Several researches have been done in literature when analyzing the Buyer and Supplier relationship (BSR), in regard to those key drivers that can lead to a better supply chain performance (March, 1991; Bucklin and Sengupta, 1993; Dyer and Singh, 1998; Jap, 1999; Sarkar et al. 2001; Schildt et al., 2005; Rajagura and Matanda, 2013; Leischnig et al., 2014; Paulraj et al., 2014; Saenz et al., 2014; Berger, 2015). Within the (more) contemporary studies conducted in supply chain and business marketing, absorptive capacity appears to be one of those key drivers that also plays a strategic role between buyer and supplier.
Absorptive capacity (ACAP) was firstly formulated by the pioneers Cohen and Levithal (1990), and consecutively developed over the years in literature, with an emphasis on intra-organizational activities (Dyer and Singh, 1998; Zahra and George, 2002). ACAP is defined as the ability of a company “to acquire external knowledge, assimilate it and then exploit this knowledge into innovative capabilities” (Cohen and Levinthal, 1990, p. 135). This can likewise be implemented through business exchange or even partnership between two organizations for achieving competitive advantage (Cohen and Levinthal, 1990; Dyer and Singh, 1998; Jap, 1999; Saenz et al., 2014).
An ACAP business exchange or partnership could exist to fill the gap of in-house necessity to acquire new knowledge (Saenz et al., 2014; Schildt et al., 2005) and more effectively “scarse environmental resources and opportunities”, due to increasing external market competition (March, 1991, p. 81). Thus, two companies engage in interorganizational learning by recognising, assimilating and exploiting valuable knowledge from the alliance (Dyer and Singh, 1998).
The need of compatibility between the two organizations can be fundamental for the success of the alliance (Bucklin and Sengupta, 1993); indeed the similarity of norms, values, goals and objectives, “helps partners exchange information openly and capitalize on the knowledge-sharing potential offered by their capabilities” (Bucklin and Sengupta, 1993; Saenz et al., 2014, p. 22).
If the requirement of compatibility is critical for the relationship performance of buyer and supplier (Bucklin and Sengupta, 1993; Rajagura and Matanda, 2013; Leischnig et al., 2014; Saenz et al., 2014), the realization of a successful knowledge exchange, on the other hand, can be also associated to the characteristics of the other party in regards to its strategic capabilities, expertise and resources (Jap, 1999; Knudsen, 2007).
The concept of strategic complementarity represents, together with compatibility, a central component for the achievement of benefits of joint combination of strategic resources between buyer and supplier (Dyer and Singh, 1998). In fact, it has been stated from literature that complementarity of resources not only serves to initially make a “cautious” evaluation of a potential external partner (Kostopoulos et al., 2011). After forming a strategic alliance, the collaboration with a specialized individual also helps to achieve, for instance, higher levels of product development performance; the goal is providing new oppportunities to leverage the existing capabilities of the firm, and consecutively the interorganizational knowledge (Knudsen, 2007; Kostopoulos et al., 2011; Ryoo and Kim, 2015).
From the numerous studies conducted with respect to these two aspects, complementarity and compatibility have been either analized together, due to their different effects on performance along the phases of the relationship (Dyer and Singh 1998; Sarkar et al. 2001), or taken separately (Bucklin and Sengupta 1993; Paulraj et al., 2014; Saenz et al., 2014).
Sarkar et al. (2001), for example, found out that resource complementarity impacts more on project performance whereas cultural compatibility has a greater effect on strategic performance, thus they can be viewed as the two faces of the same coin. Supposedly, this suggests that, when measuring the performance as an outcome, the two dimensions contribute in different moments of the business relationship.
Although several authors already investigated the effect of complementarity and compatibility in the past literature, yet few researches (e.g. Berger, 2015) have been conducted towards the combination of these two with ACAP in a BSR.
Saenz et al. (2014) investigated the single effect of compatibility on efficiency and innovation, when mediated by ACAP. As already mentioned, they stated that organizational compatibility leverages the information transfer basing on the capabilities of the two partners; eventually the authors prove that there is an evident influence of compatibility on ACAP (Saenz et al., 2014).
Also, the necessity of partnering with another company comes up whenever the firm aims to acquire new knowledge from the external environment, since it strives to obtain a certain complementarity of resources. (Zahra and George, 2002; Patterson and Ambrosini, 2015).
As suggested by the literature with reference to ACAP, the potential and the realized absorptive capacity, respectively PACAP and RACAP, are two different phases of the process in acquiring new capabilities (Zahra and George, 2002; Berger, 2015) thus these dimensions of absorptive capacity could systematically indicate two different learning performances: explorative learning performance and exploitative learning performance.
