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Journal of Business & Industrial Marketing

The relationship between supplier development and firm performance: the mediating role of marketing process
improvement
Anthony K. Asare Thomas G. Brashear Jing Yang Jun Kang
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Anthony K. Asare Thomas G. Brashear Jing Yang Jun Kang, (2013),"The relationship between supplier development and firm performance: the
mediating role of marketing process improvement", Journal of Business & Industrial Marketing, Vol. 28 Iss 6 pp. 523 - 532
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Cristóbal Sánchez-Rodríguez, David Hemsworth, Ángel R. Martínez-Lorente, (2005),"The effect of supplier development initiatives on
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The relationship between supplier
development and firm performance:
the mediating role of marketing process
improvement
Anthony K. Asare
Department of Marketing, School of Business, Quinnipiac University, Hamden, Connecticut, USA
Thomas G. Brashear and Jing Yang
Department of Marketing, Eugene M. Isenberg School of Management, University of Massachusetts Amherst,
Amherst, Massachusetts, USA, and
Jun Kang
Department of Marketing, School of Business Administration, Hunan University, Changsha, China
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Abstract
Purpose – The purpose of this paper is to test the market-based asset framework by examining the role of marketing process improvements in the
relationship between a buyer firm’s supplier-related activities and its performance.
Design/methodology/approach – Interviews with executives who were involved in supplier development were conducted to learn more about
supplier development and to help in the development of the survey constructs. A self-report survey was then developed online to collect data for the
study. In total, 338 executives responded and partial least squares (PLS) structural equation modeling was used to test the hypotheses developed in the
study.
Findings – Marketing process improvements were found to mediate the relationship between a firm’s supplier development efforts and firm
performance, thus providing empirical support for the market-based asset framework. The study also found that a firm’s supplier development activities
can lead to improvements in its marketing processes.
Originality/value – For too long, a firm’s supply chain has been seen as the primary domain of the supply chain and operations department, even
though supply chain decisions and errors have a considerable impact on the ability of marketing professionals to perform. The findings in this study
demonstrate the value of the relationship between a firm’s supply chain and its marketing activities and as such makes the case for marketing
executives to be more involved in supply chain activities.

Keywords Marketing, Suppliers, Supplier relations, Supplier development, Market-based asset framework, Organizational performance,
Intangible assets

Paper type Research paper

1. Introduction and firm performance. However, the value of MBA is hard to


measure since they are intangible and typically not recorded
The last few decades have seen a fundamental shift in the on a firm’s balance sheet (Sharp, 1995).
source of a firm’s competitive advantage from physical assets To help determine the contribution of MBA to a firm’s
such as plant and machinery to market-based assets performance, Srivastava et al. (1999) developed a conceptual
(intangible assets) such as brands, knowledge, innovation framework (MBA framework) that links MBA to
and supplier relationships (Day, 1994; Eisenhardt and Jeffrey, performance. The framework argues that MBA must be
2000; Wernerfelt, 1984). As a result, there has been a transformed and leveraged as part of an organization’s
substantial increase in the contribution of market-based assets processes if they are to generate economic value to the
(MBA) toward the market capitalization of firms (Ramaswami organization. Thus, to assess the contribution of MBA, the
et al., 2009). Recognizing the increasing importance of a framework links MBA, to firm performance through the
firm’s MBA, researchers and practitioners alike have begun to processes and routines utilized to develop those assets
focus more attention towards developing links between MBA (Srivastava et al., 2001). In a nutshell, a firm’s business
processes should mediate the relationship between its MBA
and performance. While there has been recognition in the
The current issue and full text archive of this journal is available at literature that MBA contribute to a firm’s performance
www.emeraldinsight.com/0885-8624.htm
through improvements to its business processes, the
exposition has largely been conceptual and very few studies
have actually empirically tested the framework (Ramaswami
Journal of Business & Industrial Marketing et al., 2009). Also, those studies focus more on a firm’s
28/6 (2013) 523– 532
q Emerald Group Publishing Limited [ISSN 0885-8624] downstream relationships with its customers and channel
[DOI 10.1108/JBIM-04-2013-0100] members while focusing inadequately on a firm’s upstream

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The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

