of positive

inequity, within the context of a high-magnitude interdependence relationship, will not want to

exploit its position of inequity further by continuing to restrict its resources, as such action could

increase conflict and threaten the continuation of the relationship. Although a relatively less

dependent partner may also use coercive influence tactics (e.g., Frazier, Gill, and Kale 1989;

Gundlach and Cadotte 1994), because the supplier is already benefiting more from the

relationship than its buyer and the relationship is of high magnitude (and, thus, important), the

supplier’s motivation to exploit its buyer’s increasing relative dependence will be mitigated.

More formally:

H1c: The buyer’s relative dependence does not moderate the positive interaction effect
of magnitude of interdependence and positive inequity on a supplier’s level of
resource sharing.

The extent to which the buyer–supplier relationship has met expectations (i.e., perceived

relationship performance) is a key outcome for measuring its success. We theorize a positive

influence of positive inequity on perceived relationship performance. That is, all else being

equal, as positive inequity increases, the supplier will be more satisfied with the relationship

because it is receiving disproportionally more than it puts into it; thus, the supplier is

incentivized to work with the buyer to continue to reap the rewards of the relationship. In the

11
same vein, Wangenheim and Bayon (2007) find that customers who experience positive inequity

(e.g., service upgrades) increase the amount of transactions with the service provider because of

increased customer delight, satisfaction, and loyalty resulting from perceptions of fairness. More

formally:

H2: Positive inequity positively influences the supplier’s perceived relationship

performance.

The Case of Negative Inequity

Equity theory suggests that a supplier in a position of increasing negative inequity will work to

rebalance the relationship by decreasing the level of resources it shares with its buyer. Contrary

to equity theory, and building on the concept of credible commitments (i.e., Williamson 1983) as

applied within the context of ongoing buyer–supplier relationships (e.g., Heide 1994; Jap 1999),

we contend that a supplier in a position of negative inequity will increase its level of resources

shared with its buyer. Increasing the amount of resources shared represents a credible

commitment by the supplier, serving to increase its attractiveness to its partner (Hamel, Doz, and

Prahalad 1989) by signaling its long-term commitment to the relationship (Williamson 1983).

This argumentation is also consistent with a cultural orientation of competitive achievement; a

supplier in this cultural context is averse to being in a less advantageous position in the

relationship and therefore actively works to be perceived as more valuable to the buyer.

However, we posit that the response to inequity will vary depending on the structure of

interdependence of the buyer–supplier relationship.

We argue that a supplier in a position of negative inequity in a high-magnitude

relationship will be motivated to increase its level of resource sharing with its buyer. The

underlying logic is that as the relationship increases in its level of magnitude of interdependence,

it is increasingly important for the supplier to signal its long-term commitment to the relationship

12
to not only maintain its continuation (Kumar, Scheer, and Steenkamp 1995a; Scheer, Miao, and

Palmatier 2015), but to be viewed as valuable to its partner. Similarly, in a low-magnitude

interdependence relationship, we expect the supplier to curtail the sharing of resources as the

relationship decreases in importance. More formally:

H3a: There is a positive interaction effect of magnitude of interdependence and

negative inequity on a supplier’s level of resource sharing.

Furthermore, we contend that the joint effect of magnitude of interdependence and

negative inequity on a supplier’s resource sharing with its buyer will be subject to the influence

of the relative dependence of each partner. Specifically, increases in a supplier’s relative

dependence will enhance the positive effect of magnitude of interdependence and negative

inequity on the supplier’s level of resource sharing. That is, when a supplier is in a position of

greater relative dependence, within the context of a high-magnitude relationship and negative

inequity, its concern with the relationship’s viability is heightened given its disadvantageous

position. As such, the supplier is motivated to go to greater lengths (by making credible

commitments to the relationship) to enhance the buyer’s perceptions of its contribution and value

to the relationship, even though increasing resource commitments in a position of greater relative

dependence puts the supplier at greater potential risk of exploitation (Frazier, Gill, and Kale

1989). More formally:

H3b: The supplier’s relative dependence positively moderates the positive interaction
effect of magnitude of interdependence and negative inequity on a supplier’s level
of resource sharing.

Alternatively, we expect that increases in the buyer’s relative dependence will dampen

the positive effect of magnitude of interdependence and negative inequity on a supplier’s level of

resource sharing. The underlying logic is that, given increased levels of the buyer’s relative

dependence, the supplier reduces its resource commitment in an attempt to enhance the buyer’s

13
perceptions of its contribution and value to the relationship. This is consistent with Scheer, Miao,

and Garrett’s (2010, p. 92) benefit-based dependence argument that the restriction of a supplier’s

resources can stimulate the buyer’s “desire to maintain the relationship because of the

irreplaceable net benefits it gains from the on-going relationship.” More formally:

H3c: The buyer’s relative dependence negatively moderates the positive interaction
effect of magnitude of interdependence and negative inequity on a supplier’s level
of resource sharing.

Regarding perceived relationship performance, we theorize a negative relationship

between negative inequity and perceived relationship performance.6 That is, all else being equal,

as negative inequity increases, the supplier will be more dissatisfied with the relationship

because it is receiving disproportionally less than it puts into the relationship and thus, while

engaging in resource sharing to drive the relationship toward equity, will be less motivated to

engage in other behaviors that could enhance the relationship’s effectiveness. In a similar vein,

Scheer, Kumar, and Steenkamp (2003) find that firms in a position of negative inequity report

increased hostility toward their exchange partners. In addition, Coley, Lindemann, and Wagner

(2012) find that increases in negative inequity decrease a firm’s level of engagement in future

collaborations with its partner in the short run. Finally, Wangenheim and Bayon (2007) observe

that customers who experience negative inequity (e.g., a service failure) reduce the amount of

transactions with the service provider because of perceptions of unfairness. More formally:

H4: Negative inequity negatively influences the supplier’s perceived relationship

performance.

METHOD

Research Context and Data Collection

6
As mentioned previously, we theorize that negative inequity stimulates the supplier’s sharing of resources with its
buyer. Though not specifically hypothesized herein, we expect and find a positive relationship between the
supplier’s sharing of resources and perceived relationship performance.

14
We tested the hypotheses in the context of ongoing buyer–supplier relationships, in which the

supplier reported on its primary buyer. By focusing on the supplier’s primary buyer, we could

ensure that the respondent would possess adequate knowledge of the relationship and that the

relationship warranted sufficient attention to management. Using two-digit standard industrial

classification codes representing both durable and nondurable goods industries, we drew a

systematic random sample of 1000 suppliers from Japan. We chose Japan, which has a

masculinity index score of 95, because it represents a country where firm managers largely

operate with a cultural orientation of competitive achievement (Hofstede, Hofstede, and Minkov

2010; Steensma et al. 2000). The manager with the responsibility of overseeing the firm’s

relationship with its primary U.S. buyer served as the key informant. These managers were

appropriate because of the position held in the firm and their years of experience (i.e., 23 years

on average). Each of the selected managers received a questionnaire, in Japanese, and a cover

letter that offered a summary of the results, to enhance the response rate. The questionnaire,

which contained measures derived from extant literature, was translated, back-translated, and

assessed for equivalence in form and meaning. We mailed a replacement questionnaire three

weeks later to nonresponders. Eighteen questionnaires were undeliverable. In total, we received

317 completed questionnaires.

