When are contracts and trust necessary for innovation in buyer-supplier relationships? A Necessary Condition Analysis

Wendy van der Valk, Regien Sumo, Jan Dul, Roger G. Schroeder

Research output: Contribution to journalArticlepeer-review

29 Scopus citations

Abstract

Main stream research predominantly views contracts as being sufficient for (i.e., driving) performance. In contrast, necessity-thinking implies that contracts allow performance to exist: if the necessary condition is not in place (at the right level), the desired performance will not occur, irrespective of other drivers of performance. Statements implying necessity are common in supply management research; yet, to date, an appropriate tool for testing such statements has been lacking. This article makes the case for the newly developed Necessary Condition Analysis (NCA) method, and applies it to data on forty-eight buyer-supplier service outsourcing relationships to explore the necessity of contracts for a specific relationship outcome, i.e., supplier-led innovation. Also, the necessity of trust is explored, as contracts are implemented within a broader context that involves social characteristics of relationships. The results show that successful relationships, i.e., relationships that have high levels of innovation (as observed in the top ten percent of the relationships studied) must necessarily have contracts with at least medium levels of contractual detail, as well as the highest levels of trust. In relationships with low levels of innovation (i.e., innovation levels that can be achieved by about half of the relationships), neither of the conditions (i.e., contracts and trust) is necessary. As such, applying NCA results in a fundamentally different understanding of the relationship between innovation, and contracts and trust. The results indicate that managers should first ensure the right levels of these necessary conditions, before giving attention to other factors that (on average) produce innovation.

Original languageEnglish (US)
Pages (from-to)266-277
Number of pages12
JournalJournal of Purchasing and Supply Management
Volume22
Issue number4
DOIs
StatePublished - Dec 1 2016

Bibliographical note

Funding Information:
The research underlying this article was conducted with support from the NEVI Research Foundation (NEVI Research Stichting; Project: Performance-Based Contarcting in Service Triads). The authors gratefully acknowledge the valuable feedback provided by Christoph Bode, Gerwin van der Laan, and Niels Noorderhaven; the attendants of the ISCM internal speaker series (October 2014); the attendants of the 2014 Annual IPSERA conference in Pretoria (South Africa) and the Journal reviewers. The authors furthermore acknowledge NVDO for their participation in this research and Frank Verbeeten (VU University and Utrecht University) for allowing the use of his incremental innovation scale.

Publisher Copyright:
© 2016 Elsevier Ltd

Copyright:
Copyright 2016 Elsevier B.V., All rights reserved.

Keywords

  • Buyer-supplier relationships
  • Contracts
  • Innovation
  • Necessary Condition Analysis
  • Trust

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