relationships with its suppliers. This paper empirically tests 2. Theoretical frameworks
the MBA framework and also extends it to a firm’s supply
chain. The paper focuses on an important MBA, a firm’s 2.1 Resource based view (RBV)
In recent years RBV has become one of the most influential
supplier relationships, and examines how a buyer firm’s
theoretical frameworks in business (Lavie, 2006) and has been
supplier development efforts contribute to the buyer firm’s used to address different research topics including: knowledge
performance. Supplier development refers to a program management (Hult et al., 2006), innovation (Adams and
developed by a buyer firm to upgrade its supplier’s capabilities Lamont, 2003), networks (Lavie, 2006); managerial theory
and foster ongoing improvements (Krause and Handfield, (Stoelhorst and van Raaij, 2004); organizational capabilities
2007). Such programs are created by buyer firms to help their (Skaggs and Snow, 2004) and diversification (Chatterjee and
suppliers, particularly their deficient ones, improve their Wernerfelt, 1991). RBV conceptualizes a firm as a
capabilities and business processes (Wagner, 2006). heterogeneous entity consisting of bundles of idiosyncratic
Numerous firms including Otis elevator, John Deere and resources that are highly immobile and difficult to imitate
Toyota have developed supplier development programs aimed (Barney, 1991; Wernerfelt, 1984). Proponents of the theory
at helping their suppliers improve their capabilities and argue that a firm’s competitiveness is the result of
business processes (Modi and Mabert, 2007). Drawing from heterogeneous resources internal to the firm and that firms
with intangible assets that are valuable, rare, inimitable and
the MBA framework this paper asserts that a firm’s supplier
non-substitutable, will outperform its competitors (Barney,
development programs contribute to the buyer firm’s 1991). RBV is a useful theoretical framework for this study
performance through its marketing processes. Thus a buyer since its arguments that a firm’s intangible assets can help
firm’s investments in its supplier development programs will improve its performance can be used as a theoretical
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lead to improvements in its (the buyer firm’s) marketing framework to explain why a buyer firm’s supplier
processes which will in turn lead to better performance for the development activities can improve its performance.
buyer.
The key research objectives of the study include: 2.2 Relational view (RV)
.
Testing the MBA framework by examining the role of A theoretical framework that extends the resource based view
marketing process improvements in the relationship is the relational view of competitive advantage proposed by
between a buyer firm’s supplier related activities and its Dyer and Singh (1998). Dyer and Singh argue that RBV
performance. focuses primarily on sources of rent within a firm while paying
.
Examining the impact that supplier development has on a inadequate attention to sources of rents that exist beyond the
buyer firm’s marketing processes and eventually to its firm’s boundaries. They argue that a firm’s competitive
(buyer firm’s) performance. advantage is not created only from within a firm, but also
from activities outside the firm. They therefore proposed a
In addition to the MBA framework, this study relies on the relational view of competitive advantage which is based on the
resource based view (Wernerfelt, 1984) and the relational observation that a firm’s critical resources span the
view (Dyer and Singh, 1998) to provide theoretical boundaries of a firm and may be embedded in inter-firm
explanations for the relationships examined in this paper. resources and processes (Klein and Rai, 2009). RV can be
The paper contributes to the literature in a number of ways. utilized as the theoretical basis for this study since the study
First, it empirically tests and finds support for the MBA examines the impact of a firm’s inter-firm activities.
framework thus providing additional support and validation
for this important but underutilized framework. Second, it 2.3 Market based assets framework
extends the market-based asset framework to cover a firm’s MBA refer to assets that are created as a result of a firm’s
interactions with entities in its external environment
upstream relationship with its suppliers, an area that has been
(Srivastava et al., 1998). They are typically intangible assets
inadequately studied in the marketing literature. Finally, the and are not recorded on a firm’s balance sheet. Examples of
paper examines the impact that supplier development has on a these assets include a firm’s customers, channel members,
firm’s marketing processes and performance. This and suppliers. MBA framework was developed to help explain
contribution is important because the academic literature the process through which a firm’s intangible assets can lead
has not adequately examined the relationship between a firm’s to improved performance. The framework argues that the
supply chain and its marketing activities and processes even conversion of resources into value occurs through the medium
though marketing is one of the major beneficiaries of the of processes. Thus MBA must be absorbed and transformed
increasing collaboration between a firm and its supply base as part of some organizational process through which they can
(Svensson, 2002). generate economic value for the customer and organization
The remainder of this paper is structured as follows. First, (Srivastava et al., 1999, 2001). In a nutshell, a firm’s business
we discuss the theoretical frameworks utilized in the study. processes should mediate the relationship between its MBA
Next we discuss the concepts of supplier development and and performance. Researchers have recognized the value of
the MBA framework and as such the framework has been
marketing processes. The third section develops the
utilized in a number of studies (e.g. Barua et al., 2004;
hypotheses on the relationships between supplier
Srivastava et al., 2001; Ramaswami et al., 2009).
development, marketing processes and firm performance.
The fourth part discusses the methodology used to collect and 2.4 Supplier development
analyze the data. This is followed by a discussion of the Supplier development can be defined as a program developed
results. The paper concludes with a discussion of theoretical by a buyer firm to upgrade its supplier’s capabilities and foster
and managerial implications and future research ongoing improvements (Krause and Handfield, 2007). The
recommendations. program is typically initiated by a buying firm to improve its

