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Do Supplier Perceptions of Buyer Fairness Lead to Supplier Sales Growth

Article in Industrial Marketing Management · July 2015

DOI: 10.1016/j.indmarman.2015.07.003

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 Industrial Marketing Management 53 (2016) 160–171

Contents lists available at ScienceDirect

Industrial Marketing Management

Do supplier perceptions of buyer fairness lead to supplier sales growth?

Ghasem Zaefarian a,⁎, Zhaleh Najafi-Tavani a, Stephan C. Henneberg b, Peter Naudé c
a
Leeds University Business School, University of Leeds, Leeds LS2 9JT, United Kingdom
b
Business Ecosystem Research Group, School of Business and Management, Queen Mary University of London, London E1 4NS, United Kingdom
c
mIMP Research Group, Manchester Business School, University of Manchester, Booth Street West, Manchester M15 6PB, United Kingdom

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

Article history: Despite the growing number of studies focusing on fairness perceptions in buyer–supplier relationships, the per-
Received 25 November 2012 tinent literature mostly focuses on understanding the buyers' perceptions of fairness. In this study, we argue that
Received in revised form 9 November 2014 sellers' perceptions of the fairness of the buyer are equally important but often overlooked. Moreover, existing
Accepted 25 June 2015
research fails to provide empirical evidence for examining the long-term effects of fairness on sales growth.
Available online 15 July 2015
We address these gaps by reporting the results of a longitudinal study based on both primary data collected
Keywords:
from automotive suppliers in 2009, and objective sales data for these suppliers from an automotive manufacturer
Relationship quality over a three-year period after 2009. We employ a latent growth curve model, which reveals that only interaction-
Dependency al and distributive fairness have a positive and significant effect on both trust and commitment. Our analysis fur-
Fairness (justice) theory ther reveals that the positive effect of trust and commitment on sales growth is smaller as the supplier's level of
Sales growth dependency on the car manufacturer increases. When the buyer's perception of dependence is considered, these
effects are reversed. Several managerial implications of these findings are provided.
© 2015 Elsevier Inc. All rights reserved.

1. Introduction 1999). However, in recent years it has emerged as critical in some rela-
tionship marketing models (Brown et al., 2006; Liu, Huang, Luo, & Zhao,
Today's competitive environment has increased the importance of 2012; Samaha et al., 2011; Yilmaz, Sezen, & Kabadayı, 2004).
not just building, but also preserving strong relationships with supply- Despite the growing number of studies focusing on fairness in busi-
ing companies. The fundamental underlying assumption is that long- ness relationships, a critical review of the extant literature revealed a
lasting relationships between a focal firm, e.g. a manufacturer and its number of shortcomings. One major gap is that with the exception of
suppliers can provide significant opportunities for gaining joint compet- a few studies (e.g. Liu et al., 2012; Suh, 2005) fairness perceptions in
itive advantage as well as improving financial performance (Jap, 2001; the business marketing literature are typically approached from a
Palmatier, Scheer, Evans, & Arnold, 2008). Nevertheless, there are cer- buyers' point of view (see Table 1). Most of the existing studies on re-
tain inhibitors such as unfairness and destructive conflict that could lationship fairness have tried to model the buyer's perception of a
‘poison’ a relationship and hence decrease relationship performance seller's fairness, and thus inevitably, resulting outcomes (e.g. sales,
and stability in time (Samaha, Palmatier, & Dant, 2011). performance) are solely associated with such buyer perceptions
Although the business marketing literature has documented well (e.g. Griffith, Harvey, & Lusch, 2006; Kumar, Scheer, & Steenkamp,
the corrosive effects of factors such as destructive conflict (Gaski, 1995b; Samaha et al., 2011; Yilmaz et al., 2004).
1984) and opportunism (Wathne & Heide, 2000) on relationships, the Nevertheless, many supplier–manufacturer relationships are highly
pertinent literature has paid relatively less attention to fairness/unfair- asymmetrical, with smaller suppliers dealing with larger and much
ness in business relationships (Samaha et al., 2011). Fairness in inter- more powerful manufacturers as the main buyers of their products
organizational relationships refers to the organization's perception of and services (Kumar et al., 1995b). Since business relationships are
the fairness of treatment received from other organizations, and their characterized as interactions, i.e. the confrontation of, and coping with,
reactions to such perceptions (Brown, Cobb, & Lusch, 2006; Homburg attitudes and activities of both suppliers and buyers (Ford, Gadde,
& Fürst, 2005). Fairness theory is related to complaint management Håkansson, & Snehota, 2003; Håkansson & Snehota, 1995), we argue
(Yi & Gong, 2008), equity theory, and service recovery research that supplier perceptions of fairness are equally important but often
(Patterson, Cowley, & Prasongsukarn, 2006; Smith, Bolton, & Wagner, overlooked in this context.
We relate our arguments to two main concepts, relationship quality
and the level of dependency between the business partners. Our
⁎ Corresponding author.
E-mail addresses: [email protected] (G. Zaefarian), Z.Najafi[email protected]
starting point is the proposition that a supplier's perception of a buyer's
(Z. Najafi-Tavani), [email protected] (S.C. Henneberg), [email protected] unfairness may ‘poison’ relationship quality. In such circumstances, the
(P. Naudé). supplier will have less trust in as well as commitment to the buyer, will

http://dx.doi.org/10.1016/j.indmarman.2015.07.003
0019-8501/© 2015 Elsevier Inc. All rights reserved.
Table 1
Marketing research on fairness.

Reference Research settings Key findings

(taken from the abstracts)
Sample Buyer or seller's perception Fairness dimensions Outcome variables
of fairness

Liu et al. (2012) 216 paired manufacturers (suppliers) Dyadic justice perceptions as Procedural justice Dyadic buyer–supplier Justice is not a direct determinant of buyer–supplier performance
and distributors (buyers) in China mutually perceived by both Distributive justice relationship performance but a critical conduit that nourishes mid-range coupling behaviors,
buyer and the seller Interactional justice which in turn promotes a successful relationship.
Informational justice
Samaha et al. (2011) A large Fortune 500 firm (seller) and its Buyer's perception of – Channel member performance Perceived unfairness truly acts as “relationship poison” by directly
resellers (channel members). fairness damaging relationships, aggravating the negative effects of both
984 in Year 1, 1004 in Year 2, and 1089 in conflict and opportunism, and undermining the benefits of using
Year 3 contracts to manage channel relationships.
Ellis, Reus, and Lamont 107 merger and acquisition – Procedural justice Value creation during integration Informational justice and procedural justice affect different
(2009) Informational justice Value creation post-integration components of value creation. Procedural justice reduces the
positive effects of informational justice on financial return during

G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171

the integration process, while it magnifies the effects of
informational justice on the combined firms' market position
during integration efforts.
Luo (2007) 127 dyadic cross cultural cooperative – Procedural justice Strategic alliance performance When goal differences between parties are high, the joint effect on
alliances in China Distributive justice alliance performance of procedural and distributive justice is
Interactional justice significantly positive. When interactional justice is high, procedural
justice exerts a stronger performance effect.
Brown et al. (2006) 433 wholesaler–supplier relationships Buyer's perception of Procedural justice Economic satisfaction Normative contracting is associated with higher levels of channel
fairness Distributive justice Manifest conflict member satisfaction and lower levels of conflict. Explicit
contracting, however, is linked to higher levels of channel conflict.
Distributive justice is positively associated with channel member
satisfaction as is procedural justice, but only under conditions of
high distributive justice
Griffith et al. (2006) 290 Supplier–distributor supply chain Buyer's perception of Procedural justice Long-term orientation The perceived procedural and distributive justice of a supplier's
relationships fairness Distributive justice Relational behavior policies enhance the long-term orientation and relational behaviors
Conflict of its distributor, which, in turn, are associated with decreased
Satisfaction conflict and increased satisfaction, that influence the distributor's
Performance performance.
Suh (2005) 147 responses from 49 local suppliers Local suppliers' perception of Procedural justice Trust and Commitment Procedural fairness exerts most influence on the commitment level
and their relationship with top five fairness Distributive justice of local suppliers in a channel relationship.
hypermarket retailers in Korea.
Luo (2005) 124 dyadic cross cultural cooperative – Procedural justice Alliance profitability Alliance profitability is higher when both parties perceive high
alliances in China rather than low procedural justice. Profitability is also higher when
both parties' perceptions are high than when one party perceives
high procedural justice but the other perceives low procedural
justice. Shared justice perceptions become even more important for
alliance profitability when the cultural distance between partners is
high or when the industry of operation is uncertain.
Yilmaz et al. (2004) 155 reseller–supplier relationships in Buyer's perception of Procedural justice Reseller satisfaction Reseller perceptions of supplier distributive fairness and procedural
Turkish PVC (Poly-Vinyl Chloride) doors fairness Distributive justice fairness are posited as key factors, mediating the effects of reseller
and window-systems industry assessments of supplier delivery performance, operational support,
boundary personnel performance, and financial and sales
performance on reseller satisfaction.
Kumar et al. (1995b) 417 dealers from the US and 289 Dutch Buyer's perception of Procedural fairness Relationship quality Vulnerable resellers' perceptions of both distributive and
dealers fairness Distributive fairness procedural fairness enhance their relationship quality, although
Supplier–reseller relationships in these effects are moderated by the level of outcomes and
automobile industry environmental uncertainty. Furthermore, procedural fairness has
relatively stronger effects on relationship quality than distributive
fairness.

