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Value-creation initiatives in buyer-seller relationships

Trond Hammervoll
Harstad University College, Harstad, Norway, and

Value-creation initiatives in BSRs 539

Received July 2008 Revised April 2009 Accepted May 2009

Kjell Toften
Noma, Troms, Norway
Abstract
Purpose The purpose of this paper is to identify and explore important value-creation initiatives in buyer-seller relationships (BSRs). Design/methodology/approach Following a literature review and the presentation of an appropriate conceptual framework, an exploratory study of 14 BSRs in a variety of European industries is undertaken using in-depth semi-structured interviews with key informants. Findings The ndings justify a distinction being drawn between two types of value-creation initiatives: those that are important in transaction-based arrangements (in which efciency is paramount); and those that are important in interaction-based relationships (in which effectiveness is paramount). Of the ten value-creation initiatives identied in the literature review, seven were found to be of importance in the BSRs of the present sample. Research limitations/implications Despite genuine attempts to select a heterogeneous sample, most of the data did come from sellers. Future studies could look more deeply into buyer data to explore these issues in BSRs. Practical implications The paper provides managers with practical guidance on the selection of appropriate value-creation initiatives in various types of BSRs. Originality/value The paper reports the rst known empirical study of value-creation initiatives in BSRs. Keywords Value analyis, Buyer-seller relationships Paper type Research paper

1. Introduction The emphasis in business relationships in recent years has shifted from transactions to interactions, and it is now generally accepted that rms can create and sustain signicant competitive advantages by nurturing cooperative relationships between buyers and sellers (Anderson et al., 1994; Blankenburg et al., 1999; Dyer, 1997; Dyer and Singh, 1998; Lambert et al., 2004; Sheth and Sharma, 1997; Wilson, 1995). Managers who had traditionally added value by nurturing internal competencies now seek to generate value for their rms by initiating and managing external partnerships (Kay, 1993; Prahalad and Ramaswamy, 2000). In particular, rms are now seeking innovative ways of unleashing the creativity of their business partners and taking advantage of their expertise (Sahay, 2003; Swink, 2006; Tyndall et al., 1998). The traditional transactional focus was consistent with the classical economic premise that production occurs within rms, whereas outputs are exchanged between them (Alchian and Demsetz, 1972). According to this view, cooperation merely involves the coordination of exchanges between trading partners. In contrast,

European Business Review Vol. 22 No. 5, 2010 pp. 539-555 q Emerald Group Publishing Limited 0955-534X DOI 10.1108/09555341011068930

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an interaction perspective perceives cooperation as including the creation of productive resources (Brousseau, 1993; van de Ven, 1976; Hammervoll, 2005). Nevertheless, despite a growing awareness of the theoretical and managerial importance of value-creation through cooperative interactions between rms, the mechanisms by which this occurs remain poorly understood. For example, the concept of trust has often been proposed as a means of enhancing cooperation (Dwyer et al., 1987; Hakansson and Snehota, 1995). However, it is difcult to accept the notion that deep and trusting relationships always represent the optimal solution for the majority of rms as they strive to survive (with limited resources) in todays competitive marketplace. The purpose of this study is, therefore, to identify and describe important value-creation initiatives in buyer-seller relationships (BSRs). The aim is to analyse how buyers and sellers can contribute to value-creation within their respective rms and in the BSR itself. A list of value-creation initiatives identied in a review of the literature is used as a basis for mapping real life value-creation initiatives in 14 BSRs with a view to ascertaining whether these initiatives are really useful to rms in their efforts to create value in cooperation with other rms. The remainder of this paper is organised as follows. In the following section, the relevant literature on value-creation initiatives is reviewed. The methodology for the qualitative study of the issues is then described, followed by a presentation of the ndings and conclusions. The paper concludes with a description of the main managerial implications and research limitations of the study, together with suggestions for further research. 2. Literature review and conceptual framework 2.1 Value-creation in BSRs A BSR can be understood as an organisational arrangement between a buyer and a seller that utilises the resources and/or governance structures of the two partners (Borys and Jemison, 1989). Within such a relationship, value-creation is the process whereby the capabilities of the buyer and seller are combined to enhance the competitive advantage of one or both of the partners in the BSR (Borys and Jemison, 1989). This understanding of value-creation in a BSR implies that the partners to the relationship produce something that they could not otherwise achieve independently. For example, the value-creation that occurs when a supplier gains ideas or other valuable inputs from a customer rm (Larson, 1992). The motivation for embarking upon such value-creation initiatives has received some attention in the literature. For example, Contractor and Lorange (1988) and Hagedoorn (1993), have both explored the motives of rms that cooperate in technological development in seeking business opportunities; and Gulati and Singh (1998) have studied motives for sharing complementary technology, reducing the development time of innovations, and jointly developing new technology in relationships of reciprocal interdependence. However, these studies of cooperative motivation in technological value-creation have not directly addressed the question of value-creation initiatives in relationships between buyers and sellers. Other studies have focused more directly on how buyers and sellers can contribute to value-creation in BSRs even if there is no formal cooperative process involved. For example, a demanding customer can communicate information about desired product attributes, thus motivating suppliers to improve their products in particular