After six months, we contacted informants who had completed the initial questionnaire

and asked them to have a colleague who was familiar with the specified relationship respond to a

set of performance measures. The rationale for this was twofold. First, research suggests that the

relationship between evaluations and/or the behaviors performed by a party and perceived

relationship performance can be more appropriately discerned with a two-wave longitudinal

design (Hoppner and Griffith 2011; Rindfleisch et al. 2008). Second, we minimized common

15
method variance by introducing a six-month time lag and by having different key informants

complete the measures for the independent and dependent variables (Podsakoff et al. 2003).

The final sample consisted of 296 completed matched questionnaires (e.g., responses to

both the initial questionnaire at Time 1 and the follow-up questionnaire at Time 2). The effective

response rate was 30.1%. The final sample of firms represented a balance of durable and

nondurable goods suppliers. The majority of suppliers generated annual sales revenues of less

than $25 million (62.5% of the sample) and, on average, employed 44 people. Suppliers were

engaged in their relationship with their primary U.S. buyer for an average of 15 years and

conducted approximately 25% of their total business with this buyer.

Measures

To ensure content validity of the construct measures, we reviewed the literature, discussed the

preliminary instrument with people familiar with the administrative aspects of buyer–supplier

relationships, and pretested the measures in a buyer–supplier population. Table 1 presents the

measurement items, and Table 2 provides a correlation matrix of the constructs.

------- Insert Table 1 and Table 2 about Here -------

Inequity. Inequity exists when partners perceive the ratio of outputs to inputs as unequal

(Scheer, Kumar, and Steenkamp 2003). We operationalized inequity as the difference between

supplier distributive justice (SDJ) and buyer distributive justice (BDJ).7 Distributive justice

refers to the perception of how equitable the distribution of the outputs that a party receives from

a relationship is relative to the inputs the party invests in the relationship (Frazier 1983). We

7
Prior research has used distributive justice to examine the predictions of equity theory (e.g., Bies and Moag 1986;
Cohen-Charash and Spector 2001). Our measurement of inequity as a difference of distributive justice ratios (i.e.,
the evaluation of rewards relative to input) is comparable, though not identical, to how research has previously
measured inequity (firm outcomes/firm inputs) – (partner outcomes/partner inputs) (e.g., Scheer, Kumar, and
Steenkamp 2003).

16
measured this twice, once for the supplier’s ratio and once for the buyer’s ratio, with two items

adapted from Griffith, Harvey, and Lusch (2006). To ensure that inequity would be appropriately

estimated by a difference score, we needed to establish that supplier distributive justice and

buyer distributive justice are distinct constructs.

We subjected the items to both a one-factor and a two-factor confirmatory factor

analysis (CFA). The fit indexes failed to meet any of the recommended critical values for the

one-factor model (χ2(2) = 366.076, p < .01; comparative fit index [CFI] = .559; standardized root

mean square residual [SRMR] = .506) but exceeded the recommended critical values for the two-

factor model (χ2(1) 3.024, p > .05; CFI = .998; SRMR = .010) (Bollen 1989; Hu and Bentler

1999). Furthermore, the two-factor model indicated the existence of convergent validity (λ =

.899 to .957; p < .01) and discriminant validity (AVESDJ = .738; AVEBDJ = .778; SVSDJ-BDJ =

.062) (Anderson and Gerbing 1988; Fornell and Larcker 1981). We conclude from this analysis

that supplier distributive justice and buyer distributive justice are distinct constructs, thus

allowing the construct of inequity to be estimated. When interpreting this construct, positive

values indicate positive supplier inequity (i.e., the supplier receives more from its buyer than it

provides to the buyer), a value of zero indicates equity between the supplier and the buyer, and

negative values indicate negative supplier inequity (i.e., the supplier receives less from the buyer

than it provides to the buyer). To better represent the asymmetry of inequity, following Scheer,

Kumar, and Steenkamp (2003), we created a spline variable for inequity. Positive supplier

inequity (PSI) reflects the degree of inequity when the supplier receives more from its buyer than

it provides to its buyer (i.e., PSI = |SDJ–BDJ| when SDJ > BDJ and 0 when BDJ ≥ SDJ), and

negative supplier inequity (NSI) reflects the degree of inequity when the supplier provides more

17
to its buyer than it receives from its buyer (i.e., NSI = |SDJ–BDJ| when BDJ > SDJ and 0 when

SDJ ≥ BDJ). Both PSI and NSI are zero when equity exists.

Magnitude of interdependence. Magnitude of interdependence refers to the total level of

dependence in the relationship between two partners (Gundlach and Cadotte 1994). We

operationalized magnitude of interdependence as the sum of the supplier dependence (SD) and

buyer dependence (BD). Supplier dependence refers to the extent to which the supplier relies on

its buyer, and buyer dependence refers the extent to which the buyer relies on its supplier. Three

items each, adapted from Lusch and Brown (1996), measured supplier dependence and buyer

dependence. To ensure that the magnitude of interdependence would be appropriately estimated

by a summation score, we needed to establish supplier dependence and buyer dependence as

distinct constructs. The fit indexes failed to meet any of the recommended critical values for the

one-factor model (χ2(9) = 2489.469, p < .01; CFI = .436; SRMR = .288) but exceeded the

recommended critical values for the two-factor model (χ2(8) = 0.857, p > .05; CFI = 1.0; SRMR

= .003). Furthermore, the two-factor model indicated the existence of convergent validity (λ =

.899 to .957; p < .01) and discriminant validity (AVESD = .940; AVEBD = .983; SVSD-BD = .22).

We conclude from this analysis that supplier dependence and buyer dependence are distinct

constructs, thus allowing the construct of magnitude of interdependence to be estimated. When

interpreting this construct, higher values represent higher magnitude relationships.

Relative dependence. Relative dependence refers to the comparative level of dependence

between two partners in a dyad (Lusch and Brown 1996). We operationalized relative

dependence as the difference between the supplier’s dependence and the buyer’s dependence

(Kim and Hsieh 2003). When interpreting this construct, positive values indicate a supplier’s

relative dependence (i.e., the supplier is more dependent on its buyer than vice versa), a value of

18
zero indicates an equivalent level of dependence between the supplier and the buyer, and

negative values indicate a buyer’s relative dependence (i.e., the supplier is less dependent on its

buyer than vice versa). Again, to better represent the asymmetry of relative dependence,

following Scheer, Kumar, and Steenkamp (2003), we created a spline variable. Specifically,

supplier relative dependence (SRD) reflects the asymmetry in dependence when the supplier is

the more dependent party in the relationship (i.e., SRD = |SD–BD| when SD > BD and 0 when

BD ≥ SD), and buyer relative dependence (BRD) reflects the asymmetry in dependence when the

buyer is the more dependent party in the relationship (i.e., BRD = |SD–BD| when BD > SD and 0

when SD ≥ BD). Both SRD and BRD are zero when the parties are equally dependent.