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The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

supplier’s performance or capabilities in a way that enables 4. Hypotheses development


the supplier to meet the long and short term needs of the
buyer. During supplier development, the buyer quite often 4.1 Knowledge transfer and marketing process
sends out a cross-functional development team to train the improvements
supplier and provide it with knowledge about ways in which it Knowledge transfer refers to the dissemination of knowledge,
can improve. The buyer often introduces the supplier to a and in an inter-firm context the transfer of knowledge occurs
number of process innovations including lean manufacturing between a firm and its external partners. The transfer of
knowledge between buyers and their suppliers is extremely
processes; total quality management (TQM), value stream
important (Browne et al., 1995; Hughes and Perrons, 2011)
mapping (VSM), Kanban and Six Sigma. Supplier
and a growing body of research argues that organizations that
development is increasing in popularity and a number of
are able to effectively manage their knowledge related assets
studies have been conducted to examine the concept perform better than organizations which are unable to do so
(e.g. Krause and Handfield, 2007; Modi and Mabert, 2007; (Inkpen and Tsang, 2005; Jayachandran et al., 2005; Luo
Roy et al., 2004; Wagner, 2006). et al., 2006; Selnes and Sallis, 2003). During the supplier
development process, buyer firms transfer knowledge to their
suppliers regarding the use of techniques like just-in-time
2.5 Marketing processes manufacturing, six sigma, value stream mapping, total quality
The domain of marketing has increased over the years and manufacturing and efficient consumer response.
marketers are involved in a number of business processes that Knowledge transfer has been found to have an impact on a
go beyond the functions that have been traditionally firm’s ability to innovate and improve its business processes
attributed to marketing. As a result, Srivastava et al. (1999) and a number of researchers (e.g. Luo et al., 2006; Inkpen
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identified a broader range of processes that marketers are and Tsang, 2005) assert that the transfer of knowledge across
involved in and redefined marketing as a phenomenon that is boundaries is critical for the success of new products and
embedded in three core processes: supply chain management processes. Schiele (2006) argues that suppliers are
(SCM), product development management (PDM), and increasingly becoming a major source of new ideas for firms
customer relationship management (CRM). These three and a buyer firm’s ability to improve its processes is
marketing processes encompass the fundamental tasks that increasingly reliant on the quality of its supplier base.
are necessary to attract and retain customers and create Knowledge based view (RBV) (Grant, 1996) and RV, all
sustainable competitive advantages that can drive firm suggest that firms that are able to effectively manage and
performance and shareholder value (Hanvanich et al., 2003; transfer their knowledge based resources will be able to
Srivastava et al., 1999). The three processes have been transform their organization’s capabilities and processes. The
recognized by a number of researchers as the core marketing market-based asset framework also suggests that a firm’s
processes that a firm is involved in (e.g. Bowman and ability to manage its intellectual assets such as its knowledge
Ambrosini, 2000; Ramaswami et al., 2009). This study assets, can lead to improvements to its marketing processes
utilizes Srivastava et al.’s (1999) conceptualization of (Srivastava et al., 1999). Based on these discussions, this
marketing processes and define it as a phenomenon that is study hypothesizes that knowledge transfer during supplier
embedded in three core processes: supply chain, product development activities should lead to improvements to the
development and customer relationship processes. We focus buyer’s marketing processes.
primarily on one of the marketing processes identified – This study examines two components of knowledge transfer
and their effect on marketing process improvements. The
customer relationship processes. This is because we are
study examines the frequency at which knowledge is
interested in examining the effect that suppliers have on the
transferred (Massey and Dawes, 2007; Mohr et al., 1996)
buyer firm (the customer).
by the buyer and also the content of the knowledge (Krause,
1999) that is transferred. The study examines the frequency
of knowledge transferred to determine if the volume of
3. Conceptual framework knowledge transferred alone can lead to improvements to the
The study seeks to provide support for MBA framework and buyer firm’s marketing processes. It also examines the content
of knowledge transferred to determine if the content of the
as such examines the relationship between a buyer firm’s
knowledge transferred has an impact on marketing process
supplier development activities, its marketing processes and
improvements. We therefore hypothesize that:
performance. The study examines two supplier development
related constructs: knowledge transfer and buyer involvement H1. There is a positive relationship between knowledge
intensity. Knowledge transfer in this study refers to the transfer content and marketing process improvement.
knowledge that the buyer imparts to the supplier during the H2. There is a positive relationship between knowledge
supplier development process and buyer involvement intensity transfer frequency and marketing process
examines the extent to which the buyer is involved in helping improvement.
its supplier develop its capabilities. In line with the market-
based asset framework, the study proposes that the supplier 4.2 Buyer involvement intensity and marketing process
development related concepts (knowledge transfer and buyer improvement
involvement intensity) will be positively related to the buyer The level of involvement by a buyer firm is defined as the
firm’s performance through improvements to its marketing extent to which the buyer invests time, effort and other
processes. As such, marketing process improvement should resources into the development of their suppliers (Krause,
mediate the relationship between the buyer firm’s supplier 1999). Buyers exhibit a high level of involvement if they
development activities and firm performance. Figure 1 develop formal evaluation programs such as supplier
illustrates the relationships examined in the study. certification programs. This is because the development and

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The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