Explorative learning of a firm refers to the phase of searching, experimenting, taking risks, innovating; whereas the exploitative learning is the next step of creation, refinement, implementation, efficiency and execution (March, 1991). Thus, the collaboration with another company, creates a fertile background to explore both new channels of knowledge and consecutively, to exploit the existing know-how thanks to new incremental learning (Schildt et al., 2005).
ACAP is an important driver which occupies a core position for the achievement of competitve advantage in a buyer and supplier relationship. However some factors have to be taken into consideratiion beforehand, namely, the organizational compatibility and the strategic complementarity of the two collaborating organizations.
As analized in literature, there is a visible linkage of these personal features (complementarity and compatibility) of a firm with performance, in terms of exploration and exploitation learning. This relation is likely to be also affected by the absorptive capacity. Two different aspects of ACAP are identified along the buyer and supplier relationship: the potential and realized absorptive capacity (Zahra and George, 2002).
The purpose of this study is to examine whether the compatibility and complementarity of buyer and supplier affect the explorative and exploitative learning performance, and whether this impact is mediated by the absorptive capacity (ACAP). Thereby the author aims to contribute with a further analysis of absorptive capacity in a buyer supplier perspective, while considering the combination of affinities and interdependencies of the two collaborating firms. The combination of strategic complementarity of resources and compatibility of cultures, goals and objectives, and the impact of these two on the explorative and exploitative performance, is a bracing environment for testing the mediation of ACAP. Moreover, the distinction between potential and realized absorptive capacity, helps to better undestand the effects of the variables over two performances in analysis. This separation in performance is meant to show two distinctive phases of the buyer and supplier relationship. According to this, the following research aims to clarify the roles of ACAP within the interplays of this drivers of the relationship, namely complementarity and compatibility, and their final impact on performance.
As a remark, because the data discussed in this study are equivalent to the research conducted by Berger (2015), it is expected a certain level of similarity in variables and conceptual model analyzed (and likely in the results too).
However, despite the connection to this latter, there are distinctive differences within the procedure of investigation towards the different variables, as well as the research conducted by Saenz et al. (2014). A thorough comparison with Berger (2015) and Saenz et al. (2014) will be provided along the formulation of the hypotheses (see p. 16).
The analysis is structured as follow. Within the theoretical framework, the concepts of complementarity and compatibility are investigated across the relevant literature, likewise the mediation of ACAP and its constructs – PACAP and RACAP. In closure of this section, a brief examination will be dedicated to the explorative and exploitative learning performance. Successively, the hyphotheses will be formulated with a graphic illustration of the conceptual model. The research methodology and results follow the investigation and next the conclusions and reccomendations based on the data analyzed.
1. Theoretical Background
1.1 Strategic complementarity
The increase of popularity of firms' acquisitions during the last decades of the 20th century has raised the concern of complementarity, which in turn has started to be also examined within the studies of strategic management and finance (Harrison et al., 1991). In investigating the concept of synergy, the authors state that firms choose their partners basing on the level of strategic relatedness; eventually they tested that the resulting performance was higher in case of greater differences in resources'allocation among firms, rather than when similarities of the two parties occured (Harrison et al., 1991).
Thus strategic complementarity, which represents the degree of integration or enhancement of “each other's performance by contributing distinct capabilities, knowledge and resources” (Dyer and Singh, 1998, p.666), can lead to several benefits (e.g. relational rents) - (Jap, 1999).
Although a level of uncertainty towards the other partner can materialize during the first phases of the ‘dyadic' relationship, strategic complementarity is critical for the success of the collaboration, due to the uniqueness of the capabilities brought from the two organizations, which could not be equivalent if the firms did not ever cooperate in such relationship (Jap, 1999).
Within the study conducted by Knudsen (2007), it has been demonstrated that complementarity of knowledge impacts negatively on innovative performance at the early stages of experimentation in new product development (NPD). However, a positive effect occurs at the completion of the NPD in terms of innovative performance (Knudsen, 2007).
In support to Knudsen (2007), the research of Ahmadi et al., (2014) investigates the effect of strategic complementarity between marketing and technology resources and capabilities on first product commercialization. Their findings explain a positive relation amoung these variables, resulting in an increase of first product cost-efficiency and differentiation.
Another study of Paulraj and Chen (2007) on supply chain, focusing on the examination of the strategic relationship between buyer and supplier, has verified that, overall, an efficient external logistics integration is generated by a close relationship of buyer and supplier. Moreover, an effective contribution of information technology strengthens the positive outcome of such collaboration (Paulraj and Chen, 2007). The latter helps to reach also an integration of capabilities (e.g. human resources, social capital and relational ties) within the partnership, in a logic of complementarity of resources (Paulraj and Chen, 2007).