Resource sharing. Resource sharing refers to the supplier’s willingness to make

resources and information available to its buyer. We adapted four items from Spreitzer (1996) to

measure a supplier’s level of resource sharing with its buyer. When interpreting this construct,

higher values represent greater resource sharing. To confirm that resource sharing was an

appropriate choice of a behavioral response to inequity, we conducted an experiment with 304

Japanese managers. Each manager was randomly assigned to a scenario that manipulated

inequity (positive vs. negative), magnitude of interdependence (high vs. low), and relative

dependence (supplier vs. buyer). Following Seggie, Griffith, and Jap (2013), we first asked

managers, in an open-ended format, what they would do in response to the scenario. The coded

results indicate that managers frequently modified the resources invested in the relationship.

After the open-ended question, we asked respondents if they would have modified, in any way,

the resources invested in the relationship described in the scenario. According to the results,

58.24% responded in the affirmative. Thus, we can conclude that resource sharing is an

appropriate behavioral response to examine in relation to inequity. Web Appendix A provides a

19
more detailed description of the experiment and analysis of the other responses to inequity

identified in the supplemental study.

Perceived relationship performance. Perceived relationship performance refers to the

extent to which the buyer–supplier relationship has met expectations. Three items, adapted from

Zou, Taylor, and Osland (1998), measured perceived relationship performance. When

interpreting this construct, higher values represent greater performance. We evaluated perceived

relationship performance twice: once at the initial survey collection with the first informant when

the independent variables were collected (i.e., Time 1) and once at the follow-up survey

collection with a second informant six months after the initial survey collection (i.e., Time 2).

Perceived relationship performance measured at Time 2 was the dependent variable, and

perceived relationship performance measured at Time 1 (i.e., prior perceived relationship

performance) was a control variable.

Control variables. In addition to prior perceived relationship performance, we included

the supplier firm’s size and industry to control for firm- and relationship-specific characteristics.

We operationalized supplier firm size (i.e., number of employees) and industry (i.e., durable vs.

nondurable goods) using single-item measures.

Measure Validation

We analyzed the measures for the multi-item constructs of inequity, magnitude of

interdependence, relative dependence, resource sharing, perceived relationship performance, and

prior perceived relationship performance with CFA. Table 3 reports the results of the CFA.

Single-item indicators represented inequity, magnitude of interdependence, and relative

dependence, which are linear combinations created by either subtracting (i.e., inequity and

relative dependence) or adding (i.e., magnitude of interdependence) the average of the items

20
constituting their underlying dimensions. For each of these indicators, we restricted the error

variance to (1 – reliability) times the variance of the indicator and the corresponding lambda to

the square root of the reliability (Baumgartner and Homburg 1996; Hunter and Perreault 2007).

We calculated the reliability of each linear combination following Nunnally and Bernstein

(1994). The model fit the data acceptably (χ2(53) = 366.976, p < .01; CFI =.933; SRMR =.025).

Convergent validity was demonstrated, as all factor loadings were large (range: .787 to .992) and

statistically significant (p < .01) (Anderson and Gerbing 1988). Furthermore, the average

variance extracted was greater than the shared variance between any pair of constructs (Fornell

and Larcker 1981), thus demonstrating discriminant validity. We conclude from this analysis that

our measures demonstrate adequate unidimensionality, convergent validity, discriminant

validity, and reliability.

------- Insert Table 3 about Here -------

Spline Regression Analysis

We selected spline regression analysis as the appropriate method of analysis because it allows

the asymmetry inherent in certain constructs to be incorporated in its analysis. For our purposes,

spline regression allows us to estimate separate and potentially different direct and interaction

effects of the asymmetric constructs of inequity and relative dependence on a supplier’s level of

resource sharing with its buyer and the perceived relationship performance. As described

previously, we created spline variables for positive inequity and negative inequity, as well as for

supplier relative dependence and buyer relative dependence. When asymmetry exists, the

appropriate spline variable reflects the nature and degree of that asymmetry; the other spline

variable equals zero. When symmetry exists, both spline variables equal zero. Using the spline

variables, we estimated two regression equations to test the hypotheses. The first equation

21
examines the influence of positive and negative inequity on a supplier’s resource sharing with its

buyer. The second equation evaluates the performance implications of positive and negative

inequity. The specific equations are as follows:

(1) RS = α0 + β1PSI + β2NSI + β3SRD + β4BRD + β5MI + β6PSI∙SRD + β7PSI∙BRD +

β8NSI∙SRD + β9NSI∙BRD + β10PSI∙MI + β11NSI∙MI + β12SRD∙MI +
β13BRD∙MI + Β14PSI∙SRD∙MI + β15PSI∙BRD∙MI + β16NSI∙SRD∙MI +
β17NSI∙BRD∙MI + β18FS + β19IND + ; and

(2) RP = α0 + β1RS + β2PSI + β3NSI + β4PRP + β5FS + β6IND + .

where MI is magnitude of interdependence, PRP is prior perceived relationship performance, FS

is firm size, IND is industry, and all others are as defined previously.

To increase the ease of interpretation, we mean-centered the independent variable of

magnitude of interdependence included in the interactions (Cohen et al. 2003). The adjusted R-

square for Equation 1 was .908 and for Equation 2 was .173. Multicollinearity was not a

significant issue as the maximum variance inflation factor (i.e., 7.828 and 1.388) and the

maximum condition index (i.e., 12.072 and 17.586) in both equations were below 10 and 30,

respectively. Table 4 reports the results.8

------- Insert Table 4 about Here -------

RESULTS

The Case of Positive Inequity

H1a predicted a positive interaction effect of magnitude of interdependence and positive inequity

on a supplier’s level of resource sharing. The results indicate that the interaction effect is positive

8
The positive effect of resource sharing on relationship performance has been well established. Though not
formally hypothesized in this study, to be consistent with the literature, we included resource sharing as an
independent variable in our second spline regression equation that examines the influence of inequity on perceived
relationship performance. Given the resulting endogeneity of resource sharing, we conducted supplemental analysis
to determine the robustness of our results to simultaneous estimation. Our results are consistent in both analyses.
Web Appendix B presents the full results of the supplemental analysis.

22
and significant (Equation 1: β = .062, t = 1.748, p < .05). Thus, H1a is supported. To further

clarify the meaning of the significant interaction, we examined it following Aiken and West’s

(1991) outlined procedure. We found that, though the directionality of H1a is supported, the

simple slope analysis only indicates that in response to positive inequity, a supplier in a low-

magnitude relationship will try to expand its position by decreasing its level of resource sharing

with its buyer (simple slope: b = –.09, t = –1.62). Suppliers made no adjustments to their level of

resource sharing when in high-magnitude relationships (simple slope: b = .04, t = .56).

