The 'Close But Adversarial' Model of Supplier Relations in the Us Auto Industry

While cooperative buyer-supplier relations are an important source of sustainable competitive advantage, non-cooperative behavior persists widely. Reaping the full advantages of such cooperation requires an understanding of both the underlying theory as well as the context within which implementation will take place. Theoretically, as in all cooperative games, in buyer-supplier relations it is necessary to specify each player's outside options and threat points, using transaction cost analysis. Practically, it is necessary to implement strategies and design processes that maximize the value of the shared payoff and minimize the benefits and scope of opportunistic behavior. This paper tests a model in which the incentives for non-cooperative behavior are nested within a context of formal commitment, using data from the US auto industry. This 'close, but adversarial' model appears to be reasonably well supported by the data, suggesting that even within professed cooperative buyer-supplier relationships adversarial behavior persists. In contrast, a small but significant minority of the relationships were found to be characterized by high levels of trust as well as informal commitment. The results suggest specific strategies for developing cooperative supplier relations