Power

Power is an important variable in exchange relationships with the terms power and control often used interchangeably (Anderson & Narus, 1984). There is considerable evidence that an imbalance in the power balance between exchange partners results in inequality in exchange benefits (Molm, 1997). Power is a multi-dimensional construct generally recognised as being either coercive or non-coercive in nature (Ireland & Webb, 2007). Coercive power involves the ability to inflict negative outcomes through punishment or threats of sanctions, and non-coercive power is the ability to provide rewards (Molm, 1997). Sources of power have also been categorised as mediated and unmediated (Table 4-3). On the one hand, mediated power sources are specifically administered or threatened by an

agent, whereas non-mediated sources are not directly administered by the agent but naturally exist in business relationships independent of specific actions. Mediated power sources, for example, include reward, coercive and legal legitimate (Maloni & Benton, 2000). These mediated bases of power represent the competitive and negative uses of the power traditionally associated with organisational theory. On the other hand, non-mediated power sources are more positive in orientation and they include expert, referent, and legitimate power (Benton & Maloni, 2005; Brown, Lusch, & Nicholson, 1995; Maloni & Benton, 2000). The use of coercive power has a negative effect on relationship quality and, in particular, on the levels of commitment. (Brown et al., 1995).

Table 4-3: Bases and types of power in exchange relationships Type of

Power

Power base Description Exchange relationship example

Mediated

Reward Buyer has ability to mediate

rewards to supplier. Buyer can give increased business to supplier or preferential terms. Coercive Buyer has the ability to

mediate punishment to supplier.

Buyer can cancel business or reduce volume purchased.

Non- mediated

Expert Buyer has knowledge, expertise or skills desired by the supplier.

The buyer knows what the customer wants or has knowledge or expertise in designing or distributing new products to final customers. Referent Supplier values identification

with the customer.

Supplier wants to be associated with the buyer due to organisational culture, business success or management style.

Legitimate The supplier believes the buyer has a natural right to influence.

Supplier views itself as a subsidiary or subservient to the buyer due to the

supplier/buyer relationship and therefore has the right to expect things done according to its requirements.

Legal legitimate

Buyer has the judiciary right to influence supplier.

Supplier and buyer have a formal sales contract or operate as a legal entity. Adapted from Maloni and Benton (2000) and (Zhao et al., 2008)

The scale items were selected to represent mediated power, which include both reward power and coercive power. The processor-mediated power scale (Table 4-4) was adapted from Brown et al. (1995).

Table 4-4: Scale items for processor-mediated power

Dimension Code Description

Reward

power Power1_Treat If we did not do what our processor asked we would not have received very good treatment from them (Brown et al., 1995). Reward

power

Power2_Favour We felt that by going along with what our processor asked, we would have been favoured on other occasions (Brown et al., 1995).

Coercive

power Power3_Profit Our processor has hinted that they would take certain action that would affect our profitability if we did not go along with their requests (Brown et al., 1995).

4.2.3

Specific assets

Specific assets are those that are of limited use in alternative supply relationships. These include physical assets, site assets, human assets and other dedicated assets (Williamson, 1979). The dilemma with specific assets is that efficient production requires investment in physical and human assets. Customising and developing specific assets enable firms to reduce production costs, meet product specifications, innovate and produce differentiated products (Dyer, 1996; Ebers & Semrau, 2015). However, it also results in dependence and this creates the potential for opportunistic behaviour. The scale items for specific

investments (Table 4-5) were adapted from Ebers and Semrau (2015).

Table 4-5: Scale items for specific assets

Dimension Code Description

Investments SpecInv1_Reqs We have made significant investments in our farm business in order to specifically meet the requirements of our processor (Kumar et al., 1995).

Knowledge SpecInv2_Know There has been a significant amount of specific knowledge we have had to learn in order to specifically meet the requirements of supplying our processor.

Modification SpecInv3_Modify We have made significant modifications our farming system specifically to meet the requirements of supplying the our processor (Kumar et al., 1995).

These items were measured using a 6 point Likert scale ranging from: Strongly agree to strongly disagree.

4.2.4

Dependence

Dependence is a central concept in buyer-seller exchange relationships (Andaleeb, 1995). It is defined as the extent to which partners need each other to achieve their goals. Critical to dependence is the importance of the resources provided by another party and the number of alternatives available. Dependence and commitment are positively correlated. If the supplier is highly dependent, he may continue to maintain the relationship and remain committed no matter which kind of influence strategy is used (Andaleeb, 1995; Ghijsen, Semeijn, & Ernstson, 2010). The scale items for dependence (Table 4-6 and Table 4-7) were adapted from Ghijsen et al. (2010).

Table 4-6: Scale items for buyer dependence

Code Description

ProcDepend1 Our current our processor is more dependent on us than we are on them. ProcDepend2 Regarding your [processor]: Our [processor] is very dependent on us. These items were measured using a 6 point Likert scale ranging from: Strongly agree to strongly disagree. Table 4-7: Scale items for supplier dependence

Code Description

SuppDepend1 As a business, we feel very dependent on our [processor].

SuppDepend2 We are more dependent on current our processor than they are on us. These items were measured using a 6 point Likert scale ranging from: Strongly agree to strongly disagree.