161
162 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171

make less specific investments in their relationship, or will be less flex- Slotegraaf, & Vorhies, 2009; Palmatier, Scheer, Houston, Evans, &
ible and adaptable to the buyer's specific requirements. This will mean Gopalakrishna, 2007).
that the offering to the buyer in the interaction will not be optimized, Finally, it is argued in this research that the level of dependency can
and as a consequence the buyer will not feel that there is increased considerably influence the tested associations, an issue that has not
value offered by the seller. Depending on the level of dependency, the been investigated before. Therefore, this study also contributes to the
buyer may in such circumstances decrease the proportion of a category literature on business marketing by examining the moderating effects
that it will source from a particular supplier, or the supplier may actually of dependence. This is important because a considerable number of
decrease the sales to a specific buyer. In extreme cases the supplier will buyer–supplier relationships are characterized by a seller being depen-
switch completely to sell to other potential buyers. Thus, although dent on a particular buying company, for example due to high propor-
existing studies often highlighted the importance of the buyer's percep- tions of sales and profitability being associated with a single customer.
tion of seller fairness in repurchase intentions, we argue that the study In examining the mediating effect of relationship quality and the
of fairness from the sellers' perspective can also shed light on our under- moderating effect of dependencies, this article uses a sample of 212 au-
standing of the behavioral intentions of the sellers in buyer–seller tomotive parts suppliers (APSs) and benefits from using objective longi-
relationships. tudinal data about sales levels for these supplier companies with a
A second limitation of the existing literature relates to how fairness particular car manufacturer over a three-year period. Latent growth
is commonly conceptualized. In spite of the tripartite conceptualization curve model (LGCM) (Duncan, Duncan, & Strycker, 2006), an advanced
of fairness perceptions in consumer research (distinguishing between application of structural equation modeling, examines the relationships
distributive, procedural, and interactional justice) (for a comprehensive proposed in the theoretical framework.
review see for example Cohen–Charash & Spector, 2001; or Orsingher,
Valentini, & de Angelis, 2010), inter-organizational studies have not 2. Theoretical background
considered all three dimensions of justice simultaneously. For instance,
Samaha et al. (2011) do not distinguish between three dimensions of 2.1. Justice theory
fairness; Luo (2005) focuses solely on procedural justice; and Kumar
et al. (1995b), Yilmaz et al. (2004), Brown et al. (2006), and Griffith Justice or fairness theory is derived from social exchange and equity
et al. (2006) focus on procedural and distributive justice (see Table 1). theory (Patterson et al., 2006; Smith et al., 1999). The concept of fairness
However, a comprehensive examination of relational activities employed has long been the focus of organizational research. The common as-
by supply chain members to stimulate sales growth and foster relational sumption among these studies is that fairness is the key factor for build-
characteristics such as trust and commitment requires a simultaneous ex- ing and maintaining long-lasting relationships in any social exchange
amination of both structural dimensions (distributive and procedural) (Yilmaz et al., 2004). Extensive research on organizational justice has
and the social dimension (interactional) of justice and their combined identified three main justice dimensions: distributive, procedural, and
effect on relationship performance (Homburg & Fürst, 2005). interactional justice.
Thirdly, it has been argued that the degree of dependence may lead Distributive justice deals with the perceived fairness of the outcomes
to contradictory results in justice perception studies (Kumar, 1996). received (Kumar, 1996; Patterson et al., 2006; Yi & Gong, 2008). In sup-
Therefore, while fairness perceptions as well as relationship quality ply chain and relationship management, distributive justice focuses for
may impact a suppliers' sales growth with a specific buyer, it is not example on how the benefits and risks are shared between the supplier
clear whether such associations are equally relevant in situations of dif- and manufacturer (Brown et al., 2006; Griffith et al., 2006; Yilmaz et al.,
ferent degrees of dependency within the business relationship. As such, 2004). A manufacturer can positively impact the perception of its supply
this research argues that the lack of attention regarding the issue of partner regarding the fairness of outputs in various ways. For instance, if
dependency in examining the impact of justice perceptions in buyer– a manufacturer requires a change in processes or products from its sup-
supplier relationships limits our current understanding. plier, it can share the costs for the resulting R&D activities, or it can share
In the light of these gaps, this research considers a broader view of the economic benefits gained from such changes. Furthermore, the
relationship fairness. The aim of this study is to investigate the direct methods for price negotiations can impact on the perceived distributive
and indirect impact of three dimensions of justice perceptions on both fairness (Kumar et al., 1995b).
trust and commitment as two major determinants of relationship qual- Procedural justice refers to the processes, practices and policies guid-
ity and on sales growth, based on the seller's perspective. The contribution ing the interactions between organizations (Rice & Huang, 2012). These
of this research is fourfold: First, this study uses seller fairness perceptions processes are used to determine the exchange outcomes (Brown et al.,
as possible antecedents for trust and commitment in buyer–supplier re- 2006; Kumar et al., 1995b). This type of justice has its roots in legal re-
lationships. As business interactions are characterized by interdepen- search by Thibaut and Walker (1975) but has subsequently become a
dence, the attitudes of the selling entity are equally important in focus of research in organizational psychology (Colquitt, Conlon,
affecting relational outcomes. Secondly, this study examines the simul- Wesson, Porter, & Ng, 2001) and strategy (Luo, 2007; Rice & Huang,
taneous impact of distributive, procedural, and interactional justice on 2012). Focusing on supplier–manufacturer relationships, procedural
relationship quality, whereas prior studies often focus on one or two fairness is related to some of the following activities: the willingness
dimensions of justice perceptions. This is important because the three of the manufacturer or supplier to engage in open two-way communi-
justice dimensions represent overlapping aspects; limiting an analysis cation, the consistency of manufacturer's purchasing policies, the extent
to studying the effect of one or two of the dimensions does not fully to which a supplier can question and challenge a manufacturer's poli-
cover the phenomenon of fairness perceptions. cies, or the extent to which a manufacturer or supplier provides rational
Thirdly, this study employs objective longitudinal sales data to explanations for certain decisions affecting its interaction partner
capture time-lag issues of these direct and/or indirect effects of justice (Kumar, 1996; Yilmaz et al., 2004).
perceptions. This is important because the effects of attitudes such as Finally, interactional justice involves the manner in which an
fairness perceptions are unlikely to materialize instantaneously; there- exchange partner is treated during the exchange process (Cohen-
fore, understanding such phenomena needs to take into account dy- Charash & Spector, 2001; Yi & Gong, 2008). In a buyer–supplier relation-
namics in the outcome constructs (George & Jones, 2000). In addition, ship, interactional justice refers to the behaviors and the degree of inter-
sales growth aspects are managerially critical (together with profit personal sensitivity that supplier's employees exhibit towards buyer's
growth) but have been neglected in marketing studies. Thus, in this representatives. This relates to the social glue of business relationships,
research the analyses are related to a dependent construct, which is for example honesty, empathy, courtesy, or respect (Patterson et al.,
directly linked to considerations of managerial practice (Morgan, 2006).
 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171 163

