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Journal of Research in Interactive Marketing

The role of WOM and dynamic capability in B2B transactions


Hyekyoung Kim
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Hyekyoung Kim , (2014),"The role of WOM and dynamic capability in B2B transactions", Journal of
Research in Interactive Marketing, Vol. 8 Iss 2 pp. 84 - 101
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JRIM
8,2
The role of WOM and dynamic
capability in B2B transactions
Hyekyoung Kim
Oklahoma State University, Stillwater, Oklahoma, USA
84

Received 11 December 2013 Abstract


Revised 24 February 2014
Purpose – The purpose of this paper is to verify the factors – word-of-mouth (WOM) information and
Accepted 5 March 2014
dynamic capability – that affect industrial buyer-based relationship quality and to examine their effect
on relationship continuity in business-to-business (B2B) transactions. The study also aims to examine
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the mediating role of relationship quality in linking WOM information and relationship continuity and
in linking dynamic capability and relationship continuity.
Design/methodology/approach – Two methods are used for this study: a literature review to
develop a research model and an empirical study to test hypotheses. To achieve the empirical research,
267 cases were analyzed.
Findings – This study verified that WOM information and dynamic capability have positive effects
on industrial buyer-based relationship quality and relationship continuity in B2B transactions. In
addition, relationship quality plays a partially mediating role in linking WOM information and
relationship continuity and in linking dynamic capability and relationship continuity.
Originality/value – WOM information plays an important role in consumers’ behavior in
business-to-customer transactions and in B2B transactions; however, WOM in B2B transactions
receives less attention, as it occurs by an informal process. This study suggests WOM information and
dynamic capability as factors that affect industrial buyers’ perception of relationship quality and
relationship continuity, and the research sought to examine the effects of relationship quality on the
resulting actions, relationship continuity. This study could be useful for industrial suppliers to
understand the industrial buyers’ perception on relationship quality and the results of relationship
quality. Moreover, industrial suppliers could utilize the results of this study to build managerial goals
to satisfy customers and to strengthen relationships with customers.
Keywords Relationship marketing, B2B marketing
Paper type Research paper

Introduction
In business-to-business (B2B) contexts, cooperation between buyers and suppliers has
been increasing as industrial buyers face risk and uncertainty associated with the
evaluation of the products or services (Kumar and Grisaffe, 2004), and this situation
leads industrial buyers to think about the formation of relationships (Oppel et al., 2001).
A long-term relationship with suppliers gives industrial buyers an opportunity to
increase effectiveness in terms of the quality of delivery and transaction costs, as well as
supplements (Walter et al., 2003). To achieve this improved effectiveness by reducing
transaction costs and uncertainty in the competitive environment, industrial buyers try
Journal of Research in Interactive to build long-term relationships with their selected suppliers (Crosby et al., 1990).
Marketing Complex interactions between industrial buyers and suppliers can result in
Vol. 8 No. 2, 2014
pp. 84-101 business relationships characterized by mutual dependence, belief, satisfaction and
© Emerald Group Publishing Limited loyalty, in other words, relationship quality (Morgan and Hunt, 1994; Woo and
2040-7122
DOI 10.1108/JRIM-12-2013-0082 Ennew, 2004). Relationship quality refers to both buyers’ and suppliers’ overall
assessment of relationship strength and the degree to which they are satisfied, as B2B transactions
well as to the depth and atmosphere of an exchange relationship (Johnson, 1999). In a
business relationship, quality is a major precursor of a successful long-term relationship
(Athanasopoulou, 2009). Building a high-quality business relationship requires
recognizing the factors that affect relationship quality. Furthermore, from the
standpoint of suppliers, understanding buyers’ perspectives on relationship quality can
help them know how to satisfy their customers, respond to customers’ demands 85
properly and thus create new demands as well as develop and sustain long-term
relationships.

Purpose and problems


The shift from a product-based relationship to a resource-based relationship has
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attracted considerable attention to relationship marketing in business areas (Newbert,