H1b predicted that a supplier’s relative dependence would negatively moderate the

positive interaction effect of positive inequity and magnitude of interdependence on resource

sharing, and H1c predicted that a buyer’s relative dependence would not moderate this effect. In

support of both H1b and H1c, the results indicate that the three-way interaction among positive

inequity, magnitude of interdependence, and a supplier’s relative dependence is negative and

significant (Equation 1: β = –.100, t = –2.186, p < .05); the three-way interaction among positive

inequity, magnitude of interdependence, and a buyer’s relative dependence is not significant

(Equation 1: β = .016, t = .607, p > .10). Figure 1 plots the significant three-way interaction

among positive inequity, magnitude of interdependence, and a supplier’s relative dependence

(H1b) (Aiken and West 1991). Panel A reveals that in response to positive inequity, suppliers in

high-magnitude interdependence relationships reduce resource sharing when the level of relative

dependence is high (simple slope: b = –.22, t = –1.35) but make no change to resource sharing

when relative dependence is low (simple slope: b = –.01, t = –.22). Panel B reveals that in

response to positive inequity, suppliers in low-magnitude interdependence relationships increase

resource sharing when the level of relative dependence is high (simple slope: b = .11, t = 1.32)

but make no change to resource sharing when relative dependence is low (simple slope: b = –.05,

23
t = –1.10). Thus, although the expected direction of H1b is supported, the results indicate a more

nuanced effect than what we previously theorized.

H2 predicted that positive inequity also would positively influence perceived relationship

performance. The results provide support for H2 (Equation 2: β = .106, t = 1.710, p < .05).

The Case of Negative Inequity

H3a predicted a positive interaction effect of magnitude of interdependence and negative

inequity on a supplier’s level of resource sharing. The results indicate that the interaction is not

significant (Equation 1: β = –.053, t = –1.189, p > .10). Thus, H3a is not supported. However,

though not hypothesized, we found that negative inequity had a positive direct effect on resource

sharing (Equation 1: β = .098, t = 1.985, p < .05). This indicates that suppliers increase the level

of resource sharing with their buyers as negative inequity increases, regardless of whether the

relationship is of a lower or higher magnitude of interdependence.

H3b predicted that a supplier’s relative dependence would positively moderate the

interaction effect of negative inequity and magnitude of interdependence on resource sharing,

and H3c predicted that a buyer’s relative dependence would negatively moderate the effect. In

support of H3b but not H3c, the results indicate that the three-way interaction among negative

inequity, magnitude of interdependence, and a supplier’s relative dependence is positive and

significant (Equation 1: β = .050, t = 1.746, p < .05) and that the three-way interaction among

negative inequity, magnitude of interdependence, and a buyer’s relative dependence is not

significant (Equation 1: β = –.026, t = –.874, p > .10). Figure 2 plots the significant three-way

interaction among negative inequity, magnitude of interdependence, and a supplier’s relative

dependence (H3b) (Aiken and West 1991). Panel A shows that in response to negative inequity,

suppliers in high-magnitude interdependence relationships increase resource sharing when the

24
level of relative dependence is low (simple slope: b = .07, t = 1.92) but make no change to

resource sharing when relative dependence is high (simple slope: b = .07, t = .52). Panel B

reveals that in response to negative inequity, suppliers in low-magnitude interdependence

relationships reduce resource sharing when the level of relative dependence is high (simple

slope: b = –.37, t = –1.52) but make no change to resource sharing when relative dependence is

low (simple slope: b = .07, t = .85). Thus, although the expected direction of H3b is supported,

the results indicate a more nuanced effect than what we previously theorized.

H4 predicted that negative inequity also would negatively influence perceived

relationship performance. The results provide support for H4 (Equation 2: β = –.397, t = –6.519,

p < .01).

------- Insert Figure 1 and Figure 2 about Here -------

Additional Findings

Though not directly hypothesized, the analysis revealed significant additional relationships.

Specifically, we found that a supplier’s relative dependence had a significant, negative effect on

the level of resource sharing with its buyer (Equation 1: β = –.289, t = –8.193, p < .01), whereas

a buyer’s relative dependence had a significant, positive effect on resource sharing (Equation 1:

β = .203, t = 5.871, p < .01). Both these results are suggestive of efforts to minimize asymmetry

in relative dependence in ongoing buyer–supplier relationships, which is consistent with the

literature in terms of actions taken to facilitate the continuation of the relationship. Magnitude of

interdependence had a significant, positive effect on resource sharing (Equation 1: β = .730, t =

17.722, p < .01). This result was not surprising, given both the high correlation between the

constructs and Scheer, Miao, and Palmatier’s (2015) finding of a similar relationship in their

meta-analysis. Furthermore, as indicated previously, a supplier’s level of resource sharing with

25
its buyer had a significant, positive effect on perceived relationship performance (Equation 2: β =

.263, t = 4.208, p < .01).

DISCUSSION

Theoretical Implications

The findings extend the literature in marketing on positive and negative inequity (e.g., Coley,

Lindemann, and Wagner 2012; Scheer, Kumar, and Steenkamp 2003; Wangenheim and Bayon

2007) in three ways. First, this work demonstrates that behavioral responses to different inequity

positions can be contingent on the magnitude of interdependence of the relationship. Our

findings indicate that, though a supplier in a positive inequity position does not change the level

of resource sharing with its buyer when in a relationship of high magnitude of interdependence,

when in a positive inequity position, it reduces resource sharing when in a relationship with a

low magnitude of interdependence. This suggests that, contrary to equity theory, the cultural

orientation of competitive achievement, coupled with the limited value the supplier places on the

relationship, motivates the supplier to leverage its position of positive inequity, even under the

threat of conflict escalation and relationship termination.

Also of note, we found that the magnitude of interdependence did not moderate the

positive influence of negative inequity on resource sharing. A possible explanation is that these

ongoing buyer–supplier relationships hold a degree of value to the partners and therefore are

worthy of short-term efforts geared toward furthering their continuation, regardless of

interdependence level. In such relationships, the sharing of resources signals the supplier’s long-

term commitment to the buyer (Williamson 1983), which in turn increases the supplier’s

attractiveness to its partner (Hamel, Doz, and Prahalad 1989). Taken together, the results indicate

that magnitude of interdependence becomes a boundary condition for the behavioral response to

26
positive inequity (in the case of low-magnitude relationships), but not negative inequity. As such,

this work extends the literature on positive and negative inequity (e.g., Scheer, Kumar, and

Steenkamp 2003), highlights the importance of examining positive and negative inequity as

separate constructs, and demonstrates the limitations of equity theory in explaining responses to

positions of inequity in cultures characterized by an orientation of competitive achievement.

Second, our findings extend the dependence literature (e.g., Anderson and Narus 1990;

Gundlach and Cadotte 1994) by demonstrating that supplier and buyer relative dependence

separately influence behavioral responses to positions of inequity under varying magnitudes of

interdependence. Specifically, in response to positive inequity, our findings indicate that

suppliers in high-magnitude interdependence relationships reduce the level of resource sharing

when relative dependence is greater but make no changes when relative dependence is lower. In

contrast, when in low-magnitude interdependence relationships characterized by greater relative

dependence, suppliers increase resource sharing in response to positive inequity. We also found

that as the magnitude of interdependence increases, the level of a buyer’s relative dependence

has no effect on the supplier’s response to positive inequity (i.e., they maintain the status quo).

