Inter-organizational Relationships (IORs)

Since the study takes the aspect of “relationship” as a starting point, the author must realize inter-organizational relationship in order to capture the inter-firm relationship in CSDS.

Because of been exposing to extreme competition and dynamic environment recently, many firms are faced to great uncertainty about resources flow such as capital, material, equipment, and information. Under this condition, uncertainty prompts firms to establish and manage relationships in order to achieve stability, predictability, and dependability in their relations with others (Oliver, 1990).

Inter-organizational relationships are the relatively enduring transactions, flows, and linkages that occur among or between organizations and one or more organizations in its environment (Oliver, 1990). Relationship starts with exchange behaviors in capturing critical or scarce resources between two or more organizations, which is the best way to share or learn special knowledge or skills (Baranson, 1990). By leveraging relationship among organizations, it can create competitive advantages for organization (Dyer and Singh, 1998; Kale, Singh and Perlmutter, 2000). That is to say, relationship in business environment have significantly impact on many firm’s operating strategies (Wilson, 1995).

IT can be used to easily link physical supply chain process with partners, but not

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inter-organizational relationships. Handfield and Nichols addressed that “without a foundation of effective inter-organizational relationship, any effort to manage the flow of information or materials across

the supply chain is likely to be unsuccessful” (Handfield and Nichols, 1999). Trust and commitment played necessary factors to build long-term cooperative relationship between supply chain partners (Spekman, Kamauff, and Myhr, 1998; Tan, Kannan, and Hanfield, 1998). Achrol et al. indentified commitment, trust, group cohesiveness, and motivation of alliance partnership as critical to inter-organizational strategic alliance (Achrol, Scheer, and Stern, 1990). Also, good inter-organizational relationships based on trust, commitment, and shared vision is necessary to overcome information sharing-related problems in supply chain (Bobby, MacBeth, and Wagner, 2000). And, inter-organization relationship refers to the degree of trust, commitment, and shared vision between supplier companions (Li and Lin, 2006). The table2-1 obviously presents the sub-dimensions of inter-organizational relationships from different scholars’ point of views.

In this research, following the antecedent literature studies, the author will consider inter-organizational relationships as containing three sub-dimensions: trust in trading partners, commitment of trading partners, and shared vision among trading partners.

Table 2-1 Summaries of sub-dimensions of inter-organizational relationships

Sub-dimensions of IORs Authors

Trust and commitment Spekman, Kamauff, and Myhr, 1998;

Tan, Kannan, and Hanfield, 1998 commitment, trust, group

cohesiveness, and motivation of alliance partnership

Achrol, Scheer, and Stern, 1990

trust, commitment, and shared vision Bobby, MacBeth, and Wagner, 2000;

Li & Lin, 2006

2.1.1 Trust

A number of studies have investigated “trust” in many fields in business management such as organization theory, relationship marketing, IS adoption In B2B or B2C e-commerce, and supply chain management etc. In this study, the author starts with supplier-buyer perspective to interpret the essential meaning of trust. Trust in trading companion is defined as the willingness to depend upon a trading companion in whom one has confidence. (Monezka, Petersen, Handfield and Ragatz, 1998; Spekman, Kamauff, Myhr, 1998). Trust is through faith, reliance, belief, or confidence in supply chain partner, viewed as a willingness to forego opportunistic behaviors (Spekman, Kamauff, and Myhr, 1998). Mayer, Davis, and Schoorman defined trust as the expectation that the counterpart in any circumstances will act to benefit both parties with willingness to accept the results from the actions of the counterpart (Mayer, Davis, and Schoorman, 1995). Following aforementioned definitions of trust, trust contains several necessary factors, for instance, willingness to rely on partners, mutual benefit consideration, confident to partner’s actions.

The table2-2 clearly indicates the composition factors of trust by various scholars’ views.

Most importantly, trust can stimulate favorable attitudes and behaviors (Schurr, Ozanne, 1985).For example; trust will reduce the transaction cost and promote cooperation between the involved organizations. That is to say, trust has a positive impact on maintaining the cooperative relationship (Hart and Saunders, 1997). Thus, trust has been considered by many researchers to be essential factor in most productive partner relationship (Wilson and Volsky, 1998).

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Table 2-2 Composition factor of trust Composition factor of trust Scholars

Willingness to trust Monezka, Petersen, Handfield,1998; Spekman, Kamauff, Myhr,1998

Dependency on partner Spekman, Kamauff, andMyhr, 1998

Confidence to partner Monezka, Petersen, Handfield,1998; Spekman, Kamauff, Myhr,1998

Mutual benefit consideration Mayer, Davis, and Schoorman, 1995

2.1.2 Commitment

Commitment of trading partners refers to the willingness of buyer and suppliers to exert effort on behalf of relationship (Monezka, Petersen, and Handfield, 1998; Spekman, Kamauff, and Myhr, 1998). Commitment is a durable desire to maintain a valued relationship. It includes each partner’s intention and expectation of continuity of the relationship, and willingness to invest more involvements in supply chain management (Mentzer, Min, and Zacharia, 2000). Commitment includes relation-specific investments to make both sides feel sincerity in their cooperation and thus, helps to maintain a long-term partnership (Hsieh, 2004). Commitment has been considered as the variable that can distinguish between relationships that continue and that break down (Wilson and Volsky, 1998). Commitment can implicate trusting the suppliers with proprietary information and other sensitive information. More specifically,” commitment “ups the ante” and makes it more difficult for partners to act in ways that adversely affect overall supply chain performance” (Li and Lin, 2006). Some scholar argued that commitment makes both sides of partners more willingness to work together, bear risk, and share profit until creating economic rent and synergy (Bowersox, 1990). In sum, the core conception of commitment is the extent to which partner’s involvement for lasting partnership and maximizing mutual benefit. The table2-2 clearly indicates the composition factors of trust by various scholars’ views.

Table 2-3 Composition factor of commitment Composition factor of trust Scholars

Willingness to work together Monezka, Petersen, Handfield,1998; Spekman, Kamauff, Myhr,1998; Bowersox, 1990

willingness to invest more involvements

Monezka, Petersen, and Handfield, 1998;

Spekman, Kamauff, and Myhr, 1998; Mentzer, Min, and Zacharia, 2000; Hsieh, 2004

expectation of continuity of the relationship

Mentzer, Min, and Zacharia, 2000; Hsieh, 2004

bear risk and share profit Li and Lin, 2006; Bowersox, 1990 Source: produced by the study

2.1.3 Shared vision

Shared vision between partners is identified as the degree of similarity of partner of shared values and beliefs between trading partners (Achrol, Seheer, and Stern, 1990; Lee and Kim, 1999). Shared vision is therefore the extent to which partners have belief in common about what behaviors, goals, and policies are important or unimportant, appropriate or inappropriate, and right or wrong. (Ballou, Gillbert, and Mukherjee, 2000) It is obvious that supply chain members with similar organizational cultures and should be more willing to trust their partners. Spekman et al. even suggest that collaboration within a supply chain can be achieved only to the extent that trading partners share a common

“world of view” of SCM. Organizational incompatibilities between allied organizations, in term of reputation, job stability, strategic insight, control systems, and goals, will lead to less information sharing (Mentzer, Min, Zacharia, 2000).

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