For many buying firms, how to effectively manage the multitude of suppliers remains an important and challenging agenda. The existing body of literature offers buyer–supplier relationship typologies that are straightforward and easy to apply in practice. Among those, the most prevalent classification scheme for buyer–supplier relationships may be the cooperative–adversarial dichotomy (Carter et al. 1998; MacDuffie and Helper 2003; Monczka et al. 1998).

The conventional wisdom says that a cooperative relationship is synonymous with closely tied partnership, and an adversarial relationship is equated with arm’s length transaction (e.g., Jap 1999; Wilson 1995). Building on this literature, we submit that today’s complex landscape of buyer–supplier relationships calls for an expanded typology of buyer–supplier relationships. In today’s hypercompetitive and fast-shifting business environments, companies employ more subtle and sophisticated strategies in navigating their external relations. For example, just because two companies, as a buyer and a supplier, seem to maintain a cooperative relationship does not necessarily mean that they are closely coupled in their operations. Likewise, a pair of highly interdependent buyer and supplier may not necessarily hold a positive attitude toward each other. We see similar patterns in individual-level relationships; two people working together all the time do not necessarily have a cooperative relationship. Perhaps, as in a bad marriage, two people can be operationally tied together, while harboring grudges against each other.

As we explain in this chapter, in buyer–supplier relational settings, a cooperative and adversarial relationship is really different from a closely tied and arm’s length relationship, respectively. To put it differently, there are two distinctive relational aspects that come into play in combination in or within a firm’s strategies and actions toward its external partners. Theoretically, the aforesaid cooperative–adversarial dichotomy model is limited to capturing just what we describe as “relational posture” in buyer–supplier relationships. To expand the prevailing framework, we put forth and incorporate another intrinsically different relational aspect—what we label as “relational intensity.” Consequently, in our expanded relationship typology framework, as depicted in Fig. 1, we consider concurrently two theoretically distinct relational dimensions: relational posture and relational intensity. In an earlier article published in the Journal of Supply Chain Management, we offer an analytical demonstration of the orthogonality of the two relationship dimensions (Kim and Choi 2015).

Fig. 1
figure 1

Notes Reprinted from Kim and Choi, Journal of Supply Chain Management, 51, 61–86 (2015)

Expanded buyer–supplier relationship typology (Kim and Choi 2015).

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The relational posture (i.e., cooperative–adversarial) dimension, building on the conventional typology, captures two relational parties’ affective attitudes and behavioral motives toward each other (Dyer and Singh 1998; Johnston et al. 2004). The newly added relational intensity (i.e., closely tied—arm’s length) dimension addresses interfirm operational coupling and transactional volumes. That is, it reflects the degree of economic interdependence between two exchange partners (Dyer and Nobeoka 2000; Hinings et al. 2003). Our expanded relationship typology as such integrates the two theoretically non-overlapping dyadic dimensions with different anchors, therefore yielding four archetypes of buyer–supplier relationship—deep, sticky, transient and gracious (Kim and Choi 2015).

The four archetypes embody different combinations of relational posture and intensity as discussed in the preceding paragraph. Each relationship type is unique and provides different strategic and managerial implications. In what follows, we provide a more detailed discussion of each of these four archetypes. In characterizing each, we highlight both the positive and negative relational effects. We will also illustrate pertinent real-world examples from a field research conducted by the authors. While these archetypes have been published in Kim and Choi (2015), these illustrative examples have not been published previously.

1 Deep Buyer–Supplier Relationship

In a deep type of buyer–supplier relationship, the two exchange partners are closely synchronized in their everyday operations, usually via specialized interfirm interfaces, and remain highly responsive and accommodating to each other (e.g., JIT manufacturing). Consequently, this type is characterized by efficient interfirm communications and well-coordinated production. Since both parties typically have a significant portion of their resources dedicated to the relation, they become strongly interdependent on each other, both operationally and strategically.