Figure 1 Conceptual model


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administration of such formalized programs can be costly and and firm performance (e.g. Ramaswami et al., 2009;
time consuming. They also exhibit a high level of involvement Srivastava et al., 1999; Tyagi and Sawhney, 2010).
if they utilize activities that involve direct interaction between Srivastava et al. (1999) argues that improvements to a firm’s
them and their suppliers like: on-site assistance; site visits; and marketing processes should lead to increased performance
training of supplier’s personnel (Modi and Mabert, 2007). and Tyagi and Sawhney (2010) assert that marketing
This is because activities that involve a high level of face to processes can improve organizational efficiency and
face and direct interaction can also be very involving, costly productivity. They also assert that process improvements are
and time consuming. This paper argues that firms that very important to a firm since firms that are able to improve
actively invest their time and resources into developing their their business process are more likely to perform better than
suppliers will likely reap the rewards through improvements to firms that do not. Also, RBV and RV all suggest that
their own marketing processes. Wagner (2006) found that improvements to a firm’s intangible assets (in this case their
some supplier development activities can lead to process marketing processes) should lead to improved performance.
improvements and Chapman and Corso (2005) assert that We therefore hypothesize a positive relationship between
collaboration between a customer and its suppliers is the most marketing process improvements and firm performance. We
common source of continuous innovation and improvement. categorize our firm performance construct into two types of
RV suggests that inter-firm collaboration provides value to performance: customer and financial performance. This is a
firms and MBA framework asserts that a firm’s efforts to common categorization of performance in the marketing
strengthen its relational assets such as its relationships with its literature (e.g. Luo et al., 2006). Thus:
suppliers will reap the rewards of those investments through H4. There is a positive relationship between marketing
improvements to its own marketing processes (Srivastava et al., process improvement and the buyer firm’s (a)
1999). We therefore hypothesize that: customer performance, (b) financial performance.
H3. There is a positive relationship between buyer
involvement intensity and marketing process
improvement. 4.4 Control variables: industry competitiveness and
industry dynamism
Institutional theory suggests that environmental variables
4.3 Marketing process improvement and firm such as industry competitiveness and dynamism can influence
performance the actions of an organization (Jayachandran et al., 2005).
The link between business process improvements and firm Competitive industries could compel firms in those industries
performance has been widely established and according to to focus more on short term rather than long term results.
Chapman and Corso (2005), continuous improvements to a Likewise, firms in dynamic industries are likely to focus more
firm’s business processes can lead to improved performance. on activities that will provide more visible results that can be
Arguments have been made in the marketing literature in recorded on a balance sheet instead of MBA that are usually
support of the link between marketing process improvements not recorded on balance sheets. Since the two constructs

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The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

