Purchasing Behaviour between Organisations

The inter-organisational research tradition views loyalty as a product of buyer- seller interaction and focuses on the relationship as the unit of analysis (Morris & Holman, 1988). This strand of the literature focuses mainly on buyer-supplier vertical relationships and features in both the purchasing and supply chain literature (Vereecke & Muylle, 2006) and the marketing literature, in particular the work of the Industrial Marketing and Purchasing (IMP) group (Hakansson, 1982).

The IMP approach stemmed from a growing dissatisfaction with seller-

dominated research that treated buyer and seller separately, focusing on ways in which an active seller could manipulate the marketing mix to stimulate a passive buyer to respond. A growing body of empirical evidence was showing that industrial marketing and purchasing was dominated by stable long term

relationships between individually significant buyers and sellers (Hakansson & Wootz, 1979) and the intra-organisational tradition did not appear to be

reflecting the way that industrial marketing and purchasing practitioners actually behaved. By focusing on new buying situations and discrete purchase decisions, often of capital equipment, routine purchasing behaviour was neglected

explore and describe the nature of almost 900 buyer-seller relationships across five European countries (Cunningham, 1980), resulting in the interaction approach.

The interaction approach emphasises the buyer-seller dyadic relationship as the unit of analysis and differs from the intra-organisational research tradition in three main ways (Turnbull et al, 1996; Ford, 2004):

(a) buyers are heterogeneous and individually significant to their suppliers, (b) buyers and sellers interact to develop an offering which may be complex

and highly adapted,

(c) transactions are not isolated events but episodes embedded in a relationship where previous experiences and expectations have a significant impact.

The IMP tradition takes as its point of departure the behavioural model of loyalty where loyalty is defined in the historic purchasing record, or in this case the pattern of interactions that are present in a long-lasting relationship. The measure of loyalty is the characterisation of the relationship. The early

inductive IMP research sought to describe “the pattern of dependencies between companies, the evolution of their dealings over time, the adaptations that each made to meet the requirements of the other party, and the inter-organizational person contact that took place” (Turnbull et al, 1996). The resulting interaction model (Cunningham, 1980) provides a framework for analysing relationships in terms of:

(a) The interaction process,

(c) The environment within which the interaction takes place, (d) The atmosphere affecting and affected by the interaction.

Hakansson and Wootz (1979) rationalised the existence of long term buyer- supplier relationships to be a response to uncertainty of need, market or

transaction. Other authors have noted the role of buyer uncertainty (especially in dynamic high technology markets); switching costs due to established relationships, adaptations in products or processes, incompatibility; situational factors including purchase importance; a perceived absence of choice; and the nature of the buying centre (Gadde & Mattsson, 1987; Hallen et al, 1991; Heide & Weiss, 1995) in determining the likelihood of staying with an existing vendor. Stability or longevity are often suggested as indicators of commitment in long- term business relationships although empirical studies have questioned the notion of stability as a feature of business networks (Gadde & Mattsson, 1987; Kamp, 2005). It has also been noted that close relationships (and hence implied loyalty) may become burdensome through the costs of servicing the relationship, through high interdependency that prevents one party exiting the relationship or the opportunity costs foregone when one party to the relationship prevents another from developing other relationships. Such circumstances have been described as the “golden cage” becoming an “ugly prison” (Hakansson & Snehota, 1998).

The markets as networks approach has developed from the interaction model as the analysis moved beyond the buyer-seller dyadic relationship to consider the network of relationships within which a focal firm or individual relationship is located. The Actors – Activities – Resources (AAR) model is the primary

analytical framework encountered in the study of industrial networks (Hakansson & Johanson, 1992). Actors are those who interact within

relationships, perform activities and control resources. Activities refer to the combination, development, exchange or creation of resources by actors.

Resources are the means by which actors carry out network activities. The AAR model has also been extended to recognize that the mental models (schemas, network pictures) held by individuals and organisations have a key role in the understanding of behaviour in networks (Welch & Wilkinson, 2002; Henneberg et al, 2006).

A detailed discussion of the IMP research and the Interaction Model can be found in Hakansson (1982). The model has been criticised for its looseness (McLoughlin & Horan, 2002) and lack of consistency (Turnbull et al, 1996) with some confusion over the very definition of the term “relationship” (Mattsson, 1997). In their review of the literature of inter-organisational relationships, Cheung and Turnbull (1998) observe that the “findings are scattered” (p. 47) with research addressing the multi-dimensional, directional, structured, varied and evolutionary nature of relationships.

The model has also been criticised for being overly descriptive, for the implicit assumption that relationships are always good and should be strived for and for the focus on the dyadic relationship with little regard to the embeddedness of the relationship in the network context (Anderson et al, 1994; Hakansson &

Snehota, 1998; McLoughlin & Horan, 2002). In addition, the approach has been criticised for its over-reliance on qualitative and interpretive research

well developed with recognised difficulties in the definitions of relationship, interaction and network position (Easton, 1995b).

Several authors have questioned the evidence for the persistence of long-term stable relationships (Easton, 1992) and indeed some have presented empirical evidence suggesting high levels of turnover in the portfolio of relationships held by a buying organisation (Gadde & Mattsson, 1987; Dubois et al, 2003; Kamp, 2005). While the IMP approach provides a rich description of change in a dynamic network of relationships, it lacks a quantitative dimension to describe and predict patterns of loyalty and defection in networks of relationships.