This type of buyer–supplier relationship has been well documented in the literature. In a field study we conducted with an automotive original equipment manufacturer (OEM) and its supply base, we observed several deep buyer–supplier relationships. For instance, a power-train system supplier has been working for this OEM for about five decades. According to a VP from the supplier, the two companies would work closely together on various business fronts—from daily operations to long-term product planning and market strategies. This supplier’s level of economic dependence on this buyer is as such quite high—more than half of its annual sales come from this OEM. The supplier would even develop new buyer-specific technologies. As such, the buyer is also heavily reliant on this relationship for the quality and safety of their final products.

Another example of this deep relationship type comes from a seating system parts supplier. For this firm, the OEM is among the biggest buyers in terms of sales volume. From a strategic standpoint, the OEM is perhaps the most important partner—the two firms collaborate on various business aspects, and thus, as this supplier acknowledges, their joint discussions and ideas have a significant impact on how the supplier executes daily operations as well as its longer term plans. Over the course of relation, they have built a deep mutual understanding of the technical standards and operational procedures the buyer had prescribed, particularly for problem solving, which has now become part of the key management principles this supplier had internalized. The supplier has developed high respect and trust in the buying firm. A VP of this supplier quipped, “Our relationship is deep and wide, and we will never shut each other down.”

This type of relationship typically goes deeper than formal relational contracts. The benefits of such a relationship may range from the orderly material flows to consistent product quality and lead time to the elimination of unnecessary transaction costs (Helper 1990; Sako and Helper 1998). Overall, by minimizing uncertainty and maximizing efficiency of interfirm interactions, this deep type can ensure relational stability. Both exchange parties would refrain from exploiting each other’s goodwill and keep cooperating with each other. It would be in their best interest not to jeopardize the relationship. In that regard, at the individual relationship level, this deep type may be likened to a relationship between two close colleagues who have been working together for a long time. They understand each other and can efficiently work together when given a new project. The setup cost for taking on a new project would be comparatively low.

However, in our field study, we also observed some downsides of this type of buyer–supplier arrangement. In particular, two parties in such a relationship tend to, wittingly or unwittingly, stick to their mutually familiar ways of doing things when dealing with matters in their relation; that is, they can suffer from relational lock-in or what we might call over-embeddedness symptoms. Such two parties are highly embedded within and reluctant to deviate from “the ways things work.” An unproductive facet of such tendency is the parties’ complacency with the status quo and resistance to changes. Consequently, the buyer might complain that the supplier would appear to be increasingly rigid and set in its way. And of course, the supplier might say something similar as well.

2 Sticky Buyer–Supplier Relationship

In a sticky type of relationship, the buyer and supplier regard each other in essence as a necessary evil. On the one hand, both parties have invested, to some extent, in their relationship and their operations are closely interwoven. On the other hand, this relational type usually involves contractual disparities. A buyer can impose undue demands on the long-term supplier (Mudambi and Helper 1998). Typically, the more powerful party is interested in boosting transactional efficiency at the expense of the weaker party—for instance, the buyer may force the supplier into capital investments (e.g., vendor-managed inventory) to streamline the sourcing process or mandate aggressive cost reduction and quality improvement programs. The supplier may grudgingly comply, while it looks for opportunities to get back at the buyer. At the individual level, this sticky type of relationship bears resemblance to that between an autocratic boss and a subordinate, who is grappling with the top-down style of the boss. They are supposed to meet regularly and work together closely. However, in private, they may not like each other and wish to end their relationship.

In our field study, we observed this type of buyer–supplier arrangement from the automotive OEM’s relation with a brake system supplier. Their business relationship, although long term (dating back to the mid-1980s), has been periodically punctuated by multiple different programs. Each time a new program was kicked off, two firms re-negotiated their contracts, which required some capital investments mostly from the supplier’s part. Meanwhile, the buyer has maintained a multiple-sourcing policy on the related products, keeping the supplier under competitive pressure. Further, over the course of time, there had been several trust-breaching events, where the supplier was used just as a benchmark for the buyer’s pre-development and was not given a fair chance for new businesses. The supplier has since stayed wary whenever requested by the buyer for any extra work beyond what their contract stipulates. Their position was guarded—they took extra steps to check if it is a real opportunity or just a market study for the buyer. As one sales director put it, “the learning curve (in this relation) has been extremely painful.”