could possibly influence the relationships examined in this firm invests time, effort and other resources into the
paper and are commonly used as control variables in development of its suppliers (Krause, 1999). It is measured
marketing research (e.g. Jayachandran et al., 2005), this using a six item scale borrowed from Krause (1999) and
study treats industry competitiveness and industry dynamism Cronbach’s alpha is 0.88. Knowledge transfer is categorized
as control variables. into knowledge transfer content and knowledge transfer
frequency. Knowledge transfer content refers to the content of
5. Methodology knowledge that is transferred from the buyer to the seller. The
construct was measured using a seven item scale borrowed
5.1 Sample and data collection from Krause (1999) and Cronbach’s alpha is 0.91.
The key respondents for this study were executives in Knowledge transfer frequency refers to the frequency at
manufacturing firms (buyer’s firm) responsible for managing which the buyer firm communicates with its supplier (Mohr
their firm’s relationship with their suppliers. Interviews with et al., 1996). To determine knowledge transfer frequency, the
executives in firms that were involved in supplier development respondents were provided with a list of different media that
were conducted to learn more about supplier development were used to communicate with their suppliers. They are: face
and to help in the development of the survey constructs. The to face, telephone, technical support, website, e-mail, B2B
interviews also helped us identify the types of job titles in an communications (e.g. EDI), tradeshows, seminars, and
organization that were involved in supplier development and newsletters. They were asked to list the number of times in
other supplier relationship building activities. A self-report the previous month that they communicated with their
survey was then developed online to collect data for the study. suppliers using any of these media types. The average of the
Once the survey was created the authors invited academic frequencies was used to determine the knowledge transfer
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researchers and industry experts to test the survey. This was frequency for each respondent. This approach is similar to the
to ensure the face validity, readability, and understandability approach used by Mohr et al. (1996) and Massey and Dawes
of the scales. It was also to ensure that key informants could (2007). To develop the marketing process improvement
answer all the questions in the survey. Changes were made to concept, the study utilizes Srivastava et al.’s (1999)
the scales to reflect feedback from the participants. Once the classification of marketing processes. Srivastava et al. (1999)
changes were made, a pretest was sent to 180 potential classify marketing processes into product, supply chain and
respondents out of which 64 fully completed the survey. The customer processes. This study focuses primarily on one of
response rate for the pre-test was therefore 36 percent. the marketing processes identified – customer related
Modifications were made to the survey based on the pre-test processes. In this study, marketing process improvement
after which the final survey was administered. In the final therefore refers to the continuous improvement of processes
survey, 971 executives were contacted and 338 responded associated with the identification, acquisition and retention of
providing a 35 percent response rate. To pre-qualify the customers. Srivastava et al.’s (1999) further argue that
respondents, they were asked if their job involved working marketing processes can influence and drive value creation
with their firm’s suppliers. This is because our interviews and through the acceleration, enhancement and the reduction of
discussions with industry experts indicted that managers who risk associated with cash flows. Building on the acceleration,
worked with suppliers would be able to answer the questions enhancement and reduction to risk theme, this study
in our survey. Only those who indicated that they worked with categorizes customer relationship process improvements
their firm’s suppliers were asked to respond to the survey. into: improvements that accelerate customer relationship
Respondents to the final survey came from 18 different processes (CRA); improvements that enhance customer
industries including: miscellaneous industries (19.8 percent), relationship processes (CRE) and improvements that reduce
transportation equipment (18.3 percent), electronic risks to customer relationship processes (CRR).
equipment (12.7), chemical and allied products (12.4 CRA was measured using a six item scale developed for the
percent), food and kindred (8.3 percent) and computer survey, CRE was measured using a five item scale developed
equipment (6.2 percent). Engineers were the largest group of for the study and CRR was measured using a five item scale
respondents (22.8 percent), followed by marketing (13 developed for the study. To accommodate the
percent), quality assurance (9.8 percent), purchasing (8 multidimensional nature of the marketing process
percent) and supply chain (6.5 percent). The remaining 40 improvement (MPI) construct, the items for each of the
percent made up a variety of other occupations. constructs was averaged to form three MPI scales that in turn
served as three indicators of the MPI construct. The MPI
5.2 Response bias construct was therefore made up of three items (CRA, CRE
The potential for response bias was assessed using the and CRR). This approach is similar to the approach used by
methods recommended by Armstrong and Overton (1977). A Bello and Gilliland (1997).
comparison of early and late respondents was conducted To measure financial and customer performance, the study
using one-way ANOVA tests. These groups consisted of the adapted measures used by Luo et al. (2006). Customer
first and last 25 respondents. None of the constructs were performance has the following components: customer loyalty,
found to have a significant difference between the two groups. customer satisfaction, customer lifetime value, and customer
retention. Financial performance has the following
5.3 Measures components: market share growth, sales growth, reducing
Existing multi-item scales were used whenever possible and selling costs, and profit growth.
whenever existing scales were not available, new scales were Two industry variables, industry competitiveness (IC) and
developed. The development of the scales followed the industry dynamism (ID) were utilized as control variables.
procedures recommended by Gerbing and Anderson (1988) Industry competitiveness measures the intensity of
and also Bearden and Netemeyer (1999). A summary of the competition in the respondent’s industry. The construct was
scale items used in the study can be found in Table I. Buyer measured using a four item scale borrowed from
involvement intensity is defined as the extent to which a buyer Jayachandran et al. (2005). Industry dynamism measures

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The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

Table I Measurement validation


Items Standardized loadings
Buyer involvement intensity (BI) (AVE 5 0.62; CR 5 0.91; Alpha 5 0.88)
Our firm assesses the performance of our supplier using a formal evaluation process 0.81
Our firm uses a certification program as part of our supplier development initiative 0.78
Our firm regularly evaluates and provides our supplier with feedback for improvement 0.87
Our firm recognizes our supplier’s achievements/performance in the form of awards 0.76
Our firm trains/educates our supplier’s personnel 0.75
Our firm visits our supplier’s premises to assist them with the implementation of recommended procedures 0.74

Knowledge transfer content (KTC) (AVE 5 0.64; CR 5 0.93; Alpha 5 0.91)


Our companies regularly exchange information related to . . .
the quality of products we purchase from our supplier 0.77
forecasting of products we purchase from our supplier 0.80
design of the products we purchase from our supplier 0.80
cost of producing the products that we purchase from the supplier 0.78
price of the products that we purchase from the supplier 0.84
selection of components incorporated in the products that we purchase from the supplier 0.80
delivery time of the products we purchase from the supplier 0.81

Customer performance (CP) (AVE 5 0.81; CR 5 0.95; Alpha 5 0.92)


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Relative to your firm’s stated objectives, how is your firm performing on:
customer loyalty 0.90
customer satisfaction 0.91
customer lifetime value 0.91
customer retention 0.89

Financial performance (FP) (AVE 5 0.75; CR 5 0.92; Alpha 5 0.89)


Relative to your firm’s stated objectives, how is your firm performing on:
market share growth 0.88
sales growth 0.89
reducing selling costs 0.82
profit growth 0.87

Marketing process innovation (MPI) (AVE 5 0.71; CR 5 0.88; Alpha 5 0.80)