ways (Porter, 1980). Similarly, sellers can utilise the knowledge of buyers to learn about a new market and the best means of selling to it (Chetty and Eriksson, 2002); conversely, sellers can provide information to distributors regarding products and markets (Shipley et al., 1990). A somewhat more formal arrangement in buyer-seller arrangements has been described by Raia (1991), who noted that Rank Xerox reduced product-development lead-time as a result of suppliers suggestions regarding quality and material savings, and that this subsequently fostered greater participation of suppliers in the development work of Rank Xerox. von Hippel (1988) has made similar observations about cooperation in value-creation being fostered by suggestions between buyers and sellers. These examples of limited cooperation between buyers and sellers in value-creation have focused on transaction-based arrangements; however, in accordance with Borys and Jemison (1989), the present study contends that a distinction should be drawn between value-creation in transaction-based arrangements and value-creation in interaction-based relationships. In transaction-based arrangements the key concern is technical and administrative coordination. To achieve this, buyers and sellers must understand their partners operations if they are to achieve transparency and boundary permeability. This entails effective communication, including personal interactions between buying personnel and selling personnel (Chen and Paulraj, 2004). In contrast, interaction-based relationships require ongoing mutual adjustments by both buyer and seller and continuous adaptation to each others circumstances (Gulati and Singh, 1998). As Borys and Jemison (1989) noted, suppliers can become integrated in the buyers production processes and can even make valuable contributions to improving product quality, suggest new materials, etc. In general, terms, value-creation in a transaction-based arrangement equates to cost-effectiveness (Burns and New, 1997), whereas value-creation in an interaction-based relationship involves the joint participation of partners in producing a desired output or solving a mutual problem. In the latter, value-creation is concerned with mutual learning (Gulati and Singh, 1998). 2.2 Value-creation initiatives The concept of a value-creation initiative, as such, has not been established in the literature, and there have been no studies of initiatives that foster value-creation specically in BSRs. Nevertheless, value-creation initiatives in general have been discussed in the literature, as discussed below. Table I summarises the value-creation initiatives identied in the present literature review in terms of:
Value-creation initiatives Transaction specic investments Adaptation Motivate right effort Effort (problem solving) Logistical information sharing Information supply Relationship specic investments Coaching partner problem solving Knowledge sharing (strategic knowledge) Willingness to combine complementary strategic resources In transactions X X X X X X X X X X In interactions

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Table I. Value-creation initiatives

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. .

in transactions; and in interactions.

542

2.2.1 Value-creation initiatives in transactions. The present study identies six value-creation initiatives in the literature relating to transaction-based arrangements. The rst three are derived from Ghosh and John (1999), who, drawing on transaction cost theory (Williamson, 1985), identied three categories of value-creation initiatives in transactions: (1) transaction-specic investments; (2) adaptations in plans or actions; and (3) identication and motivation of appropriate partner efforts at problem-solving. However, the distinction between the rst and second of these was unclear in the study of Ghosh and John (1999) in that adaptation included revisions of both investments and actions; indeed, it seems that making a transaction-specic investment is included in the notion of adaptation as formulated by Ghosh and John (1999). It is the contention of this study that the transaction-specic investments identied by Ghosh and John (1999) should be differentiated from what might be termed relationship-specic investments. According to this distinction, the former are made for logistical purposes (that is, cost-efciency), whereas the latter signal the effort that is made in terms of a long-term commitment to the relationship, thus serving as a foundation for developing new business opportunities. In terms of transaction-based arrangements, the degree of effort that is made in terms of the long-term relationship can thus be posited as a fourth possible value-creation initiative in transactions. Dyer and Singh (1998) suggested another type of value-creation initiative in transactions, which they referred to as logistical information exchange. The exchange of such logistical information (regarding the suppliers production processes, delivery reliability, technical specications, delivery schedules, and so on) decreases transaction costs and promotes logistical integration (Chen and Paulraj, 2004; Fugate et al., 2006). The exchange of logistical information is thus posited in the present study as a fth value-creation initiative. Finally, other valuable non-logistical information can also be supplied from one party to the other (Collins and Hitt, 2006; Lorenzoni and Lipparini, 1999; Rodrguez-Daz and Espino-Rodrguez, 2006). Examples from the literature include market information (Chetty and Eriksson, 2002; Shipley et al., 1990) and suggestions regarding material savings (Raia, 1991). A sixth value-creation initiative is, therefore, information supply. However, successful value-creation depends on the recipients ability to establish an effective system for receiving and processing this information. 2.3 Value-creation initiatives in interactions As noted above, rms that enjoy interaction-based relationships collaborate to produce a desired output or to solve a particular problem. In such relationships, value-creation is essentially concerned with mutual learning and the development of capabilities. Four value-creation initiatives can be identied in such interaction-based relationships. The rst is the development of problem-solving skills through coaching (Krause, 1997; Krause et al., 1998). Bello and Gilliland (1997) characterised such coaching in terms of insightful monitoring and guidance. Further, Dyer and Singh (1998) identify two