A number of studies have examined the impact of organizational the exchange partners to make short-term sacrifices to develop and
justice on organizational behavior and outcomes; however, most of maintain long-lasting, stable, and profitable relationships (Anderson &
these studies have focused on customers' fairness perceptions. General- Weitz, 1992). Commitment has been argued to have a crucial role in
ly, the results of these studies indicate that higher perceived levels of the structuring of business relationships (Anderson & Weitz, 1992; Jap
organizational justice not only improve relationship quality but also im- & Ganesan, 2000; Yi & Gong, 2008). Mutual commitment in a marketing
pact other organizational outcomes and overall performance (Brown channel is seen as key to building a successful business relationship and
et al., 2006; Griffith et al., 2006; Kumar et al., 1995b; Yilmaz et al., creating competitive advantage (Jap & Ganesan, 2000; Yilmaz et al.,
2004). Table 1 provides an overview of existing seminal studies using 2004).
justice theory in an inter-organizational setting. In line with Suh
(2005) and Liu et al. (2012), our research will focus on organizational 3. Hypotheses development
justice perceptions from the supplier's perspective rather than that of
the buyer. 3.1. Justice and relationship quality

2.2. Relationship quality In the literature on organizational justice, evidence exists to suggest
that perceived fairness is closely linked to different aspects of relation-
Business relationships are multi-faceted, i.e. relationships between ship quality (Aryee, Budhwar, & Chen, 2002; Cohen-Charash & Spector,
business partners consist of various dimensions such as trust, com- 2001; Griffith et al., 2006; Kumar et al., 1995b). For instance, Aryee et al.
mitment, adaptation, satisfaction, communication, cooperation, etc. (2002) demonstrate that all three dimensions of organizational justice
(Palmatier, Dant, & Grewal, 2007). To address the multidimension- can considerably increase the level of trust in an organization. They
ality of business relationship characteristics, a number of studies also found that procedural justice has a stronger effect on trust than dis-
have focused on the concept of relationship quality (Huntley, tributive and interactional justice. Focusing on procedural and interac-
2006; Jap, Manolis, & Weitz, 1999; Palmatier, 2008; Skarmeas, tional justice, Kumar et al. (1995b) show that a reseller's perception of
Katsikeas, Spyropoulou, & Salehi-Sangari, 2008). fairness has a positive impact on relationship quality with suppliers. In
Relationship quality refers to the characteristics and the quality common with Aryee et al. (2002), they also found that procedural fair-
of relational ties between two business partners (Huntley, 2006; ness has a relatively stronger effect on relationship quality compared to
Palmatier, 2008). Relationship quality is usually considered as distributive fairness.
consisting of distinct but interrelated components that reinforce However, these studies have focused on buyers' perception of the
each other (Crosby, Evans, & Cowles, 1990; Jap et al., 1999). Although sellers' fairness in a buyer–seller relationship. Our study focuses on
relationship quality has been the focus of many studies, no consen- weak sellers' perceptions of the more powerful buyer's fairness, and as-
sus exists on the operationalization of the construct. Nonetheless, sesses consequences for the business relationship as well as the sales
most studies consider relationship quality as a construct that reflects performance of these suppliers. A supplier that is not treated well by
issues around trust (Morgan & Hunt, 1994), commitment (Dorsch et al., its buyer (in our study, an automotive manufacturer) will develop neg-
1998; Kumar et al., 1995b; Morgan & Hunt, 1994), satisfaction ative attitudes such as lower trust and commitment, and a more short-
(Garbarino & Johnson, 1999; Smith, 1998), conflict resolution (Jap term orientation. In contrast, the existence of organizational justice can
et al., 1999; Kumar et al., 1995b), and long-term orientation (Lages, serve as a sign to a supplier that it is valued by a buyer, which in turn
Lages, & Lages, 2005; Ural, 2009). For a more comprehensive overview leads to the creation of positive attitudes. Moreover, when the supplier
of the relationship quality construct see Athanasopoulou (2009). believes that its contributions are being sufficiently rewarded, it will re-
For the purpose of this research, we specifically focus on two key di- spond by not only developing a stronger relationship with its partner
mensions of the relationship quality. These are trust in, and commit- (buyer) but also by signaling its desire to continue the partnership
ment to, the business partner. We propose that trust and commitment (Griffith et al., 2006). This should result in an increase in the relationship
can together represent the quality of a business relationship, since quality. Hence we hypothesize that:
these factors sufficiently capture the essential aspects of supplier–man-
ufacturer relationships, and are antecedents to many other relationship H1a,b,c. Procedural fairness (a), Interactional fairness (b), and Distrib-
quality dimensions such as satisfaction and long-term orientation. Sev- utive fairness (c) have positive and significant impact on Trust.
eral other studies on relationship quality have also frequently highlight-
H2a,b,c. Procedural fairness (a), Interactional fairness (b), and
ed the importance of these two dimensions (e.g. Crosby et al., 1990;
Distributive fairness (c) have positive and significant impact on
Huntley, 2006; Kumar et al., 1995b). Moreover, Morgan and Hunt
Commitment.
(1994) also suggest that trust and commitment are two key determi-
nants of the relationship quality. We agree that relationship quality is
not limited to trust and commitment only, however we believe that 3.2. Relationship quality and sales growth
based on the extant literature both trust and commitment are two
essential factors to be considered in studying relationship quality. According to the findings of prior studies, by decreasing the possibil-
Trust is one of the pivotal characteristics of a business relationship ity of opportunism and by resolving conflicts, relationship quality in-
(Anderson & Narus, 1990; Morgan & Hunt, 1994; Seppänen, Blomqvist, creases the supplier's confidence in the relationship (Anderson &
& Sundqvist, 2007). It refers to the willingness of the firm to rely on its Weitz, 1992). Consequently, it can be assumed that the suppliers' will-
partner in whom it has confidence (De Ruyter, Moorman, & Lemmink, ingness and ability to do business with buyers increases when they
2001). Trust in the honesty of the partner, and trust in the partner's be- have strong relationships (here characterized by high levels of trust
nevolence (the belief that the partner is interested in the firm's welfare and commitment). This could mean further relationship-specific invest-
and will avoid actions that have any negative impact on the firm) are the ments, or adaptations on the seller's side which increase the likelihood
two main sub-components of trust (De Ruyter et al., 2001; Kumar et al., of sales to the buyer (Palmatier, Dant, et al., 2007; Palmatier, Scheer,
1995b). It has been shown that through decreasing the impact of more et al., 2007). In addition, although traditionally manufacturers are seen
formal contracts, trust reduces the transaction costs and creates a posi- as ultimately determining the decisions regarding sales levels, we argue
tive working environment in business relationships (Zhang, Cavusgil, in line with the relational approach to inter-organizational marketing
& Roath, 2003). that sales levels are based on interactions, i.e. managerial decisions on
Similar to trust, commitment is one of the most widely accepted com- both sides, and thus partly depend on mutual agreements between a
ponents of relationship quality. Commitment refers to the willingness of manufacturer and its suppliers. On the one hand, manufacturers often
164 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171