2007). With this trend, researchers have begun to study relationship quality in
business-to-customer (B2C) and B2B contexts (Huang et al., 2009; Lages et al., 2005; Sun,
2010; Walter et al., 2003; Wong et al., 2007; Yang et al., 2008). These studies show that the
antecedents of relationship quality differ in different contexts.
It is widely accepted that word-of-mouth (WOM) information has a crucial
influence on shaping consumers’ behaviors and attitudes in a services setting (Yang
et al., 2012). In B2B transactions, WOM information also plays an important role in
industrial buyers’ purchase decisions (Roth et al., 2004). The decision as to whether
to purchase a large quantity of industrial goods can take a long time and often
implies uncertainty about such aspects as quality and price (Kumar and Grisaffe,
2004; Rauyruen and Miller, 2007). Industrial buyers can reduce price uncertainty by
price comparison (Oppel et al., 2001); however, uncertainty related to product or
service quality cannot be easily reduced in that way. Thus, buyers in B2B contexts
try to seek information about products or services from trusted people or friends
(Oppel et al., 2001).
The important role of WOM in attracting new customers, affecting product choice
and building a relationship in a B2C setting is well documented (Cheung and Thadani,
2012; Gremler, 1994; Murray, 1991; Nam et al., 2010). However, few studies have
provided empirical results about the effect of WOM information on building a
relationship in a B2B setting (Athanasopoulou, 2009). Athanasopoulou (2009), in her
review of the literature on relationship quality from the major journals in the marketing
area from 2000 to 2007, found that in the 38 (of 64) studies that analyzed relationship
quality in a B2B context, the major antecedents of relationship quality were the degree
of formalization, seller expertise, seller’s size and reputation, the relationship length and
the quality of communication between the two parties. Some studies (5 of 64) suggested
WOM as the result of relationship quality in B2C and B2B contexts (Huntley, 2006; Woo
and Cha, 2002), but her results showed that no study included WOM as the antecedent of
relationship quality in a B2B setting.
In addressing the research problem, this study seeks a deeper understanding of the
role WOM plays in relationship building and how a long-term relationship is formed
between a buyer and a seller from the perspective of industrial service buyers in B2B
transactions. Specifically, the main purpose of the study is to investigate the role of
WOM and dynamic capability in increasing relationship quality and relationship
continuity in B2B transactions. In addition, the mediating effects of relationship quality
JRIM between WOM information and relationship continuity and between dynamic
capability and relationship continuity are explored.
8,2
Literature review
WOM information in B2B transactions
It is widely accepted that WOM information plays a critical role in consumers’ purchase
86 decisions in B2C contexts (Katz and Lazarsfeld, 1955; Yang et al., 2012) and in B2B
contexts as well (Moriarty and Spekman, 1984; Roth et al., 2004). Information about
goods and services is delivered through informal and person-to-person communication
between noncommercial communicators and receivers (Yang et al., 2012). WOM
information about goods and services from noncommercial communicators includes
aspects such as communicators’ appraisal, detailed information and communicators’
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enthusiasm (Anderson, 1998; Bone, 1992). In other words, noncommercial


communicators’ enthusiasm (how much/often the communicator spreads the WOM
information to others), detailed description (how the information is presented –vividly or
pallidly) and appraisal (positive or negative) about the products or services are reflected
in the WOM information. These aspects of WOM influence potential customers’
behaviors, such as their intention to buy in B2C transactions (Yang et al., 2012), and this
influence is also effective in B2B transactions (Moriarty and Spekman, 1984; Roth et al.,
2004).
The influence of WOM information on a receiver’s purchasing decision or decision to
contract with a specific supplier will differ depending on perceived characteristics of the
information and information deliverers (Price et al., 1989; Wangenheim and Bayón,
2004). When potential industrial buyers receive WOM information about industrial
suppliers or industrial goods, they evaluate the WOM information based on their criteria
such as how credible the noncommercial communicator is (expertise) and whether the
WOM information is consistent with their decision-making values and criteria
(similarity). Thus, it is expected that depending on information receivers’ perception of
information deliverers’ characteristics and source expertise, they will determine
whether to accept the information in their decision making, such as their intention to
build a relationship with a specific supplier (De Bruyn and Lilien, 2008).
With technology development, WOM information is delivered not only by face-to-face
communication but also by e-channels such as Weblogs, e-mail, brand Web sites,
product review Web sites and bulletin boards. eWOM takes place between people
who may not entirely know or even somewhat know each other on the Web, and thus
the question about the credibility of such information is raised (Lee and Youn, 2009;
Steffes and Burgee, 2009). However, several studies have shown that eWOM
information that is created by noncommercial communicators may have higher
credibility than information that is created by marketers (Bickart and Schindler,
2001). This higher credibility is based on the belief that online communicators tend
to be more honest and are willing to state their view points, as they have less social
anxiety, fewer inhibitions and less public self-awareness on the Web (Roed, 2003).
The technology revolution has contributed to the development of electronic WOM,
and various e-channels enable eWOM information to be spread widely and delivered
quickly and easily to receivers (consumers) (Phelps et al., 2004). This eWOM
information, just like WOM information, influences consumers’ behaviors and attitudes
both in B2C settings (Bickart and Schindler, 2001; Brown and Reingen, 1987; Xia and
Bechwati, 2008) and in B2B settings (Hamill et al., 2010). However, in B2B transactions, B2B transactions
industrial buyers are more likely to be passive in online activities and less eager to
participate in online conversations to get product or industrial supplier information
(Brennan and Croft, 2012; Coleman et al., 2013) because of the complex and lengthy B2B
buying process (Singha and Koshyb, 2011).
Relationship quality represents the overall climate and depth of the relationship
between two parties and is considered a multidimensional construct. Crosby et al. (1990) 87
were probably the earliest researchers to identify the dimensions of relationship quality;
they suggested trust and satisfaction as the sub-dimensions of relationship quality.
Following Crosby et al. (1990), many studies have suggested and tested the dimensions
of relationship quality (Hewett et al., 2002; Lang and Colgate, 2003; Smith, 1998). For
example, Johnson (1999) suggested two components of relationship quality: trust and
fairness.
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Anderson and Weitz (1989) explained that relationship quality means a


