An Exploratory Study on the Suppliers' Strategy for Developing Long-term Relationship with Buyers

We explore the determinants of long-term relationship between the buyer and the supplier to help suppliers develope a strategy to build long-term relationship with their buyers. Based upon an extensive literature review, we propose three droops of independent variables which may affect long-term relationship, including (a) environmental factors (product complexity, product importance, source dependence, price sensitivity), (b) relational factors(trust, commitment, satisfaction, intention of expansion), (c) operational performance(quality, delivery, cost capability, technical knowhow). The buyer's actual period of relationship with its main supplier is used as a dependent variable. Using hierarchical multiple regression analysis, we empirically test hypotheses, analysing a sample of 290 manufacturing firms in the U.S. The statistical results indicate that the buyer's source dependence, price sensitivity and the supplier's commitment play a significant role in establishing long-term relationship between the buyer and the supplier. However, the supplier's cost capability and technical knowhow in operational performance negatively affect long-term relationship in contrast with our hypotheses. Due to this controversial result, we divide the sample group Into dual sourcing and multiple sourcing environments and reconduct regression analysis in a post hoc manner. The findings show that the supplier's cost capability and technical knowhow are negatively associated with the length of relationship only in the multiple sourcing environment. The results may confirm that both parties' opportunistic behavior is more salient in the multiple sourcing environment than in the single sourcing environment.