Customer relationship process innovation – Acceleration 0.81
Our firm is continuously . . .
reducing the time for market acceptance of our products
providing our customers with incentives for new product trials
increasing the speed at which we respond to customer requests
implementing new technologies that speed up the customer ordering process
reducing the length of our customer order fulfillment process
minimizing customer solution development cycle time
Customer relationship process innovation – enhancement 0.83
Our firm is continuously . . .
increasing our installed customer base
introducing new products
cross-selling parts, consumables and complementary services
up-selling our products
targeting new customer segments that we have previously not done business with
Customer relationship process innovation – reduction of risk 0.88
Our firm is continuously . . .
tracking customer trends
working to increase customer loyalty
utilizing customer insights
providing our customers with concessions for long term delivery contracts
improving our relationships with our customers

Industry competitiveness (IC) (AVE 5 0.80; CR 5 0.94; Alpha 5 0.92)


Competition in our business is cut throat 0.87
We are in a business with very aggressive competitors 0.92
Price competition in this business is severe 0.89
Companies are very aggressively making efforts to capture market share 0.90

Industry dynamism (ID) (AVE 5 0.72; CR 5 0.89; Alpha 5 0.81)


In our business, customers’ product preferences change substantially over time 0.77
Technologies used in our industry are changing rapidly 0.89
A large number of new product ideas have been made possible through technological breakthroughs in our industry 0.89
Notes: CR ¼ Composite reliability; AVE ¼ Average variance extracted; Alpha ¼ Cronbach’s alpha

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The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

the extent to which a firm’s business environment changes. does not yet have sufficient empirical support (Real et al.,
This construct was also measured using a three item scale 2006; Wold, 1979). We tested our hypotheses (1-4) using a
borrowed from Jayachandran et al. (2005). full mediation model.
We also examined the mediating role of MPI by comparing
5.4 Scale reliability and validity nested models including direct effect paths (Palmatier et al.,
Cronbach’s alpha was used to assess the internal consistency 2006; Zhao et al., 2010). Specifically, two path analysis
of the items. According to Nunnally (1978), scale items models were estimated and Table III summarizes the results.
should have an alpha value of over 0.70 to demonstrate We first estimated the fully mediated model (model 1), to
internal consistency. The alphas for all the scales in this study examine whether marketing process improvement mediates
are listed in Table I and they exceeded 0.70. In addition to the relationships between the antecedent variables (i.e. KTC,
Cronbach’s alpha, average variance extracted (AVEs) and KTF and BI) and the two performance outcomes (CP and
composite reliabilities were calculated to help assess the FP). Second, we estimated model 2 which includes both the
psychometric properties of the constructs. Both composite direct effects and the indirect effects of the antecedent
reliabilities and AVEs are measures of internal consistency variables. Finding non-significant direct effects in model 2
and high loadings are indicators of high internal consistency. would indicate the full mediation effects of MPI.
All the composite reliabilities exceeded the 0.70 threshold and
ranged from 0.88 to 0.94. AVEs for the constructs used in this
study also exceeded the 0.50 threshold (Fornell and Larcker, Table III Hypothesis testing results
1981). Discriminant validity was assessed using the variance
extracted test suggested by Fornell and Larcker (1981). In the Model 1 Model 2
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variance extracted test, AVEs for two constructs are compared BI - > MPI 0.28 (5.06) * 0.29 (5.17) *
with the square of the correlation between the two constructs. KTC - > MPI 0.36 (6.24) * 0.36 (6.30) *
To demonstrate discriminant validity, the AVEs of the KTF - > MPI 2 0.02 (1.04) 20.02 (1.00)
constructs should be higher than the square of the
IC - > MPI 0.10 (2.28) * * 0.10 (2.32) * *
correlation between the two constructs. The test results
ID - > MPI 0.20 (4.85) * 0.20 (4.73) *
indicate that all the AVEs exceeded the square of the
correlations thus demonstrating discriminant validity Table II. MPI - > CP 0.67 (15.75) * 0.64 (11.83) *
IC - > CP 2 0.02 (0.33) 20.03 (0.60)
5.5 Hypotheses testing ID - > CP 2 0.01 (0.15) 20.01 (0.15)
Partial least squares (PLS) structural equation modeling was MPI - > FP 0.45 (8.05) * 0.49 (6.54) *
used to test the hypotheses developed in the study (Fornell IC - > FP 2 0.09 (1.57) 20.08 (1.40)
and Bookstein, 1982). Specifically, we used the software ID - > FP 0.08 (1.35) 0.08 (1.46)
application SmartPLS 2.0. PLS utilizes a rigorous BI - > CP 20.06 (0.82)
mathematical algorithm to compute the optimal linear KTC - > CP 0.09 (1.28)
relationships between latent constructs (Dellande et al., KTF - > CP 0.04 (1.22)
2004) and the primary goal of PLS is to minimize errors in all BI - > FP 20.05 (0.61)
endogenous constructs or maximize the variances explained KTC - > FP 20.02 (0.28)
(Hulland, 1999). Bootstrapping re-sampling was used to KTF - > FP 0.01 (0.29)
assess the significance of paths. The bootstrapping routine
was conducted with the number of cases equal to our sample
R-square
size (i.e. 338) and the number of subsamples equal to 1,000,
MPI 0.55 0.55
as suggested by Efron and Tibshirani (1993). We chose PLS
because our study utilized a medium sized sample. PLS allows CP 0.43 0.44
for a robust estimation even when the sample size is small FP 0.22 0.22
(Chin, 1998). We also consider our paper to be at the early Notes: *p , 0.01 (two-tailed test); * *p , 0.05 (two-tailed test); We
theory development stage since the market-based asset calculated t-values through a bootstrapping routine with 338 cases and
framework does not have sufficient empirical support 1,000 subsamples; 338 cases and 1,000 subsamples; The path coefficients
(Ramaswami et al., 2009). PLS is appropriate in situations are standardized coefficients with t-values in parentheses
where a theory or concept is in early development stages and