value-creation initiatives that are relevant to interaction-based relationships when they identied: (1) sharing valuable proprietary knowledge with trading partners; and (2) willingness to combine complementary strategic resources. In the context of interaction-based relationships, the rst of these refers to the sharing of information for purposes other than exchange (Wang and Wei, 2007). The second requires an interactive knowledge of the other partys organisation capabilities (Iyer, 2002; Kogut and Zander, 1992). Finally, the present paper posits relationship-specic investments (described above) as a fourth value-creation initiative in interaction-based relationships. Although some authors ( Joscow, 1987; Dyer, 1997) have used the term relationship-specic investments in the context of a framework of transaction cost theory, it can be argued that such investments are usually made with the aim of enhancing cooperation in general (rather than for specic transactions). Learning about partners occurs in all relationships, even if not intended, and this learning affects what the partners need and what they can offer each other (Larson, 1992). Indeed, such learning promotes a gradual increase in commitment as the partners develop expectations regarding future cooperation as described in the reinforcement model of commitment proposed by Anderson and Weitz (1992). This view is in accordance with Blankenburg et al. (1999), who noted that commitment is strongly correlated with relation-specic investments. The present study therefore contends that relation-specic investments are not necessarily made with a view to inuencing coordination costs or other logistical aspects of value-creation that are essentially transaction-based; rather, they signal commitment to the relationship as a whole and serve as a foundation for future cooperation. Such relationship-specic investments are therefore posited as a fourth value-creation initiative in the context of interaction-based relationships. In sum, our review of the literature reveals that previous research has pointed to various types of value-creation initiatives. In this paper, this list of these valuecreation initiatives is used as a basis for mapping real life value-creation initiatives in BSRs with a view to ascertaining whether these initiatives are really useful to rms in their efforts to create value in cooperation with other rms. The list is shown in Table I. 3. Methodology 3.1 Design and setting Because previous research in this area is scarce, an exploratory approach was adopted in the present study, as recommended by Churchill (1979). Sampling was conducted in successful rms from a variety of industries (seafood, furniture, chemical products, and electronics) to represent best industry practice in a range of settings. As shown in Table II, 14 rms agreed to participate in the study: . four Norwegian sellers of seafood (designated S1-4 in the present study); . three French buyers of seafood (IMP1-3); . two Norwegian sellers of furniture (M1-2); . three Norwegian manufacturers of chemical products (C1-3); and . two Norwegian sellers of technical (electronic) products (T1-2).

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Firm SF1 SF2 SF3 SF4 IMP1 IMP2 IMP3 M1 M2 C1 C2 C3 T1 T2

Function Manufacturer Agent/trader Manufacturer Manufacturer Salmon curing yard Supermarket chain Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Newly established manufacturer Manufacturer Manufacturer

Products Fish llet Wild caught sh Farmed salmon Farmed salmon Farmed salmon Fish Fish Furniture Furniture Paints Industrial antiseptics Polymers Electronic systems Electronic systems

Number of employees 30 15 110 1,000 20 1,000 300 400 1,000 1,000 500 25 1,000 50

Turnover (in EUR million) 3.75 37.5 75 125 N/A 125 125 75 125 125 125 N/A 125 6.25

