The Causal Structure of Long-Term Supply Relationships

Industrial organization depends greatly on long-term supply relationships. Firms use this specific type of alliance to acquire or develop (complementary) competencies. These are necessary to be able to survive and be successful in an increasingly dynamic environment. Rather than studying particular features in isolation, this book analyzes the overall, underlying causal structure of long-term supply relationships. De Jong and Nooteboom develop an encompassing theoretical model that brings together important firm- and relation-specific characteristics such as trust, commitment, dependence, uncertainty, dedicated investments, and the exchange of information. The relationships between these main characteristics build the overall, underlying causal structure and determine the nature of long-term supply relationships. The model is based on an extended theory of transactions that includes trust next to opportunism and the development of competencies. The model is tested in the automobile industries of the United States, Japan and Europe. The empirical evidence indicates that there are strong similarities between the three regions in the underlying causal structure. There are differences but these differences seem small, particularly relative to the expectations one may have on the basis of perceived views of systemic differences between Japanese and Western contracting. Thus, if indeed there were large differences between the Triad's regions, there now appears to be considerable convergence towards a common underlying logic of long-term supply relationships. This source reviews the main theories, defines many concepts, offers an overview of literature on alliances, and provides insights into the statistical techniques of LISREL. Little background knowledge is required, since concepts are developed as the book progresses.