Another example involves an abrasive insulation parts supplier of the OEM. Since the early 1980s when their business relation first began, this OEM has grown to be one of the biggest accounts for this supplier (accounting for 10–15% of its sales for the related products). At the same time, as the supplier had made specific investments over time, it found itself increasingly embedded in this relation. The firm now supplies almost every product line of this auto OEM. Even so, the supplier remains unsure if the buyer thinks the same way about their relation. This OEM, according to the interviews with the supplier, seems to view this business tie just as expendable. One manager of this supplier noted, whenever a new product idea or prototype came along, they would run it by the buyer, but, for the most part, they only got a lukewarm response. This buyer seems to act, according to these people, as if it knows exactly how to play the supplier. Also, over the course of relation, the supplier has experienced overall relational inequity, particularly when it came to their contracts. “According to the contract, even if something goes wrong in this relation, they (the OEM) would not be held accountable at all for almost anything,” said the account director of this supplier.

In such a sticky relationship, typically the more powerful party would turn to adversarial tactics to appropriate a greater share of any extra profits (i.e., relational rents). In an extreme case, the buyer may audit the supplier to prevent it from earning excessive profits and to re-allocate the created relational rents disproportionately in its favor (Yli-Renko et al. 2001). Since such actions would necessarily invite pushbacks from the weaker party, the dominant one would frequently engage in a power play, as opposed to negotiations. The weaker, nonetheless, rather than readily surrendering, would likely attempt to get even in covert ways, for instance, by purposefully withholding critical parts and information or deviating from prescribed quality procedures. As such, this sticky type of relation does not always benefit the power-advantaged party; it can make the party vulnerable to the partner opportunism. The power-disadvantaged party, with intimate knowledge of the other party’s needs, can effectively engage in covert retaliation. This relationship type can potentially cause a vicious cycle of vengeful opportunism.

3 Transient Buyer–Supplier Relationship

In a transient buyer–supplier relationship, the two parties’ business engagement is largely on the basis of their short-term preferences. That is, it is aimed at meeting each other’s expediency and matching business requirements. Both parties would have alternative business options and are typically clear about how they should interact in their relation. The dealings, mostly based on discrete contracts, are usually struck via competitive tendering and aggressive price negotiations. They relate to each other with little motivation and forward thinking for meaningful joint activities (Anand and Ward 2004). Instead, they adhere to contractual terms, leaving open competitive markets as the recourse in case their relation fails. Consequently, it is largely confrontational or, at best, indifferent. This transient type of relationship may parallel the spot exchanges in such markets as a farmers’ market or Craigslist between basically “unknowns” or just “acquaintances.” Both parties may repeat transactions irregularly or on an ad hoc basis, while they continue to take a suspicious and vigilant stance toward each other due to a lack of or just marginal levels of knowledge about each other’s personal traits and history, and unpredictability about each other’s future behavior.

In our field research, one example comes from a suspension system parts supplier. Fundamentally, this supplier never felt secure in its relation with the OEM. Since starting its business tie with the OEM in the early 2000s, the supplier has been kept under pressure to survive every year the buyer’s supplier evaluation to remain among its sourcing options, while the buyer continued to look out for other potential sources. Per their formal contract, the buyer did not allow any negotiations on commercial matters, such as product prices and any transaction-related surcharges. Despite the supplier’s persistent call for fairer terms, whenever such an issue gets on the table, the buyer would have the final say. Nonetheless, this supplier seemed not as much concerned with such rather harsh working relationship. For this supplier, its business tie with the OEM was not economically crucial. A sales manager of the supplier said, “We can survive without them [the OEM].” They held a view that their relationship with this OEM can go sour anytime. What they focused on in this relationship was making sure they did not get shortchanged.

Another example is the OEM’s relation with a multimedia systems’ supplier (radios, amplifiers, navigation, etc.). This supplier custom makes products based on the buyer’s particular design and product requirements. Even so, the two companies were not closely tied from an operational standpoint. The orders typically came for limited product lines and in small volumes/batches only. Most of the commissioned work did not require any specific investments on the supplier part and could be fulfilled using its existing capabilities. Due to the purely transactional nature of the business tie, the buyer tended to impose and work on their own preferred schedules, with almost no intent to negotiate timelines for planning, pilot testing, system implementation and so forth. As a result, the two firms frequently disputed over those issues. However, for the most part, the supplier had a limited voice and influence on the entire sourcing process. Moreover, the buyer occasionally forced the supplier into joint works with other firms (i.e., other suppliers) to its advantage.