Taken together, these results suggest a balancing effort on the part of suppliers. Specifically, as

suppliers’ relative dependence increases, in the context of jointly increasing positive inequity and

magnitude of interdependence, they are motivated to reduce their asymmetric dependence on

buyers, to lessen their vulnerability to potential exploitation in high-magnitude interdependence

relationships. In contrast, in low-magnitude interdependence relationships and increasingly

positive inequity, suppliers increase the sharing of resources, potentially in an attempt to increase

their attractiveness to buyers.

27
 Our results with respect to responses to negative inequity differ considerably. In general,

we found that a supplier’s relative dependence moderates the relationship between magnitude of

interdependence and negative inequity and a supplier’s resource sharing with its buyer, but a

buyer’s relative dependence does not. Specifically, in response to negative inequity, suppliers in

high-magnitude interdependence relationships increase the level of resource sharing when their

relative dependence is low but make no changes when relative dependence is high. Although

these findings confirm the credible commitment argument (Williamson 1983), in which the

supplier’s concern with the relationship’s viability induces it to go to greater lengths to convince

its buyer of the relationship’s value and its contributions to the relationship, the results introduce

a caveat—that is, suppliers only increase their exposure to positions of negative inequity in high-

magnitude interdependence relationships when they are not overly vulnerable (i.e., lower levels

of supplier relative dependence). We further revealed the use of credible commitments by

suppliers by their behavioral responses to negative inequity in low-magnitude interdependence

relationships; here, suppliers maintain the current level of resource sharing when relative

dependence is low but reduce resource sharing in response to negative inequity when the level of

relative dependence is high. Taken together, these findings suggest the intricacies of the

combined effects of the structure of interdependence.

Third, the findings shed light on the influence of inequity on perceived relationship

performance, a heretofore unexplored relationship in the literature. Specifically, our findings

indicate that increasing levels of positive inequity positively influence the perception of

relationship performance. In accordance with extant literature (e.g., Coley, Lindemann, and

Wagner 2012; Scheer, Kumar, and Steenkamp 2003; Wangenheim and Bayon 2007), this finding

suggests that as positive inequity increases, a supplier is both more satisfied with the relationship

28
and more loyal to its partners, and therefore it may be more committed to working with the buyer

to advance the relationship, beyond the sharing of resources. Alternatively, an increase in

negative inequity increases dissatisfaction with the relationship. This dissatisfaction stimulates

the supplier to engage in fewer actions that would advance the relationship, beyond the sharing

of resources, resulting in decreased ability of the relationship to meet its initial performance

expectations.

Managerial Implications

From a managerial perspective, this study highlights the importance of recognizing the

intricacies associated with different positions of inequity in buyer–supplier relationships

operating within a cultural context of competitive achievement. Furthermore, the study provides

a more nuanced understanding of the commonly accepted deleterious effects of inequity by

differentiating buyer–supplier relationships according to their magnitude of interdependence and

each party’s relative dependence.

First, contrary to conventional wisdom, high-magnitude interdependence relationships

do not stimulate equity-seeking behavior for suppliers in a position of positive inequity.

Specifically, suppliers from a cultural orientation of competitive achievement with positive

inequity leverage their advantageous position in low-magnitude interdependence relationships by

decreasing the level of resources shared with buyers. The motivation to leverage a positive

inequity situation is likely buffered by high-magnitude interdependence relationships (as

suppliers maintain the status quo), as well as by increasing levels of suppliers’ relative

dependence on buyers. This suggests that managers should consider both the limitations of

magnitude of interdependence and the cultural orientation of the manager in determining

managerial action. It also suggests that buyers should proactively work to subvert their suppliers

29
from restricting contributions to the relationship. For example, buyers could communicate the

disproportional contributions or outcomes to the relationship, to open avenues for constructive

discussions with suppliers, or communicate their long-term commitment to the relationship.

Second, suppliers in a position of negative inequity will, in general, contribute more to

the relationship in an effort to ensure its continuance through credible commitments. It is

important that buyers recognize the use of these credible commitments as a strategic effort to

advance the relationship (i.e., high magnitude of interdependence and low supplier relative

dependence) or to transition away from the relationship (i.e., low magnitude of interdependence

and high supplier relative dependence), as magnitude of interdependence and relative

dependence determine suppliers’ willingness to share resources. Furthermore, it appears that

suppliers, when making credible commitments in efforts to stimulate greater recognition of their

value to buyers, restrain themselves from engaging in other collaborative actions that could

advance the functioning of the relationship. For both suppliers and buyers, such adjustments in

resource sharing and other actions can serve as signals for evaluating the future potential of their

relationships.

Last, managers should not neglect the influence of inequity on perceived relationship

performance. The results suggest that while perceptions of positive inequity can stimulate a more

effective relationship and perceptions that the relationship’s performance expectations are

increasingly being met, perceptions of negative inequity can correspondingly reduce efforts in

the relationship and perceptions that the relationship is meeting expectations. In the case of

negative inequity, continued perceptions of poor performance may lead to the eventual

termination of the relationship. Consequently, managers need to understand the different

30
influences of positive and negative inequity on performance expectations to properly manage the

relationship into the future.

Limitations and Further Research

This research provides new insights into the influence of the structure of interdependence on the

behavioral responses to positive and negative inequity in buyer–supplier relationships; however,

its implications are tempered by limitations that additional research could address. The results

show that suppliers act differently depending on whether their relationships have a high or low

magnitude of interdependence, whether they or their buyers are the dependent party, and whether

perceived inequity is or is not in their favor; however, these findings come from a sample of

small Japanese suppliers reporting on their relationship with their primary U.S. buyers, which

limits the generalizability of the findings. Beyond increasing the size of the supplier base,

researchers could also try to discern whether other predictable differences in reactions to inequity

arise from the position in the buyer–supplier relationship (e.g., do the findings from the

perspective of the supplier hold for the perspective of the buyer), as well as other environmental

and/or cultural contingencies, as the response to inequity is likely to vary depending on the

cultural orientations of respondents. For example, although Japan and the United States are

similar in that both have cultural orientations of competitive achievement (i.e., countries high on

masculinity), research could explore many other similarities and differences (e.g., other cultural

dimensions, economic factors, industry conditions).

Correspondingly, the buyer–supplier relationships we examined were ongoing

relationships of a relatively long duration. As relationships can vary over their life cycle (e.g.,

31
Dwyer, Schurr, and Oh 1987; Jap and Anderson 2003), examining whether behavioral responses

and perceived relationship performance change depending on the stage of the relationship could

provide important insights for managers. For example, are suppliers of early-stage relationships

more likely to work toward equity than suppliers overseeing relationships that have reached

maturity or are in decline? How do actions of suppliers in maintaining equity influence changes

in the relationships’ structure of interdependence? Do changes in structure cause changes in

strategy? Are suppliers more likely to leverage inequity as their partners become less important

for them to realize their objectives under strategy changes (e.g., Cui 2013; Cui, Calantone, and

Griffith 2011)? Research addressing these and similar questions would substantively advance the

literature.