544

Table II. Characteristics of the sample

As recommended by Eisenhardt (1989), the sample was heterogeneous in terms of size of rms, involvement in exports and main activities (manufacturing and retailing). Respondents from each of the rms were identied by academics with a good knowledge of the industry in question. The key informants were all general managers or export managers who were chosen on the basis of their rst-hand knowledge of BSRs. Additional respondents were contacted as required to contribute appropriate additional insights to the study. In total we contacted 18 rms, whereof four refused to participate. 3.2 Data collection and analysis In accordance with the recommendations of Miles and Huberman (1994), data were collected through semi-structured in-depth personal interviews that allowed for discussions and follow-up questions. Drawing on Larson (1992), an interview guide had been developed before the interviews. Care was taken to ensure that the questions were not biased towards preordained theoretical perspectives (Eisenhardt, 1989). The questionnaire was tested for face validity by a pilot test of marketing scholars. The interviews were conducted either at the location of a given rm or by telephone, in accordance with each respondents request. Each interview lasted 75 minutes on average, and total interview time for the study amounted to 20 hours. On most occasions a single key informant was interviewed, although two respondents were interviewed in three instances, so in total 17 interviews were conducted. General company information was collected before the interviews to avoid wasting time during the interviews. The purpose of the interview was explained to each respondent in terms of learning about how the rm related to its buyer/supplier rms. The respondents were rst asked to describe how they categorised these partner rms according to their strategic importance. They were then asked to categorise the partners in terms of cooperation (and to provide examples of such cooperation). At the end of each interview the ndings were summarised according to relationship types and value-creation initiatives. Respondents were asked whether they agreed with the general ndings. All respondents understood the proposed list of value-creation initiatives and found them interesting; no objections were raised.

The record of each interview was machine typed in full immediately after completion. Qualitative analysis of the data was then conducted manually. Interpretations, relevant documents, and summaries of preliminary ndings were then independently reviewed by two researchers thus fullling the generally accepted criteria regarding reliability and validity of qualitative data analysis (Fugate et al., 2006). 4. Findings Six of the ten value-creation initiatives identied in the literature review were spontaneously mentioned by the respondents during the interviews. Any value-creation initiatives that were not mentioned spontaneously in any given interview were discussed at the end of that interview. The ndings can be summarised as follows. 4.1 Spontaneously mentioned initiatives 4.1.1 Adaptation. In the seafood and chemical industries, the respondents reported that parties to the BSRs were often required to adapt to uctuating demand and deviations from planned quantities. This nding conrmed that adaptations in plans and actions were important in BSRs as they create exibility and improved market competitiveness (Ghosh and John, 1999). Some respondents saw this as a necessity, rather than a chosen initiative; as the respondent from C3 observed:
One party cannot choose not to adapt.

Value-creation initiatives in BSRs 545

Flexibility in transactions was required. In some instances, even non-supply were tolerated by one respondent (IMP1), as long as these were exceptions to the rule. The present ndings regarding the importance of adaptation and exibility as an important value-creation initiative in BSRs were in accordance with previous theoretical studies (Ghosh and John, 1999; Borys and Jemison, 1989). 4.1.2 Logistical information sharing. The importance of logistical information sharing was frequently mentioned by the respondents. This is not surprising research on logistics and supply chain management (Chen and Paulraj, 2004; Fugate et al., 2006) stresses the importance of information sharing as the main facilitator of effective coordination in BSRs. In particular, the respondent from C3 stated that it was essential to have good communication between the two rms because product handling of polymers requires specialised equipment and high levels of safety. This nding with regard to logistical information sharing as an important value-creation initiative in BSRs was in accordance with Dyer and Singh (1998). 4.1.3 Motivate right effort. This was a prominent value-creation initiative. For example, two of SF4s customers were reported to be demanding customers in setting product requirements. IMP3 attempted to motivate some suppliers to engage in differentiation efforts by establishing long-term, interactive, cooperative relationships with them. In this regard, IMP3s efforts to motivate effort is better described as an effort to enhance interaction, rather than an effort to enhance transactions (Borys and Jemison, 1989). In contrast, C3 made continuous efforts to motivate its customers in terms of transactions. C3 repeatedly asked its customers to nd new areas of application and to simplify product specications. In addition, when C3 was asked to customise its products to conform to specic customer requirements, it demanded a minimum purchase volume from the customer. If this target was not met, the customer was