long-term-oriented relationship beyond a positive appraisal of current benefits and
costs and the tendency to accept short-term sacrifices to keep and develop a long-term,
stable relationship. A high-quality relationship indicates that buyers trust the provider
and have confidence in their fair-trade relationship based on their past experiences with
the provider (Johnson, 1999; Sun, 2010). Consistent with prior work (Johnson, 1999; Sun,
2010), this study adopts the view of the relationship quality construct as composed of
trust and fairness.
Building a high-quality relationship between buyers and suppliers is affected by several
factors such as transaction-specific investments, environmental uncertainty, cost, WOM
and dynamic capability (Huntley, 2006; Skarmeas et al., 2008; Walter et al., 2003). Among
these factors, WOM information influences industrial buyers’ decisions to choose
transaction partners and to have the intention to build a long-term relationship with the
partners (Cheng, 2004). Moriarty and Spekman’s (1984) empirical study to investigate what
information sources are used during the industrial buying process shows that industrial
buyers rely on personal noncommercial information (WOM) when they are in the
search-for-suppliers phase of the decision process. Furthermore, their study reveals that
smaller organizations tend to rely more on WOM for procurement-related information
than do larger organizations.
Unlike relationship loyalty, which represents one party’s perceptions of “whether
they will continue to use and remain committed to the supplier” (Plank and Newell, 2007,
p. 62), relationship continuity is “the perception of the bilateral expectation of future
interaction” (Heide and John, 1990, p. 25). The major characteristic of relationship
continuity is a long-term relationship, and continuity can be explained as satisfaction
and trust between partners and the possibility of long-term transactions (Heide and
John, 1990; Joshi and Stump, 1999). There is strong evidence of the effect of WOM
information on industrial buyers’ intention to stay with the current supplier (Money,
2004). More specifically, Money’s (2004) study of the effect of WOM referral on
switching behaviors explains that the more industrial buyers refer to WOM
information, the lower the possibility that they exhibit switching behaviors.
Based on the review of literature above, the following hypothesis is tested:
H1. WOM information is positively related to relationship quality and relationship
continuity.
JRIM Dynamic capability in B2B transactions
Dynamic capability was first studied in the strategy field. Teece et al. (1997) summarized
8,2 the concept and characteristics of dynamic capability, defining dynamic capability as
“the firm’s ability to integrate, build, and reconfigure internal and external competences
to address rapidly changing environments” (Teece et al., 1997, p. 516). Similarly,
Jayachandran et al. (2004) described an organization’s competence as the ability to
88 effectively and quickly satisfy customers’ needs. That is, customer response capability
is composed of two aspects:
(1) customer response expertise; and
(2) customer response speed.

The basic concept of dynamic capability refers to the ability to cope with the
fast-changing market environment and properly change companies’ sources according
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to the time and situation to satisfy customers’ needs (Ambrosini and Bowman, 2009).
Thus, dynamic capability promotes continual renewal and rearrangement of resources
and facilities to build better relationships with buyers (Desai et al., 2007).
As previous research has suggested (Jayachandran et al., 2004; Kerin et al., 1992), when
companies have capabilities such as customer response expertise, they can be more
competitive and create valuable strategies for their customers (Peteraf and Barney, 2003).
Investments and immediate response to customers’ special requests can increase industrial
buyers’ positive perceptions of an industrial supplier, resulting in high-quality relationship
(Su et al., 2008; Yang et al., 2008). For example, Su et al. (2008) explain that specific
investments of one or both parties influence building relationships. Moreover,
Landroguez et al. (2011) propose that dynamic capability influences customer value,
which is an indicator of repurchase intention. The following hypothesis is based on the
review of literature above:
H2. Dynamic capability is positively related to relationship quality and relationship
continuity.

