| Firm vertical relationships have received considerable attention in recent years in the relational and embeddedness approaches, yet pervasive confusion and uncertainty exist over the conception, conditions, and the benefits accrued from such linkages. The research is also known to be too diverse and scattered to provide any definitive explanations. Drawing on across the board literature reviews and extensive conversation with supply managers, I develop a conceptual model to study the concept of close ties between the manufacturers and their first-tier suppliers, identify their antecedent conditions and outcomes. I also investigate the variables that best predict the relationship formation and firm performance.;My study uses a number of theories to inform, understand and explain the formation, constitution, and the outcomes of such close linkages. The findings validate resource-based view, transaction cost economics, and resource dependence theory of organizations. The results indicate that supplier partnership is a multi-dimensional construct consists of resource sharing, commitment, extensive coordination activities, and benefit sharing. The major antecedent conditions identified are trust, service expectation, purchase importance, uncertainty, and interdependence. Among them trust between parties, purchase importance, customer service expectation and uncertainty in the production and market environment best predict the emergence of partnership. Similarly sharing of resources and capabilities, relationship continuity, and sharing of accrued benefits best explain performance outcomes (viz., customer service improvement, process improvement, and cost improvement).;The model should be useful to both customers and suppliers. Customers can use the model to get an insight into the conditions that merit and sustain closer ties. They can assess if and when partnership is a better governance alternative to market and hierarchy. Suppliers can use the model to get insights into the dynamics of close relationships and find out what is involved in such relationships and why customers may be interested in these initiatives. |