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required to compensate C3 to cover its development costs. The present ndings support the contention that motivation of right effort is an important value-creation initiative in BSRs (Ghosh and John, 1999). 4.1.4 Information supply. As can be seen from Table III, rms from the seafood, furniture and chemical products industries in the present study supplied information other than for logistical purposes including various aspects of innovation and development regarding markets and new products. SF4 relied on such information to stimulate improvements in packaging, design, production technology, and so on. However, any decision to invest in new production technology was always preceded by careful analysis. The respondent from SF4 described the process in the following terms:
If a customer has an idea for improving a product, and comes to us, we examine this idea in our laboratory. The customer can be requested to estimate demand. In addition, other market opportunities for this product are explored [. . .] by using our own networks of contacts. This can be a highly unstructured process and it can go on for a long time before we eventually decide to commit to the idea or not.

In contrast, the respondent from T1 stated that information from customers was not important for product development; rather, T1 utilised this information to improve customer service, service agreements, and delivery times. The respondent from IMP2 noted that many customers:
[. . .] transmit specic wishes about products they would like to buy, [such as] biologically farmed seafood.

C2 relied heavily on information from customers; indeed, C2 undertook no value-creation initiatives other than explicitly asking for information from its customers during visits to customer sites and trade fairs. As the respondent from C2 observed:
We ask about their views on the future, including the prospects of their product portfolio.

After obtaining the information, C2 then initiated its own research-and-development processes, which did not involve further involvement from customers. C2 also provided information, but:
[. . .] only to the extent that the customers require it. From time to time customers make special requests and then production processes must be adapted. These requirements concern product size, colour, etc.

The present study thus found that the supply of non-logistical information was important in the BSRs of the present sample. This nding is in accordance with empirical observations reported in the literature (Chetty and Eriksson, 2002; Collins and Hitt, 2006; Lorenzoni and Lipparini, 1999; Raia, 1991; Rodrguez-Daz and Espino-Rodrguez, 2006;
Case rms Provide ideas for product attributes Provide estimates of expected market demand Signal appropriate production technology Provide market wants Give feedback on prototypes Give feedback on new product ideas SF4 X X X X M1 M2 C1 C2 X X X X X C3 X X X

Table III. Customers as suppliers of information

Shipley et al., 1990). The serial (as opposed to the interactive) aspects (Borys and Jemison, 1989) of how the information is taken advantage of is striking. Although such way of creating value has been reported in the literature (as empirical observations), the dominant theories on value-creation presented by Ghosh and John (1999) and Dyer and Singh (1998) do not consider information supply as a value-creation initiative in its own right. The ndings in the present study are summarised in Table III. 4.1.5 Coaching partner problem solving. As shown in Table IV, four examples were identied of buyers acting as coaches for sellers in their problem solving; these were all related to product and production issues. There were also three examples of sellers acting as coaches; in these instances, in addition to product issues there was also one example (observed in two companies) of the seller training and advising the customer regarding its selling approach. The respondent from SF3 emphasised that the combination of information exchange and problem solving (in cooperation with the other party) was the most important value-creating initiative:
Customers come to us with their product specication, but our staff [. . .] go through these with them on a strictly professional basis. They point to misspecications and inconsistencies and suggest what the customers should contract for. Because they are not salespersons themselves, customers listen to [our staff] and their advice.

Value-creation initiatives in BSRs 547

Other respondents reported similar concerns for their partners problem solving efforts. For example, the respondent from T1 described how the rm coaches some of its customers in the following way:
These customers often need our assistance for better designing or carrying out projects [because] they do not possess the required skills themselves.

T1 was motivated to do this because its involvement usually resulted in more deliveries to these projects. These ndings support the contention that coaching is important in value-creation in interactions (Borys and Jemison, 1989). In addition, these ndings provide new insights into how coaching occurs in BSRs, thus augmenting earlier empirical observations (Bello and Gilliland, 1997; Krause, 1997; Krause et al., 1998). 4.1.6 Knowledge-sharing (strategic knowledge). Several informants in the seafood industry reported that buyers had sent staff to participate in problem solving at the sellers plant, and vice versa. The respondents from SF3 and SF4 reported specic research-and-development projects in which the strategic resources of both parties had been combined to generate joint learning. In other words they provided examples of the

Case rms The buyer acting as a coach 1. Contribute to sellers development of logistical systems 2. Inspect production processes (at different stages) 3. Contribute to sellers product development 4. Contribute to problem solving (production and packaging) The seller acting as a coach 1. Discuss product specications 2. Train and advise customers staff on selling issues 3. Design inbound logistic system