Relationship quality
Relationship quality, an important factor in building and facilitating long-term
partnerships between buyers and suppliers (Han, 2004), leads to WOM intention,
relationship continuity, relationship diversity and performance (Johnson, 1999; Su et al.,
2008).
Strong empirical support for the effects of a higher level of relationship quality on
relationship continuity has been well documented in the service context. For example,
Hewett et al. (2002) indicate that the buyers’ perception of buyer – seller relationship
quality has a positive effect on repurchase intention. Kim and Cha (2002) also link
relationship quality and relationship continuity in the hotel industry. They found that
high-quality relationship is related to relationship continuity.
In B2B transactions, relationship quality also positively influences the relationships
between industrial suppliers and buyers. For example, in their empirical study, Boles
et al. (1997) found that those in a high-quality relationship group have the intention to
remain a customer. Moreover, Crosby et al. (1990) suggest that relationship quality is a
main factor in determining the probability of continued exchange between industrial
buyers and sellers. That is, once industrial buyers trust the suppliers and are confident
in the fairness of their transactions, they have a high intention to continue transacting B2B transactions
with them. Additionally, the outcomes of buyers’ trust and perception of fairness can
reinforce their decision to continue transacting with a particular service provider
(Cronin and Taylor, 1992). Su et al. (2008) assert that a long-term relationship can last
and be diverse when both parties feel the relationship is good. Gummesson (1987)
shows that a high-quality relationship positively affects customers’ perceived
quality and increases the possibility of a long-term relationship. Therefore, the 89
following hypotheses are proposed:
H3. Relationship quality is positively related to relationship continuity.
H4. The influential relationship between WOM information and relationship
continuity and between dynamic capability and relationship continuity is
mediated by relationship quality.
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Research methodology
Data collection and sample
This study used the survey method of data collection. The major respondents to the
survey were company employees in charge of buying materials and machines needed
for manufacturing goods. The companies conducted transactions with many suppliers;
thus, the respondents were asked to choose the supplier with whom they most
frequently transacted, and to respond about their perceptions and feelings of how WOM
information and dynamic capability function have affected their decision to start a
transaction with the supplier. A total of 420 questionnaires were distributed, and 285
were returned. Among them, 18 questionnaires were excluded because of insufficient
responses; therefore, 267 copies were used for this empirical analysis. Almost all of the
respondents were male (76.2 per cent). With regard to their years of transaction
experience, 58.1 per cent of the respondents reported less than five years, 29.4 per cent
more than five years and less than ten years and 12.6 per cent more than ten years. With
regard to the type of industry, 84.3 per cent were working in electronics companies and
8.3 per cent were working in mechanical companies. The remaining 7.4 per cent were
working in textile, transportations or manufacturing companies.

Measures
The scales, adapted from existing scales to suit the context of the current study,
measured industrial buyers’ perception of their transaction partners who were
providing industrial materials and goods. All constructs were measured using a 5-point
Likert-type scale ranging from “strongly disagree (1)” to “strongly agree (5)”. Four items
based on the concept of indirect communication effects and adopted from Wangenheim
and Bayón (2004) were revised according to the purpose of this study and used to
measure WOM information. Wangenheim and Bayón’s (2004) scale, originally
developed by Price et al. (1989), included ten similarity-based and six experience- or
expertise-based measures and were used to measure the effect of referent (source)
characteristics on the recommendation of a service provider. Later, in their study to
explore the effect of WOM on receivers’ attitudes and intentions, Wangenheim and
Bayón (2004) used four items (two expertise-based measures and two similarity-based
measures) to measure receivers’ perception of information deliverers’ source expertise
and similarity. They showed that this instrument satisfied internal consistency in terms
JRIM of Cronbach’s alpha (0.84 for the expertise construct and 0.80 for the similarity
construct) and item-to-total correlation (all ⬎ 0.61). Consistent with Wangenheim and
8,2 Bayón’s (2004) study, the current study also measured industrial buyers’ perception of
WOM sources in terms of expertise and similarity with their company’s preferences and
values. The four questions follow:
(1) Before making a decision to choose a provider, I have heard about the provider
90 and the source has good knowledge about that.
(2) The source is an expert and has a significant effect on the decision to choose a
provider.
(3) The source is similar to our firm in preferences and values and plays a key role
in decision-making process.
(4) Overall, the source is one that is similar to my firm.
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To measure dynamic capability, the author adapted three items from Jayachandran et al.
(2004). In their study to examine the effect of customer response expertise and speed on
performance, Jayachandran et al. (2004) developed a scale for customer response
expertise which measured organizational ability and competence to satisfy their
customers’ needs They adapted the scale for customer response speed from Kohli et al.
(1993) to measure the extent to which a supplier company responds to customer needs
They demonstrated the internal consistency of the scale in terms of Cronbach’s alpha
(␣ ⫽ 0.82 for customer response expertise and ␣ ⫽ 0.72 for customer response speed).
The current study measures industrial buyers’ perception of their transaction partner’s
capability in terms of expertise for effectively satisfying customers’ needs. The three
items are as follows:
(1) Our main supplier can easily satisfy my company’s needs.
(2) Our main supplier can satisfy my company’s needs much better than
competitors.
(3) Our main supplier has a reputation for effectively meeting customers’ demands.

