Power, governance, and value in collaboration: differences between buyer and supplier perspectives

Abstract

Early research on buyer-supplier relationships was based on two cornerstones: relational governance mechanisms and superior value creation for the whole supply chain. Relational governance mechanisms, based on trust and informal safeguards, can lead to higher value creation, while lack of trust and opportunism can be controlled by contractual governance mechanisms. To date, however, few studies have investigated the role of power asymmetry in collaboration and how the total value is distributed between buyer and supplier. The amount each partner appropriates depends on their relative power in the relationship, which has further implications in governance and relationship continuation, yet that has not been thoroughly explored in the literature. To fill this gap, this study investigates the influence of power asymmetry on governance and value appropriation in collaborative relationships, from both the buyers' and suppliers' perspectives. This article contributes to the buyer-supplier literature by exploring the gains of both the stronger and weaker partners in the dyad. Based on in-depth case studies with buyers and suppliers of the personal care and cosmetics (PC&C), and food and beverage (F&B) industries in Brazil, we found insights concerning the influence of power asymmetry and interdependence on governance mechanisms, as well as the complementarity of value appropriation inside and outside the dyad. We also propose a framework to represent the interplay between perceived justice and power asymmetry in long-term relationships.