This research is also limited by the constructs employed regarding the behavioral

response to inequity and perceived relationship performance. We elected to focus on the

behavioral response of resource sharing, given its relationship to equity theory and the

importance of such resources in ongoing buyer–supplier relationships (e.g., Cui 2013; Ghosh and

John 1999; Srivastava, Shervani, and Fahey 1998), but other behavioral responses are possible,

and their effects should be investigated. For example, research indicates that relational behaviors

occur in the management of buyer–supplier relationships (e.g., Hoppner and Griffith 2011;

Lusch and Brown 1996). Moreover, while our operationalization of performance considers the

perceived ability of the relationship to meet the expectations set forth by the supplier, other

performance measures, such as objective financial performance, could provide additional insight

into the consequences of positive and negative inequity.

Finally, the relationships among the structure of interdependence, positions of inequity,

and behavioral responses are all dynamic. As a supplier changes the level of resources it shares

32
with its buyer, it also has the potential to fundamentally change the inequity existing between

them as well as the elements constituting the structure of interdependence in the relationship.

Although our findings present a snapshot of the responses and effects that occur in buyer–

supplier relationships, an exploration of the dynamic nature of changes that occur between these

constructs should be investigated longitudinally.

33
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38
 Table 1: Construct Measures

Constructs
Supplier Inequity (Difference in Distributive Justice)
Received from the Buyer (Buyer Distributive Justice)
Our Primary Buyer…
BDJ1: Ensures that the monetary rewards we receive from our buyer are fair, given our
contributions.
BDJ2: Ensures that they share the gains from this relationship according to contributions.

Provided by the Supplier (Supplier Distributive Justice)

Due to the behavior of our primary buyer we…
SDJ1: Ensure that the monetary rewards they receive from this relationship are fair, given their
contributions.
SDJ2: Ensure that we share the gains from this relationship according to contributions.

Magnitude of Interdependence (Supplier Dependence + Buyer Dependence)

Relative Dependence (Supplier Dependence – Buyer Dependence)
Supplier Dependence
SD1: We are dependent on our primary buyer.
SD2: Our primary buyer would be difficult to replace.
SD3: Our primary buyer would be costly to lose.

Buyer Dependence
BD1: Our primary buyer is dependent on us.
BD2: Our primary buyer would find it difficult to replace us.
BD3: Our primary buyer would find it costly to lose us.

Resource Sharing
RS1: We provide our primary buyer access to the resources they need to be successful.
RS2: Our primary buyer obtains resources to support new ideas from us.
RS3: When our primary buyer needs additional resources, they can usually get them from us.
RS4: We provide our primary buyer access to the strategic information they need to be successful.

(Prior) Perceived Relationship Performance

Overall, when considering the relationship with our primary buyer, the relationship has…
RP1/PRP1: Been very successful.
RP2/PRP2: Performed very satisfactorily.
RP3/PRP3: Fully met our expectations.

Firm Size
Number of employees

Industry
Durable goods = 0; Non-durable goods = 1
*The measure for these items were taken six months later (at Time 2) and provided by a second informant .

39
 Table 2: Correlation Matrix

Construct Mean SD PSI NSI MI SRD BRD RS RP PRP FS

Positive supplier inequity 0.74 0.92 ---
Negative supplier inequity 0.57 1.11 -.417* ---
Magnitude of Interdependence 9.67 2.40 -.397* .362* ---
Supplier relative dependence 0.56 0.86 .200* -.187* -.185* ---
Buyer relative dependence 0.53 0.87 -.173* .150* -.008 -.392* ---
Resource sharing 4.53 1.39 -.434* .408* .837* -.536* .355* ---
Perceived relationship performance 4.94 1.20 .168* -.342* .009 -.084 .117* .063 ---
Prior perceived relationship performance 4.89 1.17 -.057 .052 -.100 .001 -.049 -.075 -.102 ---
Firm size 43.52 39.60 -.084 .048 -.069 .022 .021 -.068 -.137* -.035 ---
Industry NA NA -.018 -.007 .010 .111 -.075 -.058 .033 -.060 .011
*
p < .05 (two-tailed).

40
 Table 3: Measure Validation

Average
Standardized Composite
Construct Variance
Loadings Reliability
Extracted
Supplier Inequity .787 .620 ---

Magnitude of ---
Interdependence .984 .969

Relative Dependence .957 .916 ---

Resource Sharing .971 .894

RS1 .992
RS2 .983
RS3 .912
RS4 .892

Relationship Performance .943 .847

RP1 .946
RP2 .921
RP3 .893

Prior Perceived
Relationship Performance .926 .806
PRP1 .914
PRP2 .894
PRP3 .885
CFA Model Fit Indexes: χ2(53) = 366.976, CFI = .933, SRMR = .025.

41
 Table 4: Results of the Influence of Inequity

Equation 1: On Resource Sharing Hypothesis Std. β t-value

PSI -.016 -.500
NSI .098** 1.985
SRD -.289*** -8.193
BRD .203*** 5.871
Magnitude of interdependence (MI) .730*** 17.722
PSI × SRD -.012 -.261
PSI × BRD .016 .565
NSI × SRD -.048* -1.554
NSI × BRD .015 .383
PSI × MI H1a: + .062** 1.748
NSI × MI H3a: + -.053 -1.189
SRD × MI .085** 2.041
BRD × MI -.037 -1.091
PSI × SRD × MI H1b: - -.100** -2.186
PSI × BRD × MI H1c: 0 .016 .607
NSI × SRD × MI H3b: + .050** 1.746
NSI × BRD × MI H3c: - -.026 -.874
Firm Size -.012 -.673
Industry -.013 -.718

Equation 2: On Perceived Relationship Performance Hypothesis Std. β t-value

Resource sharing .263*** 4.208
PSI H2: + .106** 1.710
NSI H4: - -.397*** -6.519
Prior perceived relationship performance -.057 -1.053
Firm size -.094** -1.746
Industry .045 .846

Equation 1 – Overall Model Fit: F(10, 295) = 154.466, p < .00; R2 = .914; Adj. R2 = .908.
Equation 2 – Overall Model Fit: F (6, 295) = 11.286, p < .001 R2 = .190; Adj. R2 = .173.
*
p < .10; ** p < .05; *** p < .01 (one-tailed).

42
 Figure 1: Graphical Interpretation of Interaction Effect of Positive Inequity, Magnitude of
Interdependence, and Supplier Relative Dependence

A: High Magnitude of Interdependence B: Low Magnitude of Interdependence

6 4
Supplier Level of Resource Sharing

Supplier Level of Resource Sharing

5 3

4 2

3 1

Low Positive Inequity High Positive Inequity Low Positive Inequity High Positive Inequity

Low Supplier Relative Dependence Low Supplier Relative Dependence

High Supplier Relative Dependence High Supplier Relative Dependence

*
Black lines indicates a significant slope, and gray lines indicates a nonsignificant slope.