Relationship quality was measured by four items adapted from Johnson (1999). Johnson
(1999) developed a scale for relationship quality in her study to measure the extent of
buyers’ trust and perception of fairness in the relationship. According to Johnson’s
(1999) empirical study, Cronbach’s alpha for this scale is 0.88. The current study also
measures industrial buyers’ trust in their inter-firm relationship with their major
transaction partner company and their perception of the fairness of their transactions.
The four items are as follows:
(1) There is a high level of trust between us and our major supplier.
(2) A strong spirit of fairness exists in our relationship with our major supplier.
(3) Our firm usually gets a fair share of the rewards in the relationship with our
major supplier.
(4) We monitor every aspect of transactions with our major supplier to ensure that
nothing inappropriate happens (reverse scored).

To measure relationship continuity, this study used four items from Heide and John’s
(1990) study. Heide and John (1990) developed the scale for relationship continuity to
examine the effect of uncertainty on relationship continuity and the effect of continuity B2B transactions
expectations on the level of joint action in buyer–supplier relationships. They measured
the firm’s perception that both parties expect the relationship to continue into the future.
According to the results of their empirical study, Cronbach’s alpha was 0.88, and these
four items were also empirically validated in follow-up studies. For example, in
Johnson’s (1999) study, these items showed satisfactory internal consistency (␣ ⫽ 0.74).
Consistent with Heide and John’s (1990) study, the current study also measures 91
industrial buyers’ perception that both parties expect their relationship to continue. The
four items are as follows:
(1) We expect the relationship with our major supplier to last a long time.
(2) It is likely that our relationship with our major supplier will be terminated within
the next two years (reverse scored).
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(3) Our firm has been successful in getting our major supplier to commit to
long-term cooperation.
(4) Our major supplier is hesitant to come to any long-term agreements, even though
our firm tries very hard to establish a long-term association (reverse scored).

Data analysis and results


The research model was tested using partial least squares (PLS), a variance-based
equation modeling technique that is useful for predictive models (Chin, 1998; Joreskog
and Wold, 1982). PLS allows researchers to simultaneously assess the reliability and
validity of the measures of theoretical constructs and the relationships between
constructs (Barroso et al., 2010). The measurement model was assessed first and then the
structural model was assessed to determine whether to accept or reject the hypotheses.

Measurement model assessment


The adequacy of the measurement model was assessed by evaluating the reliability of
individual items, discriminant validity, construct reliability and convergent validity
(Hair et al., 2012; Hulland, 1999). Individual item reliability was assessed by examining
the factor loading: when a factor loading is ⬎ 0.7, that is considered adequate reliability
(Carmines and Zeller, 1979). As shown in Table I, all loadings exceed the requirements.
Convergent validity was considered using average variance extracted (AVE), that is
the average amount of variation that a latent construct can explain in the observed
variables. Fornell and Larcker (1981) recommend that all AVEs be ⬎ 0.5. As shown in
Table II, all construct validities meet the requirements. The reliability of each construct
was also assessed by examining their composite reliability (CR), which is recommended
to be ⬎ 0.70 (Fornell and Larcker, 1981), and Cronbach’s alpha, which is recommended
to be ⬎ 0.70 (Nunnally and Bernstein, 1994).
As shown in Table II, CR and Cronbach’s alphas for all constructs are ⬎ 0.70.
Therefore, all constructs in the model have adequate convergent reliability. Finally, for
discriminant validity, this study compares the square root of the AVE of each latent
variable with the correlations between constructs (the diagonal in Table II). The results
show that the square root of the AVE of each construct is greater than its correlation
with any other construct.
JRIM Dynamic capability Relationship continuity Relationship quality Word of mouth
8,2 Variables (DC) (RC) (RQ) (WOM)

