This review of theoretical approaches shows that there is in fact a significant overlap
between the economic, managerial and sociological theories. Once the rigid assumptions of neoclassical economics are relaxed, the human psychological and sociological factors cannot be ignored. Each approach has a different emphasis but they share many common elements. They all contribute in different ways to understanding the supplier characteristics,
relationship attributes and quality and supplier performance.
Transaction cost economics focuses on the nature of the transaction, transaction costs and governance mechanisms, while AT focuses on the parties to the transaction and the costs involved in monitoring the relationship. Both AT and TCE are concerned with the
management of opportunistic behaviour arising in a relationship when one party engages the services of an independent agent. They also focus on the different costs involved in
moderating opportunistic behaviour through different governance mechanisms. In TCE, these are markets, hybrids or hierarchies and, in AT, these are different types of contract. TCE and AT see superior performance primarily arising from minimising production costs and the costs involved in managing the risks of opportunistic behaviour in exchange relations. The review has shown that TCE has a limited view of the value created through exchange relationships, especially those arising from the sharing of resources and the benefits derived from learning and developmental competencies (Lazzarini et al., 2001). Despite this, many of the constructs are common to the other theories including: relationship specific assets, uncertainty, dependence, power, trust, cooperation and opportunism, and relationship- based partnerships.
The RBV looks more specifically at value creation and emphasises that competitive advantage (performance) arises from resources and capabilities that are located with the individual firm (Coleman, 1990). The relational view and resource dependency theories extend this to focus on the resources that are accessed through relationships with other parties. The RBV also shares many constructs with the other theories, including: resources, power, interdependence, trust, commitment, cooperation and competitive advantage (performance).
Social exchange and social capital theories combined with the network view specifically analyse the structure, nature and function of the relationships themselves. Each of these theories contributes to the study of relationship quality and supplier performance in supply chains. Although these approaches focus on the structure of the relationship, they too have common theoretical constructs. These include: resources (social capital and economic), trust and cooperation. Despite the apparent differences of the theories in the literature review, there are, in fact, many similarities and they share many constructs. These essentially, describe the same concept even though the definitions have a different emphasis and description.
Table 2-12 demonstrates this by showing the common constructs and the multiple theories that utilise these. Furthermore, Table 2-13 describes each of the theories discussed in the literature review, identifies the core literature relating these, the theoretical assumptions they are based on and the key variables associated with each theory. This demonstrates that many of these ideas are common to a variety of theories and this provides a basis for the multi-theoretical approach of this research.
The literature review was able to show that other than neoclassical economics the other theories, to a greater or lesser extent, integrated assumptions from the behavioural and economic paradigms (Table 2-13). This confirms that both the economic and behavioural paradigms are necessary to explain exchange relationships. These paradigms should be seen as complimentary rather than in competition (Stern & Reve, 1980). The common constructs identified in the literature review can be used in the measurement of the supplier and relationship characteristics, relationship quality and supplier performance. This is consistent with the views of Krackhardt (1992) and Nelson (1989) who, among others, recommend a multi-theoretical approach as they believe this provides greater explanatory power than a single theory approach. The theoretical framework of this research will, therefore, draw constructs from each of these approaches, rather than limiting variables to those that a particular theory focuses on.
Table 2-12 outlines the common concepts and theoretical connections.
Table 2-12: Common concepts and theoretical connections
Construct Theories
Trust Transaction cost economics (calculative trust), game theory, relational view, resource-based view, social exchange theory, social capital theory, network theory.
Commitment Relational view, resource-based view, social exchange theory, social capital theory, network theory. Satisfaction Relational view.
Specific asset resources Transaction cost economics, game theory, the relational view, resource-based view, social exchange theory, social capital theory, network theory. Social capital resources The relational view, resource-based view, social exchange theory, social capital theory, network theory. Value Neoclassical economics, transaction cost economics (calculative trust), game theory, relational view, resource-based view, social exchange theory, social
capital theory, network theory.
Dependence Relational view, resource-based view, social exchange theory, social capital theory, network theory, resource dependence theory, network theory. Power Resource dependence theory, political economic paradigm, social exchange theory. External environment Contingency theory, transaction cost economics, network theory, political economic paradigm Opportunism Transaction cost economics, agency theory, game theory, the relational view, resource-based view, social exchange theory, social capital theory, network
theory.
Cooperation The relational view, resource-based view, social exchange theory, social capital theory, network theory.
Table 2-13: List of theories, assumptions and variables
Theories Assumptions Constructs
Economic theories
Neoclassical economic theory (Becker, 1976; Smith, Cannan, & Lerner, 1937; Veblen, 1965)
Perfect information, perfect competition, mobile resources, rational-maximising decision making, discrete market-based transactions, self-interest.
Price, marginal cost, marginal revenue, marginal utility, rational agents, profit, equilibrium and resources (land, labour, capital). Transaction cost economics
(Coase, 1937; Williamson, 1979) Bounded rationality, efficiency, rational-maximising decision making, self-interest.
Transaction costs, governance mechanism, specific assets, opportunism, dependence, power, environmental uncertainty and calculative trust.
Agency theory
(Carlos, 1992; Eisenhardt, 1989; Jensen & Meckling, 1976)
Bounded rationality,
Interdependence, rational-choice decision making, self-interest.
Contract type (behavioural or outcome based), opportunism and power.
Game theory
(Axelrod, 1984; Hill, 1990)
Bounded rationality,
Interdependence, rational choice, decision making, self-interest.
Payoffs, uncertainty, cooperation, opportunism, dependence, power and trust.
Managerial theories
Contingency theory
(Donaldson, 2001; Galbraith, 1973; Lawrence & Lorsch, 1967)
Rational maximising decision making.
Internal environment, external environment and firm performance.
Resource dependence theory Sequential satisficing decision making, bounded rationality, firm as a coalition of interests.
Resources, power and dependence.
Resource theory (Resource-based view)
(Barney, 1991; Poppo & Zenger, 1997; Wernerfelt, 1984)
Immobility and indivisibility of resources, bounded rationality, Sequential satisficing decision making.
Resources, competitive advantage, capabilities, interdependence, trust commitment and cooperation.
Relational view
(Dwyer et al., 1987; Dyer & Singh, 1998; Molina & Dyer, 1999; Morgan & Hunt, 1999)
Immobility and indivisibility of resources, bounded rationality, Sequential satisficing decision making.
Resources and capabilities, specific assets and competitive Advantage. Sociological theories
Social exchange theory
(Anderson & Narus, 1984; Emerson, 1976; Thibaut & Faucheux, 1965)
Rational-maximising decision
making and bounded rationality. Reward, resources, comparison level, reward, power, dependence, trust, commitment and cooperation.
Social capital theory
(Granovetter, 1973; Nahapiet & Ghoshal, 1998)
Rational-maximising decision making and bounded rationality.
Interdependence and social capital resources. Economic resources, cooperation and trust.
(Industrial) Network theory
(Håkansson & Snehota, 1989; Mattsson & Johanson, 1992)
Bounded rationality and sequential
satisficing decision making. External environment, social and physical resources, interdependence and network structure.