Table II Descriptive statistics and correlations


Mean SD KTC IC CP FP ID KTF BI MPI
KTC 5.28 1.15 1.00
IC 5.72 1.23 0.37 * 1.00
CP 5.39 1.08 0.46 * 0.24 * 1.00
FP 4.84 1.17 0.30 * 0.13 * 0.59 * 1.00
ID 4.79 1.36 0.37 * 0.37 * 0.29 * 0.27 * 1.00
KTF 16.11 33.35 0.04 0.10 0.08 0.05 0.09 1.00
BI 5.05 1.27 0.61 * 0.27 * 0.38 * 0.27 * 0.35 * 0.20 * 1.00
MPI 5.30 0.92 0.63 * 0.36 * 0.64 * 0.51 * 0.47 * 0.08 0.59 * 1.00
Note: *p , 0.01 (two-tailed test)

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The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

6. Results physical assets. Our results are also consistent with RBV,
Dynamic capabilities and RV theories which all assert that a
The first column of Table III (fully mediated model 1) firm’s intangible assets should lead to improved performance.
summarizes the results for hypotheses 1 to 4. As predicted, Another area of interest is the mixed results regarding the
both knowledge transfer content (b ¼ 0.36, p , 0.01) and two components of knowledge transfer (content and
buyer involvement intensity (b ¼ 0.28, p , 0.01) were found frequency). As was expected, knowledge transfer content
to be significant and positively related to marketing process showed a positive and significant relationship with the buyer
improvements. This provides support for H1 and H3. firm’s performance and marketing process improvement.
Knowledge transfer frequency was not significantly related Since knowledge transfer content represents the type of
to marketing process innovation and the direction of the information that is exchanged, the positive relationship
relationship was negative instead of positive as hypothesized. between knowledge transfer content and marketing process
Therefore H2 was not supported. Marketing process improvement demonstrates that if the right type of knowledge
improvement was found to be significant and positively is shared during supplier development, the buyer benefits
related to customer performance (b ¼ 0.67, p , 0.01) and through improvements to its marketing processes and
financial performance (b ¼ 0.45, p , 0.01) providing support performance. Knowledge transfer frequency, on the other
for H4. The control variable – industry competitiveness was hand, was unexpectedly found to have a negative and non-
found to have a significant and positive effect on marketing significant relationship with firm performance and marketing
process innovations (b ¼ 0.10, p , 0.05). The other control process improvement. We have identified two possible
variable – industry dynamism was also found to be positively explanations for knowledge transfer frequency’s negative
related to marketing process improvement ( b ¼ 0.20, results. One possible explanation is that communicating
p , 0.01). With the exception of these two relationships,
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with a supplier numerous times does not necessarily help the


none of the control variables were found to have a significant supplier improve its capabilities. In fact communicating with a
relationship with any of the variables examined in this study. supplier too many times could be detrimental to the
The R2 values in the study were also examined. They are relationship since the supplier could see too much
marketing process innovation (R 2 ¼ 0.55), customer communication as interference in their business. An
performance (R 2 ¼ 0.43) and financial performance alternative explanation for the negative relationship between
(R2 ¼ 0.22). knowledge transfer frequency and its outcomes could be that
To test for mediation, we compared model’s 1 and 2. As we more communication takes place when things are not going
have already indicated, two of the key antecedents (KTC and well so suppliers who are not responding well to their buyer’s
BI) were found to be significantly related to MPI in model 1. supplier development efforts will likely receive more calls than
In model 2 the paths involving the direct effects of those two those who are responding better.
antecedent variables (i.e. KTC and BI) on performance (CP Our findings also demonstrate that a firm’s performance is
and FP) were not significant, suggesting MPI fully mediates affected by improvements to its marketing processes. We
the effects of KTC and BI on buyer firm performance. In found a positive and significant relationship between
addition, the R-square values for CP and FP in model 2 were marketing process improvements and both financial and
not significantly higher than those in model 1, indicating these customer performance. While, the relationship between
direct paths from antecedent variables to outcome variables marketing process improvements and customer performance
has limited contribution to the prediction of buy firm seems obvious, the relationship between marketing process
performance. Also, all of the original significant path improvements and financial performance is interesting. This
coefficient results in support of the hypotheses in model 1 is because, there have been questions regarding the impact
remained significant in model 2. Although MPI did not that marketing has on a firm’s financial performance. Since
mediate the relationship between KTC and performance, we found a positive relationship between marketing process
overall, these results provide evidence that MPI mediates the improvements and financial performance, we are adding to
relationship between MBA and firm performance. the increasing amount of evidence that points to the fact that
marketing activities do lead to financial performance
7. Discussion improvements.

