William T. Ross Jr. & Diana C. Robertson
Executive Summary
Until recently, the business world has focused on simple relationships between two firms, but in today's market environment, it is increasingly common to find that a firm's competitor is also its partner, supplier, and/or customer. This phenomenon means that managers face new challenges in managing multiple relationships. The authors introduce the term "compound relationship" to describe two or more simple relationships between a pair of firms. Simple relationships are separate and distinct relationships that occur between two firms, such as supplier to customer, competitor to competitor, or joint partners. The authors demonstrate the importance and ramifications of the interdependencies of the various simple relationships on four dimensions: (1) relationship norms, (2) the balance of power, (3) effects on opportunism, and (4) the nature of exchange between the two firms.
In terms of relationship norms, partnership norms between two firms are different from competitive norms, and yet though they are separate and distinct norms, they are interdependent. A firm may need to ameliorate its competitive stance if its competitor is also its business partner. Similarly, power dimensions in the simple relationships affect the power balance between the two firms. For example, being an important customer or supplier of a firm may well lead to a powerful position in other simple relationships with that firm. The authors contend that the compound relationship can act as a safeguard against opportunism in that opportunistic behavior in one simple relationship (e.g., that of a competitor) can jeopardize levels of trust in the other simple relationships. Finally, the compound relationship elicits a more relational (rather than transactional) approach to exchange because the two firms need to be aware of reputation effects that may spill over into other simple relationships.
Furthermore, the authors emphasize the importance of identifying which of the simple relationships may be the dominant one in the compound relationship, usually based on the history, economic importance, and strategic value of the simple relationship. When the dominant relationship has been identified, managers can consider how the nature of the dominant relationship will affect other simple relationships as well as the compound relationship. The authors conclude with a mandate for firms to devote attention to compound relationships and recommendations about how to manage them actively.
Biography
William T. Ross Jr. is Professor of Marketing in the Smeal College of Business at Pennsylvania State University. He earned his Bachelor of Arts degree in History from Wake Forest University, completed the first year of an MBA at the Wharton School, and earned his Ph.D. in Business from Duke University. His research interests involve the application of behavioral decision theory, cognitive psychology, and, recently, sociology to the examination of how people deal with making marketing-related decisions. His research specializes in the areas of sales force and channel management, ethical decision making, and buyer decision making. His publications have appeared in the major marketing and business ethics journals, and he is currently serving on the editorial boards of Marketing Letters and the International Journal of Research in Marketing. His teaching experience has included undergraduate, MBA, executive MBA, doctoral, and executive education courses. In marketing, he has taught in the areas of marketing management, marketing strategy, sales force management, business-to-business marketing, retailing, consumer behavior, and marketing research. He has also taught business ethics.
Diana C. Robertson is Professor of Organization and Management in Goizueta Business School at Emory University. She was previously on the faculties of the Wharton School, University of Pennsylvania, and London Business School. She received her PhD in Sociology from the University of California, Los Angeles. Diana's research interests center on business ethics, particularly the impact of the firm on employee decision making about ethical issues. Currently, she is conducting research using neuroimaging technology to identify neural activations in the brain associated with sensitivity to moral issues. Diana's work has been published in Organization Science, Neuropsychologia, Journal of Business Ethics, Human Relations, Journal of International Business Studies, Sloan Management Review, and Business Ethics Quarterly.
Journal of Marketing, Vol. 71, No. 3, July 2007
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