Buyer-supplier relational strength and buying firm's marketing capability: An outside-in perspective
Introduction
Marketing capability has long been recognized as a crucial determinant for the superior performance of firms (Day, 2011; Dutta, Narasimhan, & Rajiv, 1999; Morgan, Vorhies, & Mason, 2009; Nath, Nachiappan, & Ramanathan, 2010). Marketing capability enables a firm to respond effectively to customer demands in a complex market (Day, 2011; Dutta et al., 1999; Mu, 2015). Based on the resource-based view or the dynamic capability theory, most extant studies emphasize that firms have to develop an idiosyncratic marketing capability to generate competitive advantage by effectively understanding and serving their customers (Greenley, Hooley, & Rudd, 2005; Krasnikov & Jayachandran, 2008; Salunke, Weerawardena, & Mccoll-Kennedy, 2011). These studies focus extensively on discussing internal firm resources and capability bundles that contribute to strong marketing capability (Akdeniz, Gonzalez-Padron, & Calantone, 2010; Dutta et al., 1999). The studies take an inside-out perspective, which begins with looking inside at the firm and then outwards from the vantage point of developing marketing strategies (Castro, 2015; Day, 2011). However, recent studies suggest that such an inside-out perspective can lead to myopia that focuses too much on internal resources and capabilities within the boundary of the firm and constrain explorative initiatives and the adaptive learning of firms (Day, 2011; Mu, 2015; Mu, Bao, Sekhon, Qi, & Love, 2018). In contrast, an outside-in approach, which begins from the external environment (Jaakkola, Möller, Parvinen, Evanschitzky, & Mühlbacher, 2010; Saeed, Yousafzai, Paladino, & Luca, 2015), empowers the management team to make sense of external changes and leverage resources outside the firm such that the firm is better able to adapt to external market changes and close the gap between internal marketing capabilities and market complexities (Day, 2011; Day & Moorman, 2010; Mu, 2015). However, we still do not know how the outside-in approach works to turn external factors into internal marketing capabilities.
Upstream suppliers are one of the crucial external stakeholders that shape a buying firm's perception of the external environment. Marketing capability that adaptively converts resources into functional outputs in response to market changes hinges not only on the understanding of downstream customer needs but also on upstream suppliers that determine how the firm deploys resources to satisfy market needs (Greenley et al., 2005; Nath et al., 2010). While many studies focus on customer side antecedents of formulating marketing capabilities (Duncan & Moriarty, 1998; Greenley et al., 2005; Webster Jr., 1992), what a firm learns from upstream suppliers and how to organize suppliers to provide flexible products or services are largely overlooked but can significantly affect whether a firm can understand and respond to market changes. We ask in this study whether and how upstream buyer-supplier relational strength can help enhance the buyer's marketing capability. Taking an outside-in perspective and based on relational theory, we argue that strong relationships with upstream suppliers can help develop downstream buyers' marketing capabilities by providing an increased level of supplier information sharing and supplier flexibility.
Our findings in this study contribute in the following three aspects. First, our study contributes to the marketing capability literature by extending the research focus from an inside-out to an outside-in perspective. Our findings suggest that strong inter-firm relationships with suppliers can turn into intra-firm marketing capability. While previous studies predominantly focused on internal antecedents of marketing capability (Akdeniz et al., 2010; O'Cass & Ngo, 2011; Trainor, Rapp, Beitelspacher, & Schillewaert, 2011), we reveal that an external inter-firm relationship can also contribute to strong marketing capability. Second, our findings suggest two mediating channels, supplier information sharing and supplier flexibility, that can explain how the outside-in approach works in turning outside relationships into inside capabilities. Supplier information sharing and supplier flexibility make it possible for buying firms to follow the sense-and-respond model based on external environment changes, thereby turning external relationships into internal capability. Third, this study also indicates that a strong upstream buyer-supplier relationship is a necessity for building downstream buyers' marketing capabilities. Previous research focused extensively on customer factors in shaping marketing capability (Cannon & Homburg, 2001; Mithas, Krishnan, & Fornell, 2005; Wathne, Biong, & Heide, 2001). Our findings suggest that the upstream relationship with suppliers determines how well the firm can flexibly adjust their input and adaptively learn from suppliers to effectively convert resources to meet downstream needs.
The remainder of this paper proceeds as follows. First, we develop the theory and hypotheses based on the outside-in perspective and relational theory regarding how the buyer-supplier relational strength affects buyer's marketing capabilities. Second, we elaborate our research method and discuss the main findings from the empirical models. Finally, we conclude with a discussion on the theoretical and managerial implications, as well as limitations and future research.
Section snippets
Marketing capability
Marketing capability has been defined as the integrative process that converts resources and market knowledge to explore customer needs and achieve great market performance (Day, 1994; Merrilees, Rundle-Thiele, & Lye, 2011; Nath et al., 2010; Shou, Chen, Zhu, & Yang, 2014; Vorhies and Morgan, 2003, Vorhies and Morgan, 2005; Yu, Ramanathan, & Nath, 2014). The resource-based view and dynamic capabilities theory are the most prominent theories in explaining what and how marketing capabilities
Sampling design and data collection
Chinese manufacturing industries have been chosen for this study as the research context. China has the largest and most dynamic market in the world (Gao, Xie, & Zhou, 2015; Liu et al., 2009). It has also experienced dynamic transitions during the last several decades with fast growth and speeding changes (Zhou et al., 2014). Meanwhile, inter-firm relationship plays a very important role in the Chinese business context. As a result, the Chinese market provides an ideal setting for this research.
Analyses and results
We used structural equation modeling to test the hypotheses in the study. LISREL 8.80 was applied to test the model. Table 3 shows the summary statistics of all key variables. Table 4 presents standardized results of the structure model.
In the structure model, the results show sufficient model fit (Chi-square (117) = 201.83, P = 0.0000, GFI = 0.90, CFI = 0.96, IFI = 0.96, RMSEA = 0.06). Hypotheses 1 and 2 suggest that there is a mediating effect of supplier information sharing between
Theoretical contributions
As Saeed et al. (2015) suggest that the outside-in perspective enables firms to achieve competitive advantages by anticipating market changes and developing responding strategies ahead of competitors, this research investigates the antecedents and mechanism of external relationships in shaping the marketing capability from the outside-in perspective. The findings show that buyer-supplier relational strength can enhance the buyer's marketing capability through two important mediators, supplier
Conclusions
Different from the inside-out perspective, which stresses internal resources as the basis for developing marketing capabilities, this study responds to the call for shifting the focus from internal to external dynamics and developing marketing capability from an outside-in perspective (Day, 2011; Saeed et al., 2015). We examined the effect of buyer-supplier relational strength on the buyer's marketing capability and found that developing strong buyer-supplier relationships are better for
Acknowledgment
The authors thank the anonymous reviewers for their valuable comments. Also, the authors are grateful to the support by the National Natural Science Foundation of China [NSFC 71572065].
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