simultaneously source a particular part from several suppliers in order to The concept of dependency has been shown to be of crucial im-
avoid strong dependency on individual suppliers. On the other hand, portance in buyer–seller relationships (Kim & Hsieh, 2003; Kumar,
suppliers, particularly in a turbulent market, often learn to develop Scheer, & Steenkamp, 1995a; Van Bruggen, Kacker, & Nieuwlaat,
capabilities and invest in infrastructures, which allow them to 2005). The existence of dependency will increase the possibility of
work with different manufacturers where possible. Thus, what opportunism and mistreatment by the more powerful partner, and
drives the sales levels, and their growth, is not solely the therefore can impede the development of collaborative business ac-
manufacturer's autonomous decision, rather it is the quality of the tivities between the two parties. We argue that the more a supplier
relationship with a particular supplier, and the resulting interactions depends on a buyer, the less sensitive it would be towards the quality
between the parties, that drives sales (Palmatier, Scheer, et al., 2007; of the relationship with the buyer. This is mainly due to the fact that
Skarmeas et al., 2008). Therefore, it is expected that, ceteris paribus, highly dependent suppliers find it very hard to replace their partner
higher levels of trust and commitment increase the sales level of a with other buyers simply because there are few other alternatives
supplier within that relationship over time (Huntley, 2006). Conse- available, and/or the associated costs and risks of changing partners
quently, we hypothesize that both trust and commitment as dimen- are very high. In such circumstances, and regardless of the underly-
sions of relationship quality have a positive effect on the seller's sales ing levels of relationship quality, the supplier may do everything
growth over the time. possible to maintain or even improve its relationship with the
manufacturer.
H3. Trust has a positive effect on seller's Sales Growth. This situation, however, is expected to be reversed when the depen-
H4. Commitment has a positive effect on seller's Sales Growth. dency is low: in this case, the supplier can replace the buyer as a business
partner, for example if it has a number of attractive alternatives, or if a
change to a new customer would not incur high costs or risks. Conse-
quently, the supplier reacts to the quality of its relationship with the
3.3. The moderating role of dependency buyer. If the relationship between supplier and buyer is characterized
by trust and commitment (i.e. high levels of relationship quality), then
Dependency in supply chains and business relationships is defined the supplier may make efforts to increase its sales levels over
as a firm's need to maintain a relationship with a specific partner for time, through adaptations and relationship-specific investments
the fulfillment of its aims. While a company may become dependent which would make this supplier and its offerings more attractive
on its partner for various reasons, the inability to change partner has to the manufacturer. If not, the supplier simply switches to other
been recognized as one of the main signs of (inter)dependency buyers as customer companies. Building on the above arguments,
(Heide & John, 1988; Kim & Hsieh, 2003). High specificity of the we hypothesize that:
supplier's products and the existence of few customers (e.g. manu-
facturers) in the market are among the main reasons for such an in- H5. The positive association between Trust and Sales Growth is smaller
ability to switch. as the Supplier Dependence on a manufacturer increases.

Table 2
Construct overview.

Constructs and reflective scales Standardized item loadings

Trust Zaheer et al. (1998)

IOT1: this car manufacturer has always been evenhanded in its negotiation with us. .87
IOT2: this car manufacturer may use opportunities that arise to profit at our expense. (R) .81
IOT3: based on past experience, we cannot with complete confidence rely on this car manufacturer to keep promises made to us. (R) .82
IOT4: we are hesitant to transact with this car manufacturer when the specifications are vague. (R) .73
IOT5: this car manufacturer is trustworthy. .87

Commitment Kumar et al. (1995b)

Com1: even if we could, we would not drop the car manufacturer because we like being associated with it. .86
Com2: we want to remain a member of the car manufacturer's network because we genuinely enjoy our relationship with it. .93
Com3: our positive feelings towards the car manufacturer are a major reason we continue working with it. .92

Procedural fairness Homburg & Fürst (2005)

PF1: The car manufacturer quickly reacts to complaints or suggestions we have. .79
PF2: The car manufacturer gives us the opportunity to explain our point of view regarding aspects of the business relationship. .86
PF3: Overall, the car manufacturer's procedures within our business relationship are fair. .83

Distributive fairness Homburg & Fürst (2005)

DF1: we receive adequate benefits from the relationship with the car manufacturer. .83
DF2: in case of complaints we receive about as much compensation from the car manufacturer as expected. .71
DF3: in solving our problems, the car manufacturer gives us exactly what we need in the business relationship. .80
DF4: overall, the benefits we get from the business relationship with the car manufacturer are fair. .82

Interactional fairness Homburg & Fürst (2005)

IF1: the employees of the car manufacturer seemed to be very interested in the business relationship with us. .77
IF2: the employees of the car manufacturer understand exactly what we want from this business relationship. .74
IF3: I feel treated rudely by the employees of the car manufacturer. (R) .82
IF4: the employees of the car manufacturer are very keen to solve our problems. .88
IF5: overall, the car manufacturer employees' behavior as part of our business relationship is fair. .81

Dependence Kim & Hsieh (2003)

Dep1: it would be difficult for us to replace the sales that our relationship with this car manufacture generates. .87
Dep2: There are other car manufacturers that could buy comparable amount of products/services. (R) .91
Dep3: Our firm would suffer greatly if we lost this car manufacturer. .95
Dep4: We would incur minimal costs in replacing this car manufacturer with another car manufacturer. (R) .72

Note: All items were measured using seven-point Likert scales anchored by 1 = “strongly disagree”, 4 = “neither agree nor disagree”, and 7 = “strongly agree”. (R): reverse item.
 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171 165

H6. The positive association between Commitment and Sales Growth is 4.2. Longitudinal data collection
smaller as the Supplier Dependence on a manufacturer increases.
This study also benefits from a longitudinal design. George and Jones
(2000) argue that the relationships between constructs in organization-
al behavior studies are often not instantaneous, i.e. changes in a predic-
4. Research design and analysis tor variable are not instantly accompanied by changes in the
criterion variable. Instead, some level of time aggregation is in-
4.1. Sample and data collection procedure volved. Since our goal is to predict the impact of fairness and rela-
tionship quality on sales growth, we felt it necessary to incorporate
We employed longitudinal data for our empirical analysis. We tested sales growth data for several years after our predictors (fairness per-
our hypotheses with a sample drawn from the automotive industry in ceptions and relationship quality) were measured. The chosen
Iran, where a relatively large number of Automotive Parts Suppliers three-year period is expected to provide adequate time for the ef-
(APSs) are affiliated with half a dozen large national automotive manu- fects of fairness and relationship quality to manifest themselves in
facturers. Data from Iran was selected because of the unique economic changes in sales growth. Similar approaches are often practiced in
conditions of the automotive market, notably that the absence of any comparable business marketing research (Fang, Palmatier, Scheer,
foreign automotive manufacturers in Iran has created a distinctive situ- & Li, 2008; Palmatier, Dant, et al., 2007).
ation in which the APSs have developed the capacity and capabilities Therefore, a second round of data collection followed after three
that enables them to simultaneously work with different automotive years, in 2011. We contacted the automotive manufacturer to get objec-
manufacturers in Iran. Moreover, the automotive industry in Iran is tive sales data for the last three years for each of the 212 APSs in our
not based on single sourcing. For any given automobile part, there are sample. This minimized the potential existence of common method
multiple producers supplying the car manufacturers. Thus, each suppli- bias in two related ways. First, we measured the independent predictor
er has a share in providing a particular part in the industry. This is an im- constructs (i.e. perception of fairness and relationship quality) in time 1,
portant characteristic as it provides the potential for increasing or using where possible two key informants from the supplier side. Sec-
decreasing sales levels as well as enabling APSs to switch between ondly, we measured the dependent construct (i.e. supplier sale growth
buyers. This characteristic allows us to directly understand the reaction based on sales level data) through objective data from the buyer end of
of these APSs to perceived unfairness or low relationship quality in busi- the business relationship (i.e. the automobile manufacturer) at 3 differ-
ness relationships. ent points in time (time 1, 2, and 3, relating to the years 2009, 2010, and
We collected primary data using a two key-informant survey design. 2011). The two key informant approach followed in our research design,
The original questionnaire was first designed and refined in English. and the collection of objective sales data for our dependent variable are
Next, the original English version was translated into Persian and back both recommended approaches to address common method bias issues
translated into English to ensure translation equivalence. Differences (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). We also asked the auto-
between the original and the back-translated versions were then motive manufacturer to identify the extent to which they are dependent
reconciled. We initially used face-to-face interviews to pre-test the on each of the suppliers in our sample, which allowed us to analyze how
questionnaire with four managers of APSs in Iran to ensure the far the dependency of the manufacturer on the supplier affects the ex-
comprehensibility of the translated questionnaire. After a few amined relationships.
minor changes in the wording, we mailed the translated question-
naire to both the CEO and the chief marketing officer of 500 APSs 4.3. Measurements
(i.e. 1000 informants) in 2009. The common theme among these
APSs is that for all of them a particular automobile manufacturer We used existing multi-item measurement models with a strong
is a major buyer of their products. In the personal letter that psychometric test history for their validity and reliability in business
accompanied the questionnaire, respondents were guaranteed marketing research. The final set of measures is presented in Table 2.
anonymity and confidentiality of the data to reduce evaluation All constructs in our model are measured with reflective scales, in line
apprehension. with their original conceptualization (Diamantopoulos & Siguaw, 2006).
We received completed and useable questionnaires from a total Perception of fairness, following our theoretical conceptualiza-
of 326 informants. We evaluated each informant's knowledge of tion, is conceptualized as consisting of three dimensions of proce-
their APS's business relationship with the car manufacturers, as dural, interactional, and distributive fairness. All of the items for
well as their level of knowledgeability regarding the survey in gen- the three dimensions of fairness are adapted from Homburg and
eral, using a 7-point Likert scale. We dropped three questionnaires Fürst (2005), and are operationalized through three, five, and four
(i.e. informants indicating levels of 4 or less for either of these ques- items respectively.
tions). Therefore the final sample consists of 323 responses from Several different operational alternatives exist for the relationship
212 APSs, resulting in a 32.3% response rate, which is generally quality construct (for comprehensive review of the literature see
accepted as satisfactory for comparable studies. Following the ap- Athanasopoulou, 2009). Relationship quality in the literature is often
proach of Anderson and Narus (1990), we then verified that random operationalized with trust and commitment as its major dimensions
measurement errors across informants' reports are uncorrelated, (e.g. Crosby et al., 1990). Consequently, relationship quality in this
suggesting that two informants in each APS independently an- study is manifested in two reflective factors, all measured via existing
swered the questionnaire. On average our sample APSs had been items: organizational trust (Zaheer, McEvily, & Perrone, 1998) with
in business for 20 years. A total of 50% of APSs' reported annual five items and commitment (Kumar et al., 1995b) with three items.
sales of less than $50 million, 20% reported sales of $50–$100 mil- The dependence construct is adapted from Kim and Hsieh (2003).
lion, and 30% reported sales greater than $100 million. Of these The four items for this construct capture the extent to which an APS is
APSs, 36 were small companies, 93 were medium-sized, and 83 dependent on the car manufacturer. Finally, to capture the dependent
were categorized as large, based on the number of full-time em- sales variable, we used objective data, i.e. absolute sales levels, collected
ployees. We further conducted a short telephone survey about com- from the automotive manufacturer for each of the APSs in our
pany information with a sample of 40 non-respondents, which was dataset over the last three years (i.e. sales in year 2009, 2010, and
then compared with the respondent data. The results of a t-test for 2011). Given that we collected objective data for each APS in our
equality of means of these two groups suggest that non-response sample, the level of analysis is represented by the APS in its
bias is not a problem. relationship with the automotive manufacturer. By taking the
166 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171