SF3 X X

SF4

M1

M2

C3

X X X X X X Table IV. Coaching partner problem solving

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importance of sharing strategic knowledge (Dyer and Singh, 1998). This joint learning was related to either: (1) joint problem-solving (aligning product characteristics and customers production processes; developing new packaging solutions, and so on); or (2) exploring new market opportunities (comparing different seller production processes with regard to further processing by customer; exploring new product designs, and so on). Informants in other industries also noted that knowledge sharing was often essential to successful value-creation in interactions. The respondent from C3 reported that collaboration with a customer began with a joint recognition that a new product was required to solve a particular problem:
Together, we developed the idea that a certain chemical substance could be introduced in our basic product.

C3 then developed the product, which was subsequently tested by the customer. Feedback from the customer then led to the product being modied during several iterations. These ndings provide support for existing theories on value-creation in interactions (Borys and Jemison, 1989; Dyer and Singh, 1998). In addition, we obtained concrete observations of how different types of strategic knowledge were exchanged and how interactive cooperation (as opposed to serial) (Borys and Jemison, 1989) contributes to making use of such information. While the importance of knowledgesharing is recognised (Wang and Wei, 2007), the literature actually contains few examples of this value-creation initiative in BSRs. 4.2 Other value-creation initiatives Four value-creation initiatives were not spontaneously mentioned by the respondents during interviews. These were all discussed with respondents at the end of each interview. 4.2.1 Transaction-specic investments. Several examples of transaction-specic investments were detected, although they were not spontaneously mentioned by respondents as examples of value-creation initiatives. For example, the respondent from one seafood supplier described how the rm had installed special equipment at its buyers site to reduce transportation costs. Although the equipment could be used by the buyer in transactions with other suppliers, the costs of installing the equipment were paid by the supplier. It is clear that this was a transaction-specic investment (Williamson, 1985) for the seller. However, in this and other instances, it seemed that the respondents classied such investments as adaptation. This response might have been an artefact of the methodology employed in the present study, which tended to emphasise buyer-seller cooperation. 4.2.2 Relationship-specic investments. No respondent used the term relationship-specic investment during the interviews, but all appeared to recognise that such investments are always present in value-creating cooperative relationships. Respondents from both SF3 and SF4 reported that cooperative partnerships entail the sharing of upturns and downturns as they occur. As the respondent from SF3 observed:

At times the sun shines; at other times it rains.

Moreover, several respondents mentioned the importance of attempting to maintain loyalty to exchange partners to ensure value-creation. However, respondents noted that uncritical loyalty could result in bankruptcy. The respondents from C3 and IMP2 noted that their rms, after several years of experience, had gradually increased the complexity of relationships. However, as the respondent from IMP2 observed:
The supplier must earn our condence by performing well over several years.

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In other words, BSRs gradually develop as commitment and dedication increases (Dwyer et al., 1987; Anderson and Weitz, 1992). If the BSR is satisfactory to both parties they will continue to invest in it. Relationship development is resource-intensive, and the respondent from IMP3 noted that the rm had invested considerable time and resources before feeling condent that it could embark upon constructive dialogue with a given producer:
We have to invest much in order to know the producers.

It was apparent that such relationship-specic investments were a prerequisite for establishing a cooperative relationship; indeed, respondents appeared to believe that this was self-evident. As such, respondents did not identify such relationship-specic investments as a specic value-creation initiative. Nevertheless, the ndings of the present study are in accordance with the contention of Borys and Jemison (1989), who stated that knowledge of the partner organisation enhances value-creation in interactions. 4.2.3 Effort (problem solving). During the interviews, effort in problem solving did not emerge as an important concern. However, respondents did refer to various competencies and resources of their exchange parties including perceived competence, product range, and so on. The failure of the respondents to identify effort as a distinct value-creation initiative is in conict with the recommendations of both governance value analysis and the transaction cost approach (Ghosh and John, 1999; Williamson, 1985). 4.2.4 Willingness to combine complementary strategic resources. A willingness to combine complementary strategic resources was perceived to be a prerequisite for cooperation and a signal of commitment by several respondents (SF3, SF4, IMP2, and C3). However, as was the case with relationship-specic investments, a willingness to combine complementary strategic resources was perceived as a prerequisite for cooperation in interactions, rather than as a value-creation initiative in its own right. This nding was in accordance with Borys and Jemison (1989), who suggested that such willingness is a precondition for value-creation in interactions. However, the nding is in conict with Dyer and Singh (1998) which suggests that their model on how value is created should be modied willingness to combine complementary strategic resources should not be considered to be a value-creation initiative variable having direct effects on value-creation. 4.3 Summary of ndings The most important value-creation initiatives identied in the present study are summarised in Table V. Seven of the ten value-creation initiatives identied in the literature review appear to have been important in BSRs. These seven include the six that were spontaneously mentioned by the respondents, together with transaction-specic