The primary objective of the present study was to test the 7.1 Managerial implications
MBA framework by examining the mediating role of The relationship between a buying firm and its suppliers have
marketing process improvements in the relationship between been traditionally characterized as adversarial and emphasis
a buyer firm’s supplier related activities and its performance. has been placed on competitive bidding, short term-contracts
The study provided support for most of our hypotheses and and multiple sourcing (Watts and Hahn, 1993). Such an
with the exception of the hypotheses involving knowledge approach tends to focus on the short-term view of the
transfer frequency, all of the hypothesized relationships were relationship without considering the long-term capabilities
found to be significant. Of particular importance were the and outcomes of such an approach. Our findings demonstrate
findings that marketing process improvements mediate the to practitioners that their supplier base is an important asset
relationship between a firm’s supplier development efforts and that needs to be supported and nurtured and that programs
firm performance which provide further empirical support for aimed at improving a supplier’s capabilities (such as supplier
the market-based asset framework. Since there have been calls development programs) in the long run lead to improvements
for studies to empirically test the framework (Ramaswami in the buyer’s performance.
et al., 2009), these results provide further validation for this This study also provides value specifically to marketing
useful but inadequately utilized theoretical framework. This practitioners. The findings in this study that the buyer firm’s
paper also extends the MBA framework to a firm’s supply supplier development activities can impact the buyer’s ability
chain and shows that a firm’s suppliers relationships are an to improve its marketing processes are very important since it
asset that needs to be nurtured and invested in just like a their demonstrates the value of the relationship between a firm’s

530
The relationship between supplier development and firm performance Journal of Business & Industrial Marketing
Anthony K. Asare, Thomas G. Brashear, Jing Yang and Jun Kang Volume 28 · Number 6 · 2013 · 523 –532

supply chain and its marketing activities. For too long, a Bearden, W.O. and Netemeyer, R.G. (1999), Handbook of
firm’s supply chain has been seen as the primary domain of Marketing Scales: Multi-Item Measures for Marketing and
the supply chain and operations department even though Consumer Behavior Research, Sage Publishing, Thousand
supply chain decisions and errors have a considerable impact Oaks, CA.
on the ability of marketing professionals to perform. Since Bello, D.C. and Gilliland, D.I. (1997), “The effect of output
firms are increasingly relying on their suppliers for products, controls, process controls, and flexibility on export channel
and the performance of their suppliers now has an increasing performance”, Journal of Marketing, Vol. 61 No. 1,
effect on the products they sell to their customers pp. 22-38.
(Hakansson, 1987; Ritter and Gemunden, 2003) our study Bowman, C. and Ambrosini, V. (2000), “Value creation
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Browne, J., Sackett, P.J. and Wortmann, J.C. (1995), “Future
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8. Limitations and future research Computers in Industry, Vol. 25, pp. 235-254.
A limitation of our study is that we use cross-sectional data to Chapman, R.L. and Corso, M. (2005), “From continuous
examine the relationships in the study. Since some of the improvement to collaborative innovation: the next challenge
activities and relationships in the study are developed over in supply chain management”, Production Planning and
Control, Vol. 16 No. 4, pp. 339-344.
time, longitudinal data might be able to better capture some
Chatterjee, S. and Wernerfelt, B. (1991), “The link between
of the relationships examined in the study. Future studies can
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resources and type of diversification: theory and evidence”,


examine the relationships in this study using longitudinal
Strategic Management Journal, Vol. 12 No. 1, pp. 33-48.
data. Another limitation associated with our use of cross-
Chin, W.W. (1998), “Issues and opinion on structural
sectional data is that our results should not be interpreted as
equation modeling”, MIS Quarterly, Vol. 22 No. 3, pp. 7-16.
proof of causal relationships. To test for causal relationships
Day, G.S. (1994), “The capabilities of market-driven
between the constructs examined in the study, further
organizations”, Journal of Marketing, Vol. 58 No. 4,
research should consider testing the framework developed in
pp. 37-52.
the study using experimental and quasi-experimental Dellande, S., Gilly, M.C. and Graham, J.L. (2004), “Gaining
methods. compliance and losing weight: the role of service provider in
Since the MBA framework has been underutilized in the health care services”, Journal of Marketing, Vol. 68,
literature (Ramaswami et al., 2009) future studies should pp. 78-91.
continue to test the efficacy of the framework under multiple Dyer, J.H. and Singh, H. (1998), “The relational view:
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examine the relationship between a firm’s supplier competitive advantage”, Academy of Management Review,
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