43
Figure 2: Graphical Interpretation of the Interaction Effect of Negative Inequity, Magnitude of
Interdependence, and Supplier Relative Dependence

A: High Magnitude of Interdependence B: Low Magnitude of Interdependence

6 4
Supplier Level of Resource Sharing

Supplier Level of Resource Sharing

5 3

4 2

3 1

Low Negative Inequity High Negative Inequity Low Negative Inequity High Negative Inequity

Low Supplier Relative Dependence Low Supplier Relative Dependence

High Supplier Relative Dependence High Supplier Relative Dependence

*
Black lines indicates a significant slope, and gray lines indicates a nonsignificant slope.

44
 WEB APPENDIX A:
AN EXPERIMENTAL STUDY OF THE RESPONSES TO INEQUITY

Purpose
Managers have multiple possible responses to the existence of inequity in their buyer–supplier
relationships. We conducted an experiment to identify the actions that managers take in response
to positive and negative inequity given the constraints imposed by the relationship’s structure of
interdependence. This experiment allowed us (1) to determine whether resource sharing was an
appropriate choice of a behavioral response to inequity and (2) to validate the causal ordering of
our constructs within the cross-sectional survey model by determining whether resource sharing
was an outcome of inequity.

Experimental Design
We employed a 2 × 2 × 2 between-subjects experimental design in which each treatment
represents a combination of the three manipulations of interest: supplier inequity (positive vs.
negative), magnitude of interdependence (high magnitude vs. low magnitude), and relative
dependence (supplier relative dependence vs. buyer relative dependence).

Experimental Scenario
The objective of the scenario development was to ensure that the scenario was realistic and that
respondents correctly interpreted both the manipulations and the context. For the context of the
scenario, respondents were asked to assume the role of a manager of a firm responsible for the
supply of microchips to a midsized U.S. electric component manufacturer. The relationship
between a Japanese supplier and a U.S.-based buyer allows for correspondence with the sample
used in the two-wave survey. We chose the microchip category because (1) it is bought on a
repetitive basis and forms a key component in electronic equipment, encouraging ongoing
interorganizational exchanges (Noordewier, John, and Nevin 1990), and (2) it has been
successfully used in prior buyer–supplier research (e.g., Joshi and Arnold 1997; Seggie, Griffith,
and Jap 2013). For the manipulation of magnitude of interdependence, we used the terminology
of Gundlach and Cadotte (1994) and labeled each relationship as either a major or a minor
relationship, as well as specified the relationship’s level of dependence. Furthermore, we held
additional factors (i.e., asset specificity, environmental and behavioral uncertainty, and
transaction frequency) constant to limit the interference of alternative theoretical explanations
(Seggie, Griffith, and Jap 2013).

Respondents were randomly assigned to one of the eight treatments. The final scenario read as
follows:

Imagine you are a manager responsible for supplying microchips to a midsize, U.S.
electronic components manufacturer. You have been supplying microchips twice a week
to this buyer for two years.

You consider it a major relationship as you believe that there is significant mutual
dependence in the relationship, that you and the buyer would find it difficult to replace
each other, and that it would be costly if the relationship were to end (High-Magnitude
Relationship)/You consider it a minor relationship as you believe that there is limited

45
 mutual dependence in the relationship, that you and the buyer would not find it
difficult to replace each other, or that it would be costly if the relationship were to end
(Low-Magnitude Relationship). While it is a major/minor relationship, you are more
dependent upon your buyer than they are on you (Supplier Relative Dependence)/your
buyer is more dependent upon you than you are on them (Buyer Relative Dependence).

There are no unanticipated changes in the external environment. There are multiple
qualified buyers and suppliers of microchips in the market. You have made some
investments specifically dedicated to your relationship with this buyer, but these do not
completely bind you to the relationship.

As part of your annual planning process, you re-evaluate each and every supplier
relationship. When evaluating the gains and costs of this relationship, you believe, on
average, that you have received significantly more from this buyer than you have
provided to the buyer (Positive Supplier Inequity)/that you have received significantly
less from this buyer than you have provided to the buyer (Negative Supplier Inequity).

After reading their specific scenario, respondents responded first to the following open-ended
question: “Given your evaluation of the gains and costs of the relationship, what actions might
you take?” After moving to the next screen, respondents were asked: “Did you indicate that you
would have modified, in any manner, the resources invested in this relationship?”

Sample
To maintain a sample consistent with the sample used in the two-wave survey, we selected
Japanese managers of buyer–supplier relationships as our respondents. A market research
company (i.e., Research Panel Asia) helped us access Japanese managers. The respondent pool
was sent an invitation to participate in an online survey. To qualify for participation, respondents
had to be a manager at a firm operating in the manufacturing, wholesale, or retail industries and
to have at least five years of work experience. In total, 304 Japanese managers participated in the
experiment.

Coding the Open-Ended Responses

We developed a classification scheme of possible behavioral responses on the basis of response
strategies suggested by equity theory. We classified response strategies as continuation (no
action), information gathering, discussion (constructive), strengthening the relationship,
withdrawing from the relationship, search for alternatives, and exit from the relationship. In
some cases, responses characterized more than one of the seven possible response strategies;
therefore, we allowed for combinations of the categories, such as continuation and search for
alternatives or information gathering and strengthening the relationship (Seggie, Griffith, and Jap
2013). Three researchers, not members of the author team, were trained in the classification
scheme. Two researchers independently coded each response, allowing for multiple categories of
classification, while the third researcher reconciled the differences between the coding of the first
two researchers. Using Perreault and Leigh’s (1989) method, we obtained an interrater reliability
of.847. Table A1 presents the responses by type of inequity and structure of interdependence.

46
To gain a better understanding of the open-ended data, we grouped responses according to their
type of investment: (1) increased investment response (i.e., information gathering, constructive
discussion, and strengthening the relationship, or any combination thereof), (2) neutral
investment response (i.e., continuing the relationship, search for alternatives, or the combination
thereof), (3) decreased investment response (i.e., withdrawal), and (4) exit.

Interpretation of Open-Ended Data

Positive inequity. When considering all high-magnitude relationships in a positive inequity
situation, 40% of our respondents had an increased investment response, 57% had a neutral
investment response, 0% had a decreased investment response, and 3% exited the relationship.
When considering all low-magnitude relationships in a positive inequity situation, 39% of our
respondents had an increased investment response, 50% had a neutral investment response, 4%
had a decreased investment response, and 7% exited the relationship.

Negative inequity. When considering all high-magnitude relationships in a negative inequity

situation, 55% of our respondents had an increased investment response, 36% had a neutral
investment response, 3% had a decreased investment response, and 7% exited the relationship.
When considering all low-magnitude relationships in a negative inequity situation, 38% of our
respondents had an increased investment response, 34% had a neutral investment response, 5%
had a decreased investment response, and 23% exited the relationship.

The open-ended data in response to both positive and negative inequity conditions indicated that
a significant percentage of respondents (ranging from 38% to 55%) would increase their
investment in the relationship. This suggests that the sharing of resources with one’s partner can
be viewed as an appropriate outcome of inequity.