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Value-creation initiatives Transaction specic investments

In transactions

In interactions

550

Undertake investments for increasing logistical efciency in a BSR Adaptation Show exibility with regard to requests for temporary/ad hoc changes in logistical operations Motivate right effort Identify valuable partner contributions and attempt to motivate partner to perform such activities Supply logistical information Supply information relevant to exchange partners logistical operations Supply other information Supply information regarding developments in markets, technologies, and products Coaching Knowledge sharing (of strategic knowledge) Discuss and guide exchange partners problem solving Share knowledge to facilitate joint problem solving

Table V. Value-creation initiatives as identied in this study

investments (which were apparent in the interviews without being identied as a specic value-creation initiative). By and large, the present ndings support extant theories on value-creation in the literature (Borys and Jemison, 1989; Williamson, 1985; Ghosh and John, 1999; Dyer and Singh, 1998). Our ndings further suggest that in the larger rms BSRs we nd more examples of value-creation initiatives, in particular related to interaction-based relationships, across the different industries focused in this research. 5. Conclusion The objective of the present study was to identify and explore important value-creation initiatives in BSRs. By and large, the study found that most of the value-creation initiatives identied in the existing literature played a prominent role in the BSRs of the sample of rms that was investigated. The study has thus found support for the theoretical studies on value-creation in the extant literature. In particular, transaction-specic investments, adaptation, and motivation of right effort, as identied in governance value analysis of Ghosh and John (1999) have been shown to be important in BSRs. In addition, logistical information sharing (Borys and Jemison, 1989) and coaching and knowledge sharing (Dyer and Singh, 1998) have also been demonstrated to be of importance. However, other value-creation initiatives identied in the literature such as relationship-specic investments and willingness to combine complementary strategic resources were perceived by the respondents in the present study as being prerequisites for cooperation in interactions and commitment, rather than value-creating initiatives in their own right, as suggested by Borys and Jemison (1989). In addition, the respondents did not believe that effort (in problem solving) was an important value-creation initiative. All types of value-creation initiatives were detected in the seafood industry. In the chemical, technical, and furniture industries several (but not all) types of value-creation

initiatives were identied. It would seem that the large rms in these industries had the resources to participate in a range of development activities and to transact high volumes. 6. Theoretical implications The study suggests that it is important to distinguish between value-creation in transaction-based arrangements and value-creation in interaction-based relationships. In the former, value-creation initiatives aim to reduce logistical costs or improve logistical performance; in contrast, in the latter, value-creation initiatives require a cooperative response from the exchange partner to create value. Examples of value-creation initiatives in transaction-based arrangements included transaction-specic investments, providing information for planning logistical ows, or adapting to changing logistical requirements. A specic instance of such a value-creation was investment in appropriate goodshandling equipment to facilitate transactions with an exchange partner. Examples of value-creation initiatives in interaction-based relationships included the provision of strategic information (on developments in products, markets, or technologies) and coaching. In these instances, the exchange partner must respond and contribute to the value-creation initiatives made by the focal party. In addition, the study has identied a third class of value-creation initiatives that might be described as prerequisites for possible value-creation in a relationship. This class of initiatives includes relationship-specic investments and willingness to combine complementary strategic resources. Such initiatives indicate a commitment to the long-term relationship and a desire to create new opportunities for cooperation in interactions. However, in the present study, these initiatives did not constitute an overt aspect of the process of value-creation in existing collaborative arrangements. 7. Practical implications The study provides managers with practical guidance on the selection of appropriate value-creation initiatives in various types of BSRs. For managers, the important value-creation initiatives that emerged from this study can be summarised as follows: . Transaction specic investments. Investments made to enhance logistical performance (efciency in technical and administrative coordination); they should be tailored to the relationship such that they have lesser value in alternative uses if the relationship is ended. . Adaptation. Effecting changes in plans or actions to obtain satisfactory logistical performance. . Motivate right effort. Identifying and motivating the exchange partner to engage in appropriate actions (differentiation efforts, simplication of product specications, developing new production processes). . Logistical information sharing. Exchange of information to enhance technical and administrative coordination in logistical operations. . Information supply. Provision of useful non-logistical information (regarding developments in markets, products, or technologies). . Coaching. Contributing to the other rms problem-solving efforts. . Strategic knowledge sharing. Exchange of knowledge that enables the two rms to engage in joint problem-solving efforts.