Table 3
Mean, standard deviation, Cronbach's alpha, AVE, correlation matrix and composite reliability.

M SD α AVE Correlations

1 2 3 4 5 6 7 8 9

1 — Procedural justice 4.37 1.12 .87 .68 .87

2 — Interaction justice 4.47 1.19 .90 .65 .53⁎⁎ .90
3 — Distributive justice 4.31 1.22 .87 .63 .54⁎⁎ .50⁎⁎ .87
4 — Trust 4.50 1.25 .91 .69 .46⁎⁎ .52⁎⁎ .59⁎⁎ .92
5 — Commitment 4.93 1.36 .93 .82 .59⁎⁎ .56⁎⁎ .65⁎⁎ .56⁎⁎ .93
6 — Dependence 4.73 1.77 .92 .75 .20⁎⁎ .20⁎⁎ 24⁎⁎ .29⁎⁎ .28⁎⁎ .92
7 — Sales t1 2.97 1.23 NA NA −.12 −.01 −.16⁎ −.18⁎⁎ −.15⁎ −.26⁎⁎ NA
8 — Sales t2 3.37 1.25 NA NA .01 .05 −.03 −.06 .01 −.24⁎⁎ .82⁎⁎ NA
9 — Sales t3 3.85 1.71 NA NA .22⁎⁎ .27⁎⁎ .20⁎⁎ .19⁎⁎ .24⁎⁎ −.12 .58⁎⁎ .71⁎⁎ NA

Notes: bold numbers on the diagonal show the composite reliability; lower diagonal represents correlation; sales figures are multiples of $10 m.
M represent mean.
SD refers to standard deviation.
AVE refers to average variance extracted.
α refers to coefficient alphas.
⁎ p b .05.
⁎⁎ p b .01.

averages,1 we combined responses for those APSs where two infor- of structural equation modeling that is used on repeatedly measured
mants returned the completed questionnaires (n = 111), leaving dependent data to model individual growth trajectories (Preacher,
101 APSs with only one informant, thus creating an overall sample Wichman, MacCallum, & Briggs, 2008). LGCM is used to reveal the tra-
size of 212. We assessed interrater reliability between the two in- jectories for those latent constructs that are specified and observed as
formants by calculating the intra-class correlation coefficient (ICC) a function of the same item across multiple time points (Bollen &
(McGraw & Wong, 1996). The ICC across scales ranged from .65 Curran, 2006; Duncan et al., 2006). It has been argued in the literature
to.78 (p b .01). that LGCM is one of the most powerful and informative approaches
We took several steps to evaluate the robustness of the measures. for the analysis of longitudinal data (Byrne, Lam, & Fielding, 2008;
First, we performed a confirmatory factor analysis on our sample Jaramillo & Grisaffe, 2009). LGCM has several advantages compared
using the maximum likelihood method in LISREL to evaluate the mea- with more traditional methods of the analysis of growth curves such
surement model. We limited each of our 24 measurement items to as autoregressive and simple difference scores. LGCM is performed
load onto its pre-identified factor and correlated each factor with all using structural equation modeling approaches and therefore shares
other factors in the model (Hair, Black, Babin, Anderson, & Tatham, the same strengths with regard to its statistical methodology (Duncan
2010). Our purified measurement model suggests a good fit with the et al., 2006; Preacher et al., 2008). It has the ability to provide within-
data: χ2(df = 237) = 411.95 p b .01, CFI = .98, IFI = .98, NFI = .95, case and between-case models of individual growth within the same
NNFI = .97, SRMR = .047 and RMSEA = .058, 90% confidence interval study, hence LGCM can test the adequacy of the hypothesized growth
for RMSEA = (0.048; 0.068). All item loadings are significant (p b .01) form by incorporating time-varying covariates. In addition, by develop-
and ranged between .71 and .95, thus supporting convergent validity ing a common growth trajectory, LGCM rules out cohort effects (Duncan
(see Table 2). Both composite reliability (Fornell & Larcker, 1981) and et al., 2006). Moreover, LGCM accounts for measurement errors and dif-
Cronbach's alpha are .87 or above, indicating good internal reliability ferent residual structures; and has the capacity to test complex relation-
for all the constructs in our study. We provide the descriptive statistics ships including mediation and moderation tests (Bollen & Curran,
and correlations in Table 3. 2006).
We confirmed discriminant validity by calculating average variance
extracted (AVE) for each construct (see Table 3) and verified that it was 5. Model specification
higher than the squared correlations for all possible pairs of constructs
(Fornell & Larcker, 1981). In addition, following Anderson (1987), we To develop and test our LGCM, we used LISREL and followed the
analyzed all pairs of constructs in a series of two-factor CFA models two-step approach explained by Bollen and Curran (2006). In the first
(the f coefficient in model one was set as free, while it was set to unity step, we built an unconditional LGCM (i.e. within-case model) compris-
in model two) and performed a χ2-difference test on the paired nested ing two constructs, namely sales level and sales growth. These two con-
models. In all pairs the critical value (Δχ2(df = 1) = 3.84) was exceeded, structs were then fitted to the repeatedly measured sales variable to
further supporting discriminant validity. model intra-case change and simultaneously examine between-case

4.4. Data analysis

We used latent growth curve modeling (LGCM) for our data analysis
regarding the impact of perceived fairness and relationship quality on
longitudinal sales growth trajectories. LGCM is an advanced application

1
Van Bruggen, Lilien, and Kacker (2002) have suggested two alternative approaches to
the simple average approach. These are “Response Data-Based Weighted Mean” approach
and “Confidence-Based Weighted Mean” approach. We have aggregated our data using
both Response Data-Based Weighted Mean approach and Confidence-Based Weighted
Mean approach as well. Our analysis of the unconditional model suggests that all paths
that were significant in our simple average approach based model are still significant
(the weightings have slightly changed). These sets of analysis provide further confidence
in the robustness of our model and findings. Fig. 1. Unconditional latent growth curve model.
 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171 167

Table 4
Model specification and comparison of the nested models.