DC1 0.8621 0.2869 0.3590 0.2598


DC2 0.8697 0.3857 0.4208 0.2170
DC3 0.8261 0.3901 0.3236 0.3355
RC1 0.3464 0.8553 0.3449 0.4660
92 RC2 0.3971 0.9078 0.3459 0.5839
RC3 0.3558 0.8809 0.3673 0.6091
RC4 0.3838 0.8991 0.4575 0.6220
RQ1 0.3068 0.3205 0.7739 0.2188
RQ2 0.2979 0.2869 0.7998 0.1777
RQ3 0.3179 0.3158 0.8275 0.2601
RQ4 0.4276 0.4173 0.7949 0.3931
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WOM1 0.3545 0.5691 0.3348 0.8288


WOM2 0.2225 0.5459 0.2652 0.8746
Table I. WOM3 0.2392 0.4933 0.2616 0.8658
Loadings and cross- WOM4 0.2632 0.6182 0.3247 0.8845
loadings for the
measurement model Note: Factor loadings over .70 appear in bold

Composite Cronbach’s
Construct reliability alpha AVE WOM DC RQ RC

WOM 0.9215 0.8865 0.7459 0.8636


DC 0.8889 0.8132 0.7273 0.3150 0.8528
Table II. RQ 0.8761 0.8152 0.6389 0.3464 0.4342 0.7993
Construct reliability, RC 0.9359 0.9089 0.7851 0.6490 0.4192 0.4304 0.8860
convergent and
discriminant validity Note: Square root of AVE on the diagonal in bold; correlations on the off-diagonal. For discriminant
coefficients validity, diagonal elements should be larger than off-diagonal elements (Joreskog and Sorbom, 1996)

Structural model assessment


For the structural model assessment, bootstrap tests were used to estimate path
coefficients and their significance. The results show that the exogenous variables
explain 23 per cent of the variance in relationship quality and 49 per cent of the variance
in relationship continuity. As depicted in Figure 1, all of the structural paths in the
research model were found to be statistically significant: WOM information (path
coefficient ⫽ 0.23, t ⫽ 3.79) and dynamic capability (path coefficient ⫽ 0.36, t ⫽ 5.99) have
positive effects on relationship quality; WOM information (path coefficient ⫽ 0.53, t ⫽ 10.24)
and dynamic capability (path coefficient ⫽ 0.18, t ⫽2.80) also have positive effects on
relationship continuity (H1 and H2 are supported); and the effect of relationship quality
on relationship continuity (H3) is also supported (path coefficient ⫽ 0.17, t ⫽ 2.80).
H4 predicted that relationship quality mediates the relationship between WOM
information and relationship continuity and between dynamic capability and
relationship continuity. To test the mediation effect of relationship quality, a
bootstrapping process, a nonparametric resampling process, was used to calculate
indirect effects along with the 95 per cent confidence interval (CI).
WOM1 0.82 B2B transactions
0.77
RQ1
0.87
WOM2
0.23
Word of 0.80
(3.79) RQ2
0.86 Mouth Relaonship
WOM3
Quality
0.82
RQ3
93
0.88 0.53
WOM4 (10.24)
0.79
0.17 RQ4
(2.80)
0.85
RC1
0.36
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0.86 (5.99)
DC1 0.90
RC2
Relaonship
0.87 Dynamic Quality
DC2 0.18
Capability 0.88 Figure 1.
(2.80) RC3
Structural model results
0.82 with path coefficients and
DC3
0.89 t-values
RC4

As shown in Tables III and IV, total indirect effects through relationship quality were
0.1743 and 0.0973, respectively. The z values for the mediating model were ⬎ |1.96|
(WOM-RQ-RC: z ⫽ 4.5552, p ⬍ 0.01; DC-RQ-RC: z ⫽ 4.1289, p ⬍ 0.01), indicating that
relationship quality mediates both the effect of WOM and the effect of dynamic
capability on relationship continuity. Moreover, because none of the bootstrapped CIs
contain 0, the result is also supported.