Results of Resource Modification Question

After collecting the open-ended responses, we asked all respondents if they would have
modified, in any manner, the resources invested in the relationship described by the scenario.
The results indicated that 58.24% of respondents reported in the affirmative. Given this majority,
we conclude that resource sharing is a behavioral response to inequity and thus appropriate to
examine.

47
 Table A1: Coded Responses to Positive and Negative Inequity within Interdependence
Structures
Positive Inequity Negative Inequity
High Magnitude Low Magnitude High Magnitude Low Magnitude
BRD SRD BRD SRD BRD SRD BRD SRD
1 C C C C C C C C
2 C C C C C C C C
3 C C C C C C C C
4 C C C C C C C C
5 C C C C C C C C
6 C C C C C C C C
7 C C C C C C I C
8 C C C C C, A I I C
9 C C C C C, A I I I
10 C C C C I I I I
11 C C C C I I I I
12 C C C C I I I I
13 C C C C I I D I, A
14 C C C C I D D D
15 C C C C I D D D
16 C I C C I D D D
17 C I C, A C I D D D
18 C I I C D D D D
19 C I I C D D D S
20 C I I C, I D D D W
21 C I D I D D D A
22 C I D I D D S A
23 C D D I D D S A
24 C, I D S I D D S, E A
25 C, S D S I D D W A
26 C, A D S I D D W A
27 C, A D S D D D W A
28 I S S D D W A A
29 I S S D S W, A A E
30 I S S D, A S A A E
31 I S S S S A A E
32 D S S S A A E E
33 D A S S A A E E
34 D A W W A A E E
35 S E W A E A E E
36 S E E A E A E E
37 S E E E A E E
38 S E E E E
39 A E E
40 E
Notes: C = Continuation (no action), I = Information Gathering, D = Discussion (constructive), S = Strengthening
the Relationship (increase own input), W = Withdraw from the Relationship (reduce own input), A = Alternatives
(search for alternatives), and E = Exit from the Relationship. Each column represents the sequential response of an
individual manager. The order of the respondents in the experiment is not the same as presented here (we changed
the order to make the table easier to follow).

48
References

Gundlach, Gregory T. and Ernest R. Cadotte (1994), “Exchange Interdependence and Interfirm
Interaction: Research in a Simulated Channel Setting,” Journal of Marketing Research, 31 (4),
516-32.

Joshi, Ashwin W. and Stephen J. Arnold (1997), “The Impact of Buyer Dependence on Buyer
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Psychology & Marketing, 14 (18), 823-45.

Noordewier, Thomas G., George John, and John R. Nevin (1990), “Performance Outcomes of
Purchasing Arrangements in Industrial Buyer-Vendor Relationships,” Journal of Marketing, 54
(3), 80-93.

Perreault, William D., Jr., and Laurence E. Leigh, (1989), “Reliability of Nominal Data Based on
Qualitative Judgments,” Journal of Marketing Research, 26 (May), 135-48.

Seggie, Steven H., David A. Griffith, and Sandy D. Jap (2013), “Passive and Active
Opportunism in Interorganizational Exchange," Journal of Marketing, 77(6), 73-90.

49
 WEB APPENDIX B:
SYSTEM ESTIMATION OF MODEL

Method
Because of the potential endogeneity problem of resource sharing, we employed both a partial
least squares structural equation model (PLS-SEM) and a two-stage least squares model (2SLS)
to check for robustness of the model.

Results of System Estimation

1. PLS-SEM Estimation

Using SmartPLS 2.0, we estimated both equations simultaneously with single-item

constructs, using a product indicator approach to model the interaction variables (Chin et
al. 2003). To assess the significance of parameter estimates, we used a bootstrap
approach with 500 resamples. The significance levels of estimated relationships remain
the same (see Table B1).

2. 2SLS Estimation

Using SPSS 20, we input the independent variables in Equation 1 as instrumental

variables for the estimation of Equation 2 (DV= perceived relationship performance). The
results of the Sargan test of overidentifying restrictions (Χ 2 = 16.54 , p = .282) and the
weak identification statistic (F = 135.33) indicate that the instrument variables are valid
and strong (Kennedy 2003; Staiger and Stock 1997). The significance levels of estimated
relationships remain the same (see Table B2).

From the results of the two estimation procedures, we conclude that the previous spline
regression analysis results of the model are robust.

50
 Table B1. PLS-SEM Estimation: Influence on Resource Sharing and Relationship Performance

DV Β t-value
Equation 1 Resource Positive Supplier Inequity (PSI) -.016 -.532
Sharing (RS) Negative Supplier Inequity (NSI) .098** 1.841
Supplier Relative Dependence (SRD) -.289*** -7.504
Buyer Relative Dependence (BRD) .203*** 5.671
Magnitude of Interdependence (MI) .730*** 18.163
PSI × SRD -.012 -.308
PSI × BRD .016 .662
NSI × SRD -.048* -1.482
NSI × BRD .015 .427
PSI × MI .062** 1.951
NSI × MI -.053 -1.136
SRD × MI .085** 1.677
*
BRD × MI -.037 -1.293
PSI × SRD × MI -1.00** -2.011
PSI × BRD × MI .016 .755
NSI × SRD × MI .050* 1.64
NSI × BRD × MI -.026 -1.093
Firm Size -.012 -.753
Industry -.013 -.659
2
Adj. R = .908

Equation 2 Perceived Positive Supplier Inequity (PSI) .106** 1.700

Relationship Negative Supplier Inequity (NSI) -.397*** -5.871
Performance Resource Sharing (RS) .263*** 3.584
(RP) Firm Size -.094 *
-1.368
Industry .045 .883
Prior Perceived Relationship Performance -.057 -1.216
Adj. R2= .173
*
p < .10; ** p < .05; *** p < .01 (one-tailed).

51
 Table B2. 2SLS Estimation of Equation 2: Influence on Relationship Performance

DV β t-value
**
Equation 2 Perceived Positive Supplier Inequity (PSI) .142 2.036
Relationship Negative Supplier Inequity (NSI) -.425*** -6.360
Performance Resource Sharing (RS) .330*** 4.116
(RP) Firm Size -.075* -1.293
Industry .067 1.147
Prior Perceived Relationship Performance .233 .996
2
Adj. R = .158
*
p < .10; ** p < .05; *** p < .01 (one-tailed).

52
References

Chin, Wynne W., Barbara L. Marcolin, and Peter R. Newsted (2003), “A Partial Least Squares
Latent Variable Modeling Approach for Measuring Interaction Effects: Results from a Monte
Carlo Simulation Study and an Electronic-mail Emotion/adoption Study,” Information Systems
Research, 14 (2), 189-217.

Kennedy, Peter (2003), A Guide to Econometrics. Cambridge, MA: MIT Press.

Staiger, Douglas O. and James H. Stock (1997), “Instrumental Variables Regression with Weak
Instruments,” Econometrica, 65 (3), 557-86.

53