Model specification χ2 df Comparison of the nested models Δχ2 Δdf NFI CFI RMSEA

Model 1 (linear growth; homoscedastic residual structure) 2.8 3 .996 .999 .017
Model 2 (optimal growth; homoscedastic residual structure) 1.1 2 Model 1 v Model 2 1.7 n.s. 1 .998 1.000 .000
Model 3 (linear growth; heteroscedastic residual structure) 1.4 1 Model 1 v Model 3 1.4 n.s. 2 .997 1.000 .033

variability (Jaramillo & Grisaffe, 2009). Once the optimum growth 5.2. Conditional LGCM and hypothesis testing
model with satisfactory fit statistics and significant intercept and slope
variability was identified, we developed in a second step a conditional Once the optimum unconditional LGCM was identified, we intro-
LGCM (i.e. between-case model) to explain inter-individual differences duced both the three dimensions of fairness (i.e. Procedural, Interaction-
by adding explanatory (i.e. independent) constructs and by testing both al, and Distributive fairness) and two relationship quality dimensions
the hypothesized mediation effect of relationship quality and the mod- (i.e. Trust and Commitment) into our model (see Fig. 2). This enabled
eration effect of dependency. us to test our proposed main effects (i.e. H1 to H4) using structural
path modeling with maximum likelihood criteria. Moreover, to examine
our two moderation hypotheses (i.e. H5 and H6), we computed two in-
5.1. Unconditional LGCM teraction terms: 1) Trust × Dependence and 2) Commitment × Depen-
dence (we first mean centered item values prior to multiplication). We
To develop the unconditional LGCM, we fitted the two constructs of then linked these two interaction terms to the sales grows as our depen-
sales level and sales growth to three measures of sales in three consecu- dent construct. We also controlled our model for APS size, APS age, rela-
tive years (see Fig. 1). We then compared alternative growth models for tionship age between the APS and the car manufacturer, and macro-
sales. These nested models vary in terms of the functional form and the level fairness of the automobile industry in general (Aurier & Siadou-
residual structure of the growth curve (Eggert, Hogreve, Ulaga, & Martin, 2007).
Muenkhoff, 2011). As illustrated in Table 4, we first examined whether The results of our path analysis (see Table 5) indicate that Procedural
the change of APSs' sales to the car manufacturer over the three years justice has no significant effect on Trust and Commitment, rejecting H1a
was linear. A χ2-difference test verified that estimating a free, non- and H2a. However Interactional justice has a positive and significant ef-
linear LGCM does not significantly perform better than the linear fect on Trust (β = .39, p b .01) and Commitment (β = .26, p b .01);
model. This finding suggests that the change of sales over the last supporting H1b and H2b. Similarly, Distributive justice also has a signifi-
three years for APSs is reasonably linear. Next, we compared two nested cant effect on both Trust (β = .44, p b .01), and Commitment (β = .40,
linear LGCMs: one with different time-specific residual variances and p b .01); supporting H1c and H2c. In addition, the path from Trust to Sales
one where they were set to be the same. Our χ2-difference test favored Growth is also positive and significant (β = .13, p b .01); supporting H3.
the more parsimonious homoscedastic residual structure (i.e. the model The path from Commitment to Sales Growth is also significant (β = .26,
with the same residual variance). p b .01); supporting H4.
The covariance between sales level and sales growth is − .08 Note that the direct paths from the three dimensions of fairness to
(p b .05), which suggests that APSs with low levels of sales in year sales growth are not significant. We also controlled for the effect of
2009 are exhibiting greater rates of increase over the next years in com- three dimensions of fairness as well as trust and commitment on sales
parison to the APSs with high levels of sales in that year. In addition, the levels; all paths are not significant, and the overall explained variance
significant variances for sales level (1.48) and sales growth (.18) confirms of sales levels is only R2 = .11, suggesting that other explanatory vari-
considerable inter-company differences in both the APSs' initial levels of ables account for sales levels. Thus, in line with our hypotheses, it can
sales in 2009, and their changes between 2009 and 2011. Therefore, a be shown that our model focuses exclusively on understanding sales
more comprehensive conditional LGCM, which incorporates ante- growth trajectories and not sales levels in general. As for our two mod-
cedent constructs, can be used to explain the varying sales growth eration hypotheses (i.e. H5 and H6), our results provide support for both.
trajectories. The path from the Trust × Dependence interaction term to Sales Growth

Fig. 2. Conditional latent growth curve model.

168 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171

Table 5 interactions that take place among individuals (Wong, 2004). In such
Results of the hypothesis testings. a culture, the interaction between individual managers plays an impor-
Antecedents → Endogenous β tant role in making business decisions. Often the managers of APSs have
Procedural fairness → Trust 0.05
direct relationships with the top management of the manufacturer, and
Interactional fairness → Trust 0.39⁎⁎ decisions are made on the inter-personal rather than inter-
Distributive fairness → Trust 0.44⁎⁎ organizational level. This is in contrast to Western culture in which
Procedural fairness → Commitment 0.06 clear processes and policies guiding the interactions between organiza-
Interactional fairness → Commitment 0.26⁎⁎
tions (i.e. procedural fairness) are vital to enhancing relationship quality
Distributive fairness → Commitment 0.40⁎⁎
Trust → Sales Growth 0.13⁎⁎ (Kumar et al., 1995b). The implication of this is that we could expect our
Commitment → Sales Growth 0.26⁎⁎ results to show the counter-intuitive finding that interactional justice
Dependence → Sales Growth 0.11⁎⁎ supersedes procedural justice in the context of Iranian supplier–buyer
Trust → Sales Level −0.06 relationships. However, while such an interpretation was also sug-
Commitment → Sales Level 0.03
Dependence → Sales Level −0.32⁎⁎
gested by subsequently interviewed top managers of the automotive
Trust × Dependence → Sales Growth −0.09⁎⁎ manufacturer (see below), further research into such a cultural moder-
Commitment × Dependence → Sales Growth −0.14⁎⁎ ation of the relative effects of different justice aspects is needed.
R2: Trust = 0.45, Commitment = 0.35, Sales Level = 0.11, and Sales Growth = 0.38. Our results also suggest that both trust and commitment have a pos-
⁎⁎ p b .01. itive impact on suppliers' sales growth. It can be inferred that through
enhancing relationship quality (i.e. elevating trust and commitment in
the relationship), the suppliers' perception of the manufacturer's inter-
actional and distributive fairness can increase suppliers' sales growth. In
is negative and significant (β = −0.09, p b .01); and the path from the other words, sales growth increases when a supplier's perception of in-
Commitment × Dependence interaction term to Sales Growth is also teractional justice increases and when the supplier believes that the
negative and significant (β = − 0.14, p b .01). These results suggest outcome received from manufacturer is fair e.g. the benefits and risks
that the effect of trust and commitment on sales growth is smaller as are shared between both parties. The estimated values for the parame-
supplier dependency increases. Overall, our model explained 38.2% of ters of the unconditional LGCM indicate that the average initial level of
the total variance in sales growth as our primary dependent construct. sales in our APSs in 2009 is 2.97, and sales increase by .426 from 2009 to
2011 (note that sales figures are multiples of $10 m). Therefore, on av-
6. Implications and limitations erage, the percentage increase in sales growth for our sample ASPs is
16.67%, whereas according to publicly available data, at the same time,
6.1. Discussion the number of cars produced by the specific car manufacturer increased
by only 4.8%. This finding indicates that the sales growth in APSs is only
This study aimed to investigate the direct impact of three dimen- marginally due to the increase in the overall number of cars produced
sions of organizational justice (namely procedural, interactional, and by the car manufacturer, and that other factors are responsible for the
distributive justice) as perceived by the seller company on their trust observed sales growth. Therefore, we conclude that the suppliers' per-
and commitment in their relationship with a much more powerful ceptions of the manufacturer's interactional and distributive fairness
buyer company in an automotive industry setting. In addition, the play a key role for the APS in deciding to increase their sales to a partic-
study examined the moderating effect of dependence on the effect ular car manufacturer.
that both trust and commitment have on sellers' sales growth. In order to scrutinize this finding further, we conducted several in-
The results of a latent growth curve model analysis using longitu- depth interviews with the car manufacturer's top management team
dinal data revealed that the seller's perceptions of interactional and in 2012, including the VP for supply chain management, and the VP
distributive justice considerably enhance the levels of trust and com- for procurement management, and discussed the results of our study.
mitment in the relationship between the APSs and the manufacturer. Their interpretation (in line with our assumptions) is that the majority
However, we found that procedural justice has no significant effect of supply relationships in the Iranian automotive industry are not with
on either trust or commitment. This is surprising, since previous single suppliers. The manufacturer (i.e. the buyer) buys each part or
studies reported that procedural fairness had strong effects on rela- product category from multiple suppliers. Thus, each supplier has a
tionship quality (Kumar et al., 1995b) and organizational trust share of the total number of parts required by the manufacturer. In
(Aryee et al., 2002). such circumstances, any supplier that creates a better quality relation-
This result adds to the previous findings by Kumar et al. (1995b). ship (e.g. is seen to show high levels of trust and commitment) becomes
While they demonstrated that buyer perception of the supplier fairness more attractive to the buyer, and consequently captures a higher share
is positively associated with relationship quality, our analysis further re- of the quantity purchased.
vealed that, at least within our sample of the car industry in Iran, the In addition, due to the international trade sanctions against Iran, car
suppliers' perceptions of the buyer's interactional and distributive fair- manufacturers in the country often have to rely exclusively on domestic
ness also have a positive impact on relationship quality, as manifested sources for the supply of parts. As a consequence, this situation has en-
by trust and commitment. This finding is critical and indicates that in couraged the suppliers to enhance their capability to supply different
highly asymmetric relationships, such as a powerful car manufacturer's car manufacturers in Iran, thereby creating even stronger competition
relationship with its much less powerful APSs, it is not just the former within specific parts or product categories, as well as increasing the
that determines relationship quality. This necessitates some further dis- APSs' flexibility and thereby lowering the dependence on a specific car
cussion of ways to initially make sense of these results: One interpreta- manufacturer. Thus, capable suppliers can decrease their sales, or even
tion for the non-significant effect of procedural justice is to consider the stop selling to a particular car manufacturer when they feel that they
role of culture in the market that we studied. Iranian culture is typically are being unfairly treated. These findings therefore demonstrate
considered as collectivist in terms of orientation, norms and values. In that relying solely on the buyers' perception of fairness to assess is-
such collectivist societies, individuals strive for social harmony, possess sues of relationship quality creates ‘relational myopia’, i.e. intro-
a sense of mutual dependence, and adhere to norms of reciprocity duces a certain bias and limits our understanding of the interactive
(Mattila & Patterson, 2004), all of which emphasize the role of interac- characteristics of business relationships (Håkansson & Snehota,
tion between individuals in developing quality relationships even at 1995). Hence our results call for a reevaluation of some of the previ-
an organizational level. Thus, central to the collectivist culture are the ous research findings.
 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171 169