In conclusion it has been verified from literature that strategic complementarity generates relational rents on one hand, effectively impacts on NPD's last stage, improves the positioning of first product in the market with lower costs and it leverages the integration of resources. However, in a logic of structural and process mechanisms, complementarity does not totally support the relational performance between partners in every situation (Dyer and Singh, 1998; Knudsen, 2007; Paulraj et al., 2014; Ahmadi et al., 2014). Apparently, in order to increase the overall performance, the consideration of strategic complementarity alone does not always entail a successful outcome.
Some researches suggest the observation of complementarity in combination with the similarity of the organizations in regard to their cultures: the organizational complementarity (or compatibility) can indeed deliver those benefits coming from the strategic complementarity of resources, within the business alliances (Bucklin and Sengupta, 1993; Dyer and Singh, 1998; Sarkar et al., 2001).
1.2 Organizational Complementarity (Compatibility)
Organizational complementarity, also labeled ‘compatibility', is defined as the “complementarity in goals and objectives, as well as similarity in operating philosophies and corporate cultures” (Bucklin and Sengupta, 1993, p. 35).
In a buyer and supplier perspective, inter-organizational compatibility has different dimensions, since it regards either the technical, cultural or strategic aspects of the dyadic collaboration; it contributes to the integration of inter-organizational information and the creation of supply chain capabilities and affects positively the quality of the interactions, within the process of exchange information and technology (Rajaguru and Matanda, 2013; Leischnig et al., 2014).
Unlike strategic complementarity, compatibility focuses on “compatible norms and values” which the two parties share within their relationship, specifically it can result in a complete adaptation of each partner in daily routines, such as business transactions and information sharing, in the event of a long lasting collaboration (Andersson et al., 2002; Saenz et al., 2014).
As suggested by numerous authors in literature, compatibility distinguishes from strategic complementarity due to its focus on the similarities in organizational values and complementarity of objectives and goals, rather than on the ‘mere' resource interdependencies of the two connected enterprises (Bucklin and Sengupta, 1993; Dyer and Singh 1998; Sarkar et al. 2001; Paulraj et al., 2014; Saenz et al., 2014).
The relationship between strategic complementarity and organizational complementarity can be, thus, drawn upon the researches of Bucklin and Sengupta (1993), Dyer and Singh (1998) and other studies in literature. That is, the selection of a partner initially, basing on the reciprocity in strategic resources, goals and objectives or expertise, followed by the development of a certain level of collaboration; eventually the two parties adapt each other's operational mechanisms and cultures.
It implies that organizational compatibility may help in different phases of the business alliance: firstly, the identification of a suitable partner for the purpose of technology transfer, or more broadly, the share of knowledge; secondly, compatibility helps to achieve relational rents, innovation and efficiency, in a logic of complementarity of resources (Dyer and Singh, 1998; Leischnig et al., 2014; Saenz et al., 2014).
Therefore, compatibility is a critical component for the success of a business alliance (Bucklin and Sengupta, 1993) and it guides to a better quality of the relationship, by arranging the scopes for the strategic management of complementary resources (Dyer and Singh 1998; Sarkar et al., 2001; Paulraj et al., 2010).
1.3 ACAP: Potential Absorptive Capacity and Realized Absorptive Capacity in BSR
After the introduction of absorptive capacity in the first nineties, numerous studies have more deeply investigated this concept by analyzing its constructs and linkages with the other dimensions in economic literature. More specifically, ACAP has been also introduced within the researches of buyer and supplier relationship - BSR (Tsai, 2009; Kostopoulos et al., 2011; Flatten et al., 2011; Saenz et al., 2014; Berger, 2015).
Absorptive capacity is the ability of a firm to acquire knowledge, assimilate it and exploit it for commercial purposes and it is composed by prior knowledge and the knowledge absorbed (Cohen and Levinthal, 1990; Van den Bosch et al., 1999).
The viewpoint can thus move from cross-functional absorptive capacity to inter-organizational absorptive capacity in a BSR (Cohen and Levinthal; 1990). Thanks to the knowledge-sharing routines the two organizations have implemented during their relationship, the know-how recognised is transferred across the firms' borderlines (Dyer and Singh, 1998). Hence the additional perspective of ACAP in BSR resides within the capability of the partners to develop the shared complementary competencies, as well as the improvement of routines in technical and relational sinergies (Dyer and Singh, 1998).
As stated within the research of Zahra and George (2002), Saenz et al. (2014) and Azadegan et al., (2008), ACAP can be considered a dynamic capability: it responds to the changing environment in attracting new knowledge inside the company for its future implementation and brings to competitive advantage.