In general, two firms in a transient relationship would likely have only a casual understanding of each other’s business strategies, needs and internal operations. Consequently, such relational tie would experience high ambiguity when facing partner behavior. Even so, this relational type may afford some strategic advantages for the buying firm, particularly in terms of problem solving. The supplier, having been kept at bay from the buyer, is most likely to have had exposure to a variety of encounters and perspectives through its conceivably broad business connections (Stam and Elfring 2008). Consequently, the supplier would likely become relatively adaptable when facing various problem situations, rather than tending to keep to a particular course of action (Volberda 1996; Zahra and Filatotchev 2004). By tapping a wide array of opinions through this type of relation, the buyer would be better able to deal with changing rules of business competition and potentially become more resilient in the long run.

4 Gracious Buyer–Supplier Relationship

In a gracious type relationship, the buyer and supplier do not work intensively together but hold each other in high regard and in goodwill. Their business deals are struck only periodically and each in short term, but they tend to occur endearingly and collaboratively. The supplier in such a tie is typically resourceful and technologically independent, having diversified offerings and a balanced customer base. In general, both parties retain autonomy in their respective operations while remaining amicable and courteous toward each other. Such posture from both firms is typically calculated considering the shadow of the future in anticipation of greater benefits than what the current state can bring. This gracious type may be akin to an individual-level relationship involving two neighbors living in the same cul-de-sac and staying friendly to each other. They share little in common other than they live in the same neighborhood. As different needs arise, the two can help each other resorting to their own respective expertise. Perhaps one is in health care and the other is in construction.

Some examples surfaced in our field research. Notably, there is a supplier with specialty in filming technology, which had been working for the OEM since the early 2000s. For this supplier, this OEM is essentially not a major customer. Also, their working relation had been primarily based on intermittent project-based contracts. Nonetheless, the OEM kept this supplier in high regard. The supplier owned a proprietary technology, called hydro-graphics, which was rather peripheral to the functioning of the final product, but affected the finish of the product that came in contact with the consumers. Further, due to the technology’s applicability potential, the supplier created a diverse customer base, spanning many different industry sectors. Accordingly, this OEM had little operational control and relational leverage. At the same time, this supplier valued this relation because working with a reputable global OEM would lend credibility to its reputation and possibly open up other opportunities down the road.

Another example is an electric air pump supplier. As with the preceding case, for both firms, the other was not a major business partner. This supplier was not the biggest source for the buyer in terms of total annual purchases. However, this was not because the supplier is less reliable or competent, but rather in large part due to the supplier’s corporate-level strategic priority for a balanced customer base. This supplier deliberately refrained from being occupied for its time and resources by any single customer. They believed that having a well-blended group of strong customers would help nurture the creation of varied perspectives and capabilities, not to mention minimizing the risks involved in R&D activities. In fact, this supplier had often utilized its diversified customer base as a test bed for a new technology or product idea, and this was how it had recouped its R&D expenditures. As the supplier’s plant manager put it, “We can afford to take a chance on innovations.” Apparently, this supplier was “not a cost leader,” as one purchasing manager of the auto OEM said, since this supplier pursued only profitable products. Its technological acumen spoke volumes about why the buyer valued this relation. “We’ve learned something useful from them,” added a purchasing manager from the OEM. Also, a director of the supplier remarked that in their relationship so far, some lucrative synergies had been realized through inter-divisional collaborations between the two firms.