Our results provide full support for our proposition that the level of large buyers need to manage carefully the fairness perceptions of their
the APSs' dependence negatively moderates the effects of trust and smaller suppliers, because problems in this area could decrease the
commitment on their sales growth. We find that both interaction quality of the exchange relationship.
terms (i.e. Trust × Dependence and Commitment × Dependence) have Our findings also show a strong positive effect of trust and commit-
a negative impact on sales growth. This finding indicates that when ment on sales growth, in line with previous results (Kumar et al.,
the APSs are less dependent on the buyer, an increase in the level of 1995a). In addition, our study provides empirical support for the argu-
trust and commitment though interactional and distributive justice am- ment that the effects of unfairness perceived by suppliers in business re-
plifies sales growth. This can be due to the fact that both parties are in lationships do not immediately affect sales levels. The non-significant
(perceived) equal positions. Therefore, the main factor that persuades effect of trust and commitment on sales levels (β = −0.06; 0.03 respec-
APSs to maintain (and increase) the partnership is the existence of a re- tively, both p N .05) provides evidence that sales growth, i.e. relative
lationship that is based on commitment and trust, which in turn are changes in sales, is a more appropriate dependent variable in the
based on the APSs' perception of being treated fairly by the buyer. study of fairness theory.
We also performed the moderation test based on two additional
perspectives: once based on the manufacturer's perception of depen- 6.3. Implications for managers
dence on each of the APSs (a reciprocal perspective), and once based
on the relational dependence, this being an average score derived Our findings have direct implications for the managers of both APSs
from the dependence perspectives of each of the partner (i.e. a dyadic and the buyer. These managers should understand that interactional
perspective). For the reciprocal perspective, we used the car and distributive justice are the main drivers of trust and commitment
manufacturer's level of dependency on each supplier as a variable to com- in their business relationships, hence they should have mechanisms in
pute the two interaction terms (Trust × Dependence and place that fairly share the risks and benefits between the two parties.
Commitment × Dependence). The results suggest that both interaction In addition, as the literature suggests, those involved in these relation-
terms positively moderate the impact of trust on sales growth (β = ships need training in social skills that allow them to engage in empa-
0.12, p b .01) and commitment on sales growth (β = 0.15, p b .01). thetic, responsive, and courteous interactions (Wuyts, 2007).
This finding suggests that the impact of trust and commitment on For the managers of the APSs, our results indicate that suppliers have
sales growth is greater as the manufacturer's dependence on their sup- the potential to increase their sales to a particular buyer if they believe
pliers increases. Taking the dyadic perspective, we first calculated an av- that they are being treated fairly. This goal can be achieved for example
erage dependence score for each dyad, and then used it to compute the by acquiring bigger share in providing the requested parts for a particu-
two interaction terms. The result of testing our new structural model lar buyer. However, on the flip side, a supplier can perceive that it is not
suggests that relational dependence has no significant effect on sales being treated fairly. These suppliers can follow two different strategies
growth. It can therefore be argued that if our focus had been restricted depending on their individual circumstances:
to the dyadic operationalization of dependency, the conclusion would First, the aggrieved suppliers can positively address the problem and
have been drawn that dependency does not moderate the impact of invest in their relationship with the unfair buyer – despite being treated
trust and commitment on sales growth. unfairly – in the hope that the buyer will recognize their efforts in mak-
ing the relationship works, and thus being rewarded by the reciprocal
6.2. Implications for theory behaviors from the buyer. The results of our analysis suggest that trust
and commitment have a positive impact on sales growth, although
Several theoretical implications can be deduced from our study. this effect is significantly lower under high levels of dependency.
First, we found that the suppliers' perception of the buyer's procedural When the APS is highly dependent on the buyer, it cannot easily switch
fairness has no significant effect on the suppliers' trust and commitment to other manufacturers, since such changes are potentially costly and
in their relationship with the buyer. Both interactional and distributive risky. Therefore, the APS maintains its partnership (and may even in-
justice have a significant and relatively similar impact on suppliers' crease its collaboration activities) not because it has a reliable relation-
trust. We also found that distributive fairness has a stronger effect on ship, but because it has no other options. It is therefore crucially
commitment relative to interactional fairness. Moreover, our findings important for managers to understand dependency within the context
add to the body of knowledge about why dependency matters in the of their industry. Managers of APSs need to focus on the fact that their
study of fairness in business relationships. Previous studies have not ad- market may be extremely limited, in that they can potentially work
equately considered the effect of dependency on the link between fair- with only a small number of car manufacturers in a limited domestic
ness and financial outcomes in buyer–supplier relationships. We market. As such, the context may be one in which they feel that they
addressed this gap and found that APSs are in fact very aware of the ex- are highly dependent on these manufacturers. This view limits their ne-
tent to which their partners misuse their power in putting their own in- gotiation power and hampers them to the point that despite having a
terests first. Such unfairness perceptions may decrease the financial and propensity to switch, they have to maintain their relationship even
non-financial satisfaction of the APSs with the business relationship in under conditions of poor relationship quality. In such circumstance,
the short run, and increase conflict in the long run. the aggrieved supplier can continue working with the buyer and invest
To investigate this point further, we also examined the moderating in the relationship hoping that the buyer will recognize their efforts and
effect of dependency on the link between the three dimensions of fair- reciprocate it.
ness and relationship quality, using the interaction approach. The re- The second alternative for these aggrieved suppliers is to decrease or
sults of our post-hoc analysis revealed that suppliers' dependence even stop their sales to the buyer. Those suppliers that have enhanced
does not moderate the impact of these dimensions of fairness on trust their capability to work with different manufacturers can decrease or
and commitment. This finding indicates that, irrespective of their levels even stop selling to a particular buyer when they feel that they are
of dependency, APSs are highly sensitive to their perception of fair treat- being unfairly treated. In other circumstances, where a supplier has
ment by the buyer. Nevertheless, APS' dependence negatively moder- not developed its capability to serve multiple manufacturers, the ag-
ates the effect of trust and commitment on the supplier's sales growth grieved supplier can still follow this strategy because the key issue to
with the buyer. In essence, if a powerful manufacturer treats its inde- consider here is to recognize the power of dependency. Our ad-hoc
pendent APSs fairly, the latter will be more satisfied with the relation- analysis based on the reciprocal perspective, i.e. the buyer's perception
ship. Hence, they are more interested in maintaining and developing of dependence on each of the APSs suggests that the effect of trust and
the relationship, consequently leading to more successful relationships commitment on suppliers' sales growth is greater as the level of the
via the growth in sales. Therefore, to maintain effective relationships, manufacturer's dependence on the supplier increases. The direct
170 G. Zaefarian et al. / Industrial Marketing Management 53 (2016) 160–171