Bootstrapping
Product of Percentile 95 BC 95 per cent BCa 95 per cent
Mediating Point coefficients per cent CI CI CI
variable estimate SE Z Lower Upper Lower Upper Lower Upper

RQ 0.1743 0.0383 4.5552 0.1053 0.2456 0.1077 0.2479 0.1075 0.2479 Table III.
Mediation of the effect of
Notes: BC, bias corrected; BCa, bias corrected and accelerated; 5,000 bootstrap samples WOM on RC through RQ

Bootstrapping
Product of Percentile 95 BC 95 per cent BCa 95 per cent
Mediating Point coefficients per cent CI CI CI
variable estimate SE Z Lower Upper Lower Upper Lower Upper

RQ 0.0930 0.0225 4.1289 0.0453 0.1476 0.0474 0.1506 0.0444 0.1458 Table IV.
Mediation of the effect of
Notes: BC, bias corrected; BCa, bias corrected and accelerated; 5,000 bootstrap samples DC on RC through RQ
JRIM Discussion
Building a continuous relationship between buyers and suppliers in B2B transactions is
8,2 important to both buyers and suppliers. From the industrial buyers’ perspective, having
a stable supplier of raw materials and industrial goods is one source of competitive
competence in the fast-changing market and in competing with global companies (Sheth
and Sharma, 1997). From the industrial suppliers’ perspective, having regular
94 customers is also crucial: developing high-quality relationships with their customers
helps suppliers have loyal customers and achieve a high level of profitability. To
develop high-quality relationships, industrial suppliers must first understand industrial
buyers’ decision-making process and the process by which they choose their transaction
partners. This study suggests that WOM information and dynamic capability may be
important factors when buyers choose their transaction partners and make purchasing
decisions.
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The results of the hypothesis testing show that WOM information and dynamic
capability have positive effects on relationship quality and relationship continuity and
that relationship quality also has a positive influence on relationship continuity. As
hypothesized, relationship quality partially mediates both the relationship between
WOM information and relationship continuity and the relationship between dynamic
capability and relationship continuity. The findings of this study show that one way
industrial suppliers can build a quality and long-term relationship is by including WOM
and dynamic capability in their marketing strategy. Moreover, these results statistically
identified the strengths of relationship quality and the importance of WOM information
in B2B transactions. Based on these results, implications, limitations and suggestions
for further research follow.