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Value-creation in transactions is best managed by seeking mutual transparency, adaptations, appropriate logistical planning, and the efcient ow and processing of information between parties. Value-creation in interactions is best managed by ensuring that each party has good knowledge of the others organisation. Value-creation initiatives should be in the form of either: (1) the provision of relevant expertise for coaching problem-solving efforts; or (2) the establishment of appropriate joint problem-solving arrangements. Finally, managers should note that some value-creation initiatives are followed up, whereas others are not. The present study found that some rms did not fully exploit customer feedback, even though they recognised that they probably should do so. Managers must be conscious of: . How their partners contribute to value-creation? . Which value-creation initiatives are important to them? 8. Research limitations Certain limitations in the study are acknowledged. First, the sample included only 14 rms. Despite genuine attempts to assemble a heterogeneous sample and to capture general impressions of the subject matter being examined, care should be taken in attempting to generalise the ndings to other contexts. Second, this was a cross-sectional study. A longitudinal study, with data collection at several points in time, would have produced more reliable ndings. Third, despite attempts to obtain a heterogeneous sample, most of the data in the present study did come from sellers. 9. Future research This study reports the ndings of the rst empirical study of value-creation initiatives in BSRs. The ndings in this exploratory research suggests that some value-creation initiatives are prerequisites for value-creation in BSRs, while others are important in transaction- and interaction- based relationships. The lack of empirical research in this eld means that there is little guidance on how to optimise cooperative activities with partners both from a practical and an academic point of view. We suggest that a natural rst step for further research should be to establish models that relate different value-creation initiatives to value-creation outcomes, like learning and performance. Such efforts comprise developing variables (including reliable and valid scales for measuring them) and developing comprehensive but parsimonious models. Only by doing that, we will be on our way to increasing our knowledge and understanding the role of value-creation initiatives in value-creation. Possible avenues of research in this regard include: . investigations of the management of knowledge redundancy and its implications for rm- and relationship performance; and . a study of how internet technology can be used to promote value-creation in BSRs. The framework for the present study was rooted in technological interdependence within BSRs. Future research can shift the focus to other value-creation initiatives beyond the dyad and related to the network (Hakansson and Snehota, 1995).

For example, the role of initiation of new bonds to other exchange partners in seeking new exchange opportunities can prove to be an interesting avenue for investigation.
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Swink, M. (2006), Building collaborative innovation capability, Research Technology Management, Vol. 49 No. 2, pp. 37-47. Tyndall, G., Gopal, C., Partsch, W. and Kamauff, J. (1998), Ten strategies to enhance supplier management, National Productivity Review, Vol. 17 No. 3, pp. 31-44. van de Ven, A.H. (1976), On the nature, formation and maintenance of relations among organizations, Academy of Management Review, Vol. 1, pp. 24-36. von Hippel, E. (1988), The Sources of Innovation, Oxford University Press, New York, NY. Wang, E.T.G. and Wei, H.-L. (2007), Interorganizational governance value creation: coordinating for information visibility and exibility in supply chains, Decision Sciences, Vol. 38 No. 4, pp. 647-74. Williamson, O.E. (1985), The Economic Institutions of Capitalism, The Free Press, New York, NY. Wilson, D.T. (1995), An integrated model of buyer-seller relationships, Journal of the Academy of Marketing Science, Vol. 23 No. 4, pp. 335-45. About the authors Trond Hammervoll is an Associate Professor of Logistics in the Department of Business Administration and Social Sciences at Harstad University College in Norway. His research areas of interest include dependence and value-creation in supply chain relationships. His work has been published in such journals as the European Journal of Marketing and Journal of Business-to-Business Marketing. Trond Hammervoll is the corresponding author and can be contacted at: trond.hammervoll@hih.no Kjell Toften is a Scientist at Noma (previously Fiskeriforskning), Norway. His main research interests include marketing strategies, supply chain relationships, and use of market information, particularly related to international niches. His work has been published in such journals as the European Journal of Marketing, Journal of International Marketing, International Marketing Review, Marketing Intelligence & Planning, Journal of Food Products Marketing, and Food Quality and Preference.

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