implication of this finding for the managers of the aggrieved supplier is Aryee, S., Budhwar, P. S., & Chen, Z. X. (2002). Trust as a mediator of the relationship be-
tween organizational justice and work outcomes: Test of a social exchange model.
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dependency and lower their sales volume temporarily. This tactic will Athanasopoulou, P. (2009). Relationship quality: A critical literature review and research
send a strategic signal to the manufacturer that should they continue agenda. European Journal of Marketing, 43(5/6), 583–610.
Aurier, P., & Siadou-Martin, B. A. (2007). Perceived justice and consumption experience
treating these suppliers unfairly, they can and will decrease the volume evaluations: A qualitative and experimental investigation. International Journal of
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buyer incurring large losses. This is a rather aggressive approach and Brown, J. R., Cobb, A. T., & Lusch, R. F. (2006). The roles played by interorganizational con-
should be considered only if other options are already exhausted. tracts and justice in marketing channel relationships. Journal of Business Research,
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Byrne, B. M., Lam, W. W., & Fielding, R. (2008). Measuring patterns of change in person-
sociated with greater sales growth for the supplier (i.e. to the supplier's
ality assessments: An annotated application of latent growth curve modeling. Journal
benefit), but also with benefits to the buyer. When contextualizing the of Personality Assessment, 90(6), 536–546.
industry from the buyer's perspective, one may argue that they can Cohen-Charash, Y., & Spector, P. E. (2001). The role of justice in organizations: A meta-
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Colquitt, J., Conlon, D., Wesson, M., Porter, C., & Ng, K. (2001). Justice at the millennium: A
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Heide, J. B., & John, G. (1988). The role of dependence balancing in safeguarding
side (to avoid common method bias), measuring perceptions of fairness transaction-specific assets in conventional channels. Journal of Marketing, 52(1),
from the car manufacturers' sides too could add more insights to the 20–35.
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loyalty: An analysis of the mechanistic and the organic approach. Journal of Marketing,
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could be shown. Therefore, further research needs to examine addition- Huntley, J. K. (2006). Conceptualization and measurement of relationship quality: Linking
al antecedents to explain sales levels as well. relationship quality to actual sales and recommendation intention. Industrial
Marketing Management, 35(6), 703–714.
Jap, S. D. (2001). Perspectives on joint competitive advantages in buyer–supplier relation-
Acknowledgment ships. International Journal of Research in Marketing, 18(1–2), 19–35.
Jap, S. D., & Ganesan, S. (2000). Control mechanisms and the relationship life cycle: Impli-
cations for safeguarding specific investments and developing commitment. Journal of
The authors would like to thank Professor Andreas Eggert and Marketing Research, 37(2), 227–245.
Professor Neil A. Morgan for the helpful guidance in the development Jap, S. D., Manolis, C., & Weitz, B. (1999). Relationship quality and buyer–seller interac-
of this research and manuscript. tions in channels of distribution. Journal of Business Research, 46, 303–313.
Jaramillo, F., & Grisaffe, D. B. (2009). Does customer orientation impact objective sales
performance? Insights from a longitudinal model in direct selling. Journal of
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Ghasem Zaefarian is Assistant Professor of Marketing at Leeds University Business School,
marketing effectiveness in business-to-business exchanges. Journal of the Academy
University of Leeds, UK. He has been awarded a PhD in Marketing from Manchester Busi-
of Marketing Science, 36(2), 174–190.
ness School, The University of Manchester, UK. He is also Associate Editor of the journal of
Patterson, P. G., Cowley, E., & Prasongsukarn, K. (2006). Service failure recovery: The
Industrial Marketing Management. His research interests include business relationships,
moderating impact of individual-level cultural value orientation on perceptions of
networks, services marketing, and quantitative methods in marketing and strategy
justice. International Journal of Research in Marketing, 23(3), 263–277.
research.
Podsakoff, P. M., MacKenzie, S. B., Lee, J. -Y., & Podsakoff, N. P. (2003). Common method
biases in behavioral research: A critical review of the literature and recommended
Zhaleh Najafi-Tavani is Assistant Professor of Marketing at Leeds University Business
remedies. Journal of Applied Psychology, 88(5), 879.
School, University of Leeds, UK. She received her PhD in International Business from Man-
Preacher, K. J., Wichman, A. L., MacCallum, R. C., & Briggs, N. E. (2008). Latent growth curve
chester Business School, The University of Manchester. She has published in journals such
modeling — Quantitative applications in the social sciences. Thousand Oaks, California:
as Journal of World Business, Industrial Marketing Management, Management Interna-
SAGE Publications Inc.
tional Review, and The Service Industries Journal. Her research is focused on distribution
Rice, J., & Huang, F. (2012). Openness in product and process innovation. International
channel relationships, intra-firm knowledge transfer, organizational performance, and
Journal of Innovation Management, 16(4), 1250–1270.
new product development.
Samaha, S. A., Palmatier, R. W., & Dant, R. P. (2011). Poisoning relationships: Perceived
unfairness in channels of distribution. Journal of Marketing, 75(3), 99–117.
Stephan C. Henneberg is Professor of Marketing and Strategy at the School of Business
Seppänen, R., Blomqvist, K., & Sundqvist, S. (2007). Measuring inter-organizational
and Management, Queen Mary University of London, UK, where he is also the Director
trust — A critical review of the empirical research in 1990–2003. Industrial
of the Business Ecosystems Research Group. He received his PhD in Marketing from the
Marketing Management, 36(2), 249–265.
Judge Business School, University of Cambridge, UK. His main research interests are in
Skarmeas, D., Katsikeas, C. S., Spyropoulou, S., & Salehi-Sangari, E. (2008). Market and
business relationships, business networks, strategic management, service infusion, and in-
supplier characteristics driving distributor relationship quality in international mar-
novation.
keting channels of industrial products. Industrial Marketing Management, 37(1),
23–36.
Peter Naudé graduated in Marketing from the University of Cape Town. After some years
Smith, J. B. (1998). Buyer–seller relationships: Similarity, relationship management, and
in industry he undertook his postgraduate studies at Sussex and then Manchester Univer-
quality. Psychology and Marketing, 15(1), 3–21.
sities. He joined the staff at MBS in 1990 and then moved to the University of Bath School
Smith, A. K., Bolton, R. N., & Wagner, J. (1999). A model of customer satisfaction with ser-
of Management as Professor of Marketing in 1999. He returned to MBS in 2005 as
vice encounters involving failure and recovery. Journal of Marketing Research, 36(3),
Professor of Marketing.
356–372.

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