Implications for management and marketing practitioners


The results of this study may give some direction to supplier companies that want to
have regular customers and want to develop or increase their buyers’ positive
perceptions of relationship quality.
First, this study shows that WOM information is positively related to relationship
quality and relationship continuity. This means that WOM information affects
industrial buyers’ perceptions and behaviors in B2B transactions similar to its effect on
consumers’ behaviors in customer-to-business transactions. Thus, knowing what types
of information sources industrial buyers use to choose transaction partners will give
industrial suppliers and marketing practitioners an advantage in competitive industrial
markets (Roth et al., 2004). This result suggests that marketing practitioners of the
company must take WOM into account and develop personalized marketing
communication strategies to satisfy their current customers and to attract new
customers.
As mentioned earlier, personal noncommercial information delivered by customers who
have already transacted with specific suppliers may be a good source of WOM in B2B
transactions (Kumar et al., 2003; Moriarty and Spekman, 1984). Marketing practitioners need
to focus on current customers who are potential sources of WOM information because
current satisfied customers may deliver good information and positive feelings to their
related companies and friends. As the results of the study reveal, when a receiver hears
information that is more relevant to his or her company and more professional, he or she will
be more committed to the relationship and more likely to have intention to continue the
contract with the transaction partners. To take advantage of current customers as a source B2B transactions
of WOM information, marketing practitioners need to help their current customers better
understand their goods and services by contacting them frequently and by delivering
updated and recent information.
Understanding where industrial buyers acquire information is even more important to
marketers. Industrial buyers obtain information not only from colleagues in other companies
but also from opinion leaders in trade press and analytic reports. Especially when industrial 95
buyers cannot evaluate the products and goods prior to purchase and the products are
expensive, they tend to get more professional and objective information about the products
by reading trade press and analytic reports (Bienstock and Royne, 2007; Rogers, 1995).
Marketing practitioners need to identify those people to utilize as a critical advertising tool.
Moreover, they need access to the person who collects and filters WOM information and
transmits it to the key decision makers. Recently, increased cross-country trades require
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industrial buyers to access e-channels and to participate in international trade fairs for
obtaining information about their potential transaction partners and goods. To attract more
potential international customers, marketing practitioners need to utilize various e-channels
as online marketing tools, which allow current customers to share their experiences with
potential international customers and to help potential international customers get
information in real time at any place. To do this, marketing practitioners need to take into
account a way to diversify communication channels, such as developing brand Web sites
and product review Web sites.
Marketing practitioners also need to note that customers are more likely to
recommend suppliers when they share similar goals and communicate closely with
companies; therefore, communication and contact should take place frequently through
newsletters with information about their new products and services, even though the
transaction has ended.
As previously discussed, dynamic capability is related to suppliers’ capability and
will to change their resources and facilities for buyers and adapt to buyers. The results
reveal that the more the suppliers demonstrate their dedicated capabilities for the
buyers, the more the buyers think that the suppliers are reliable, the more they trust
them and the more committed they are to them. Therefore, industrial suppliers need to
demonstrate how they are supporting the buyers’ organization and how they are
promoting a win-win strategy for each other. And industrial suppliers must offer quality
solutions in time to deal with their buyers’ product and service needs For example,
suppliers must pay attention to the quality of the service delivery system to secure
reliable product delivery and to satisfy their buyers’ needs to acquire goods promptly.
In addition, this study explains the importance of relationship quality for building a
successful relationship in B2B transactions. Industrial buyers who trust and are content
with the current transaction have intentions to keep that relation in the future. A close
relationship between industrial buyers and suppliers can become a strong barrier to the
entry of other companies; once a strong barrier is built, industrial buyers get used to
current transactions, and the probability that the buyers will find another partner
decreases. A company that builds a long-term relationship with a specific company has
a higher sales growth rate and profitability, lower inventory retention and lower control
costs than those that do not build such a relationship (Kalwani and Narayandas, 1995).
Moreover, acquiring satisfied, trusted and committed buyers will most likely lead to an
increase in purchases through cross-selling, a high possibility of long-term transactions
JRIM and positive WOM. Customers who are building a relationship with a company are
likely to engage intensively in WOM advertising (Griffin, 1995). A supplier who has
8,2 content buyers may be able to get new customers without any marketing activity.
Therefore, if industrial suppliers want to continue the current transactions with their
specific buyers and to develop and find new customers, they should focus on the
relationship quality with their current customers.
96
Implications for research
A significant finding that has not been studied much in previous research is that WOM
also influences relationship quality and relationship continuity in B2B transactions, just
as in B2C transactions. This study is an important bridge between WOM and its
performance in terms of relationship quality and relationship continuity in B2B
literature because many previous studies in B2C literature focused mostly on the
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association of WOM and consumer behaviors such as purchase intention.


The results of this study may enhance the theoretical development and
understanding of the role of WOM in B2B settings by empirically investigating its effect
on relationship continuity through relationship quality. Future research may include
some potential outcomes of WOM and dynamic capability to extend the findings of this
study and to contribute theoretical development. It is also important to extend the
findings to online contexts.
Finally, this study theoretically and empirically develops the relational process of the
four variables (WOM, dynamic capability, relationship quality and relationship
continuity) and explains the mediating role of relationship quality. By formulating and
testing a mediation model, this study underscores the value of relationship quality to the
better understanding of WOM and dynamic capability and their effects on relationship
continuity in B2B settings.

Limitations and future research


Despite these research findings in B2B transactions and contributions, this study has
some limitations that could be overcome in future studies. First, when this study
explored the relationship between WOM information and dynamic capability and
building a relationship, it did not consider the effects on relationship formation
according to the characteristics of goods and level of decision making because the
research scope focused on industrial buyers’ perception of their relationship with their
major supplier. Future research needs to consider how the effect of referring WOM
differs in B2B settings depending on the level of decision making, the characteristics of
industrial buyers and organization size. Also, this study asked industrial buyers to base
their responses on their main supplier company, but there were no time criteria for
selecting a supplier. Consequently, if they chose one that was the major supplier in the
past, they had to rely on their memory of the major supplier company. To avoid this
limitation, future studies need to set a specific timeline for the industrial buyers in
selecting a supplier. Finally, future studies need to investigate to see which type of
companies are more affected by WOM and which type of companies have stronger or
weaker relationships between the suggested four variables. To do this, future studies
can perform in-depth interviews and utilize open-ended questionnaires to better
understand what role WOM information has in industrial buyers’ decision to choose
suppliers.
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Further reading
Jöreskog, K. and Sörbom, D. (2001), LISREL 8: User’s Reference Guide, 2nd ed., Scientific Software
International, Lincolnwood, IL.

Corresponding author
Hyekyoung Kim can be contacted at: altorang@gmail.com

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