In practical manner, firms like Procter and Gamble and Air Product and Chemicals Inc. are particularly capable to maintain their competitive advantage. They have developed unique ways to bridge the gap between external innovativeness and internal capabilities, which is the essence of ACAP. Two main figures play a strategic role within the absorptive capacity process of these two companies: the technology entrepreneurs, who identify and collect data of new developments and innovations from the external environment by interacting with key-suppliers, and the needs tracker, a powerful database containing technical solutions that links the internal needs with the outside's competencies (Azadegan, 2008).
In case of strategic alliances, ACAP results to strenghten the firm performance and new product performance. This is more likely to happen when the partners have been collaborating for a long time (Flatten et al., 2011). However this effect is verified if the ACAP is well developed in intensity, the size of the firms is big and if the collaboration of the organization takes place with suppliers rather than other stakeholders (e.g. research organizations, final customers, competitors) - (Tsai, 2009; Flatten et al., 2011).
Furthermore, it has been demonstrated that ACAP provides direct and indirect effects on innovation, operational efficiency and financial performance in different periods (Kostopoulos et al., 2011; Saenz et al., 2014). The previous considerations evoke, consequently, the distinction of potential absorptive capacity (PACAP) and realized absorptive capacity (RACAP).
The study of Zahra and George (2002), with a strong contribution from past literature, shapes absorptive capacity into potential ACAP and realized ACAP. PACAP and RACAP incorporate the four dimensions of the absorptive capacity, namely: acquisition, assimilation, transformation and exploitation of knowledge.
PACAP includes the existing expertise of the organization, which leverages the acquisition of external knowledge (basing on the internal key competencies of the organization), and the process of assimilation of the new knowledge. The comprehension, analysis and translation of the insights help consequently to make a selection and adaptation of the internalized knowledge. This phase represents the initial step before the transformation of the acquired know-how, and it leads to the realization of the absorbed knowledge into concrete outcome. In other words, RACAP results from the combination of refinement, development and finally exploitation of the ‘routines' into commercial goods or services or, more broadly, into new expertises; whereas PACAP embodies the prior acquisition and assimilation of knowledge (Zahra and George, 2002).
Therefore, PACAP and RACAP represent two different phases which lead to the creation of new capabilities, innovative products or services. Hence, it is now relevant to take into consideration the link between the two constructs of ACAP to the final outcomes of the process in a BSR: explorative and exploitative learning performance.
1.4 Explorative and Exploitative Learning Performance
The concepts of exploration and exploitation are discussed within the (inter)organizational learning theory (March, 1991; Azadegan and Dooley, 2010).
As stated in his study, March (1991, p. 71) defines these two aspects: “Exploration includes things captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery, innovation. Exploitation includes such things as refinement, choice, production, efficiency, selection, implementation, execution.” However, problems can materialize in high costs of investigation for uncertain future results, the ‘overabundance' of un-actualized ideas, or even the presence of uncorrelated capabilities. These issues are likely to worsen the balance of exploration and exploitation within the organizations (March, 1991), as well as the resources allocation for such explorative and exploitative activities (Uotila et al., 2009).
The exploration process can give ambiguous and questionable outcomes because it is based on expectations and assumptions, whereas exploitation is more readily measurable and provides more tangible results, such as the realization of new products, services or expertise (March, 1991; Azadegan and Dooley, 2010).
In a buyer and supplier perspective, the organizational learning, that is the acquisition of new knowledge through the learning and integration of external resources with the previous knowledge by the firm's members (March, 1991), can be explained, for example, in the event of a supplier selection. The level of innovativeness of the supplier, the organizations' complementarity of resources and their “contrasting learning styles” of exploration and exploitation are positively related to each other and provide an overall better performance for both parties (Azadegan and Dooley, 2010).
The overall performance resulting is in relation to lower costs, increase of quality, logistics, flexibility, new expertise and product development (Azadegan and Dooley, 2010); but it can also be partitioned, giving that exploration learning is likely to lead to a long term performance while exploitation provides instant effects on financial performance (Uotila et al., 2009). However, it is important to always consider exploration and exploitation as a sequence of activities, starting with a market research, followed by an adaptation of the external information to the existing knowledge, transfer of the competencies to the company's suppliers, and concluding in the exploitation of these new acquired capabilities into the market place (Yalcinkaya et al., 2007; Uotila et al., 2009).
Finally, the importance of balancing exploration and exploitation seems to be essential for the competition of scares resources (March, 1991). Moreover, in a BSR, these two aspects have to be also implemented and dynamically developed over time within the routines and general practices by the two parties; in addition, the joint ventures represent a powerful practice for an agile and effective learning, and this mechanism ends up in the exploitation of the existing expertise combined with the cumulative information (March, 1991; Schildt et al., 2005).
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