Table 4-8 presents descriptive variables that were used in the analysis and provided an alternative measure of dependence to the scale items.

Table 4-8: Descriptive variables for supplier dependence

Code Description

SuppDep%_Inc Approximately what % of your total farm income comes from your [processor]?

SuppOptions How many other companies are there in your area that you could potentially supply your [product] to?

4.3

Supplier characteristics

Supplier characteristics represent specific attributes that suppliers have that may influence relationship quality and/or supplier performance (Figure 3-4).

4.3.1

Customer focus

Suppliers are considered to be customer-oriented when they perform behaviours with the goal of increasing long-term customer satisfaction (Dorsch et al., 1998). The scale items in Table 4-9were adapted from Narver, Slater, and MacLachlan (2004).

Table 4-9: Scale items for supplier customer focus

Dimension Code Description

Customer

needs Customer9_Underst We try to understand customers to recognise their needs months or even years before the majority of the market may recognise them (Narver et al., 2004).

Customer1_Needs We continually try to understand the needs of our customers even ones of which they are unaware (Narver et al., 2004). Customer2_Soln We try incorporate solutions to future customer needs into to

farming operation.

Customer

adaptation Customer3_Mod We are willing to modify our production practices to meet customer requirements even if it increases our costs. Customer7_Reqs We have made significant changes to our farming operation to

better meet customer requirements.

Customer

connection Customer4_know It is important for me to know who the customer of our [product] is.

Market

innovation Customer5_Inn_Mkt We are always looking for innovative ways to market our products

Product differentiation

Customer8_Diff We are always looking for ways to differentiate our farm products and gain a premium price.

These items were measured using a 6 point Likert scale ranging from: Strongly agree to strongly disagree.

4.3.2

Supplier motivation

Motivation is an important aspect of supplier capability. Suppliers may possess significant abilities that can be used to meet customers’ needs; however, unless they are motivated to achieve this they are unlikely to deliver to the buyers’ specifications. Supplier motivation is defined as the willingness to exert high levels of effort to enhance performance and develop long-term relationships (Sang Chin, Yeung, & Fai Pun, 2006). There were no existing scales for supplier motivation in the agri-food industry. Therefore the scale items were developed following the procedure of (Churchill, 1979). These items focused on motivation to improve farm performance and stock quality.

Table 4-10: scale items for supplier motivation

Dimension Code Description

Farm SuppPerF1_Farm We continually strive to improve our farm performance. Quality stock

SuppPerF2_QLStock We continually strive to improve the quality of our stock. SuppPerF5_NoPremium We would aim to produce the best quality stock even if we

were not able to get a premium for it. Animal

production SuppPerF3_Yield We continually try to improve our farm performance by improving yields (animal production). Efficiency SuppPerF6_Effic We have consistently managed to improve our farm efficiency Higher market

returns

SuppPerF7_ImpReturns Regarding you and your farm business? We continually try to improve our farm performance by achieving higher market returns for our products.

These items were measured using a 6 point Likert scale ranging from: Strongly agree to strongly disagree.

4.3.3

Supplier ability

Supplier ability is very context specific and is relative to the ability of other suppliers. Farming is also a practical enterprise that involves considerable tacit knowledge. Supplier ability scales was developed to cover specific ability outcomes for delivery of stock numbers when required, improving farm efficiency, and implementation of new technology. They were also required to self-assess their overall farm management ability. Though self-

assessment of these scale items by individual farmers is likely to produce inflated values the relative values are likely to produce consistent differences in ability.

Code Description

SuppAbil1_Qual Compared to other farmers how would you rate your ability to deliver the numbers of stock when required. SuppAbil2_Mgmt Compared to other farmers how would you rate your overall farm management skills. SuppSuppAbil3_Eff

Compared to other farmers how would you rate your ability to reduce production costs and increase farm efficiency.

SuppAbil4_Inn Compared to other farmers how would you rate your ability to implement innovation and new technology. These items were measured using a 6 point Likert scale ranging from: Strongly agree to strongly disagree.

4.3.4

Self-direction

The concept of self-direction is derived from the work of Schwartz (1992) who describes ten universal values which include: power, achievement, hedonism, universalism, benevolence, self-direction, tradition, conformity and security. Schwartz and Bilsky (1990) define self- direction as independent thought and action involving choosing, creating and exploring. In this way, self-directed suppliers have independent thought and action and have a greater sense of mastery and control over their destiny. Self-direction is similar to the concept of

internal locus of control. People with an internal locus of control attribute causality to themselves, and believe they have agency over circumstances (Albert & Dahling, 2016; Lefcourt, 2014). The scale items for self-direction are shown in Table 4-11

Table 4-11: Scale items for supplier self-direction

Code Description

SelfDirect1_ProfitR The reverse of: the main things that affect our farm profitability are outside of my control (eg weather, price).

SelfDirect2_ProdR The reverse of: the years when the farm has shown poor production or profit have been due to circumstance totally out of my control.

SelfDirect3_ConstrR The reverse of: there is little room to make improvements in our farm operation due to natural production constraints.

These items were measured using a 6 point Likert scale ranging from: Strongly agree to strongly disagree.