In a gracious buyer–supplier relationship, neither party is strongly reliant on the other from the operational standpoint. Both parties would rather remain in a holding pattern to see if their business tie would pay off in any foreseeable future. For the buyer, this type of supplier tie may be the most favorable setting for realizing breakthrough innovations. The relation’s arm’s length nature increases the likelihood of the supplier having an exposure to otherwise far-flung resources or business circles (Rosenkopf and Nerkar 2001). Further, the party’s inherent resourcefulness may translate into its vigorous engagement in exploration and boundary-spanning activities outside the focal tie (Fleming et al. 2007). That is, the supplier holds enough potential to serve as a conduit for novel ideas and non-overlapping information. This relationship type will benefit the supplier too. A positive tie to a reputable manufacturing firm can be a springboard for broadening its horizons beyond its current business spheres. At the individual level, such a relationship can promise similar effects. Often, we tend to hear and access novel ideas or new opportunities from our neighbors who are in unrelated lines of work.

5 Discussion

Our goal in this chapter is to take us beyond the conventional wisdom that close, collaborative business relationships are good, whereas arm’s length, adversarial relationships are bad. For almost every company, managing its relationship with its partner, be it supplier or buyer, is an essential part of the ongoing business process and management strategy. Particularly, buyer–supplier relationships almost invariably involve conflicts of interest and require careful strategic considerations and actions. Two parties in such an arrangement, however long and closely working together, remain self-seeking and tending toward their own profits. In general, firms on the supplier side have to navigate a set of different—often disagreeing—demands of their diverse customers. Firms on the buyer side need to find a balance between building a deep relationship with their individual suppliers and being mindful of the competitive landscape among them.

There is no single, ideal way to manage buyer–supplier relationships. Building a “deep” type of relationship, for example, may work in some cases but not in others. As noted, for instance, a deep type can offer stability but it also generates rigidity in the relationship. Each of the archetypes in our expanded relationship topology has its own pros and cons when it comes to relational outcomes. Thus, for the buyer, having an adequate understanding of potential benefits and pitfalls for each possible relationship type is of strategic importance, particularly in terms of creating a balanced supplier portfolio. For companies to successfully manage the intricacies of such relationships, first and foremost, they should be able to effectively discern and classify their various relationships. In this chapter, we discuss two relational dimensions—posture and intensity—to use as two normative yardsticks against which to assess each relationship. Making sense of how the two relational aspects play out both individually and in combination would help firms to make better and more reasonable predictions as to what a given specific relationship can do now and how it might unfold down the line.

We also note that every socio-economic relationship changes or evolves over time, and of course, various buyer–supplier relationships are no exception. As a buyer and supplier continue to face and cope with shifting expectations and conditions in their respective markets or industries, both parties would be compelled to consider and make changes to their existing relationship. However, as noted, the proposed relationship typologies in our framework represent essentially archetypes—in other words, under relatively stable environmental conditions, a given particular buyer–supplier arrangement would tend toward one of those relational states and stay steady in the particular state. However, this also implies that under certain industry landscape changing conditions or individual firms’ pressing strategic needs, firms would have to adjust their existing relations. Understanding such conditions is beyond the scope of our focus in this chapter, but what may trigger a shift of relationship types is an intriguing question and worth exploring.

Further, at a casual glance, the four relationship archetypes in our framework may be associated with different material or sourcing categories. However, we argue otherwise. We submit that the individual archetypes do not necessarily dovetail with any particular material or sourcing attributes. Although the relational intensity dimension in our framework appears to connect, to some degree, to sourcing type or material nature, it is merely one of the many factors that would affect the dimension. For instance, as indicated previously in the illustrated cases for the sticky type, brake systems are in general considered highly critical for consumer safety, whereas abrasive insulation parts, while falling in the same archetype, do not seem to be as much critical from the buyer’s standpoint. Also, while both suspension system parts and multimedia systems are quite important in determining driving comfort and consumer satisfaction for cars, the related suppliers were both classified to be in a transient relation with the OEM. That is, there are many other factors affecting the overall characteristics of a given buyer–supplier relationship, other than the nature of the involved materials.

Using the expanded relationship typology we put forth here in the buyer–supplier relationship context (Kim and Choi 2015), buying companies can have a more holistic view of their supplier portfolio. Specifically, through more effectively categorizing the full spectrum of supplier relations, they can assess individual supplier’s merits and risks in a more realistic way and potentially better manage their entire supply bases and extended networks.