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The Role of Information and Opportunism in the Choice of Buyer‐Supplier Relationships

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  • Stanley Baiman
  • Madhav V. Rajan

Abstract

An important characteristic of any buyer‐supplier relationship is the amount and type of information that is exchanged between the contracting parties. Buyer‐supplier networks are characterized by greater information exchange than arm’s‐length transactions. This enhanced information exchange allows for greater production efficiency but increases the potential for information misappropriation. In this paper we characterize the set of innovations for which each of these forms of exchange relationships is efficient. We then explore the effect of an initial information linkage between the buyer and supplier. Such linkages increase the set of innovations for which networks are efficient. However, such linkages have a negative effect on the buyer’s incentive to innovate and an ambiguous effect on the supplier’s incentive to invest in flexible production techniques. Finally, we identify settings in which the buyer‐supplier surplus is greater with such linkages.

Suggested Citation

  • Stanley Baiman & Madhav V. Rajan, 2002. "The Role of Information and Opportunism in the Choice of Buyer‐Supplier Relationships," Journal of Accounting Research, Wiley Blackwell, vol. 40(2), pages 247-278, May.
    • Handle: RePEc:bla:joares:v:40:y:2002:i:2:p:247-278
    DOI: 10.1111/1475-679X.00046
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    Cited by:

    1. Duong, Phuong-Anh Nguyen & Voordeckers, Wim & Huybrechts, Jolien & Lambrechts, Frank, 2022. "On external knowledge sources and innovation performance: Family versus non-family firms," Technovation, Elsevier, vol. 114(C).
    2. Clinton Free, 2007. "Supply†Chain Accounting Practices in the UK Retail Sector: Enabling or Coercing Collaboration?," Contemporary Accounting Research, John Wiley & Sons, vol. 24(3), pages 897-933, September.
    3. Habib Mahama & Zhichao (Alex) Wang, 2023. "Impact of the interactive and diagnostic uses of performance measurement systems on procedural fairness perception, cooperation and performance in supply alliances," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3253-3296, September.
    4. Balachandran, Kashi R. & Wang, Hsiao-Wen & Li, Shu-Hsing & Wang, Taychang, 2013. "In-house capability and supply chain decisions," Omega, Elsevier, vol. 41(2), pages 473-484.
    5. Saravanan Kesavan & Tarun Kushwaha, 2020. "Field Experiment on the Profit Implications of Merchants’ Discretionary Power to Override Data-Driven Decision-Making Tools," Management Science, INFORMS, vol. 66(11), pages 5182-5190, November.
    6. Hui, Kai Wai & Klasa, Sandy & Yeung, P. Eric, 2012. "Corporate suppliers and customers and accounting conservatism," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 115-135.
    7. Dequiedt, Vianney & Martimort, David, 2004. "Delegated monitoring versus arm's-length contracting," International Journal of Industrial Organization, Elsevier, vol. 22(7), pages 951-981, September.
    8. François Fulconis, 2010. "Les coopérations inter-entreprises face au risque de sclérose organisationnelle : l’opportunisme comme source potentielle de performance ?," Post-Print hal-02819424, HAL.
    9. Francois FULCONIS, 2010. "Inter-company Cooperation Faced with a Risk of Organisational Sclerosis: Opportunism as a Potential Source of Performance?," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 3(2(10)), pages 85-98.
    10. Johnson, William C. & Kang, Jun-Koo & Masulis, Ronald W. & Yi, Sangho, 2018. "Seasoned equity offerings and customer–supplier relationships," Journal of Financial Intermediation, Elsevier, vol. 33(C), pages 98-114.
    11. Gilliland, David I. & Rudd, John M., 2013. "Control of electronic channel affiliates: An exploratory study and research propositions," Journal of Business Research, Elsevier, vol. 66(12), pages 2650-2656.
    12. Peng, Xuan & Wang, Xiongyuan & Chan, Kam C., 2020. "Does supplier stability matter in initial public offering pricing?," International Journal of Production Economics, Elsevier, vol. 225(C).
    13. Lili Ren & Chunling Li & Ruijun Zhang & Runsen Yuan & Nosherwan Khaliq, 2023. "Customer Concentration and Information Transparency: Evidence From China," SAGE Open, , vol. 13(4), pages 21582440231, November.
    14. Bönte, Werner & Wiethaus, Lars, 2005. "Knowledge Transfer in Buyer-Supplier Relationships - When It (Not) Occurs," RWI Discussion Papers 34, RWI - Leibniz-Institut für Wirtschaftsforschung.
    15. Kim, Taeyeon & Kim, Hyun-Dong & Park, Kwangwoo, 2023. "Customer concentration and firm risk: The role of outside directors from a major customer," Journal of Banking & Finance, Elsevier, vol. 152(C).
    16. repec:zbw:rwidps:0034 is not listed on IDEAS
    17. Mahama, Habib & Chua, Wai Fong, 2016. "A study of alliance dynamics, accounting and trust-as-practice," Accounting, Organizations and Society, Elsevier, vol. 51(C), pages 29-46.
    18. Jinhua Cui & Hoje Jo & Haejung Na, 2018. "Does Corporate Social Responsibility Affect Information Asymmetry?," Journal of Business Ethics, Springer, vol. 148(3), pages 549-572, March.
    19. Selena Aureli & Andrea Cardoni & Mara Del Baldo & Rosa Lombardi, 2019. "Traditional management accounting tools in SMEs? network. Do they foster partner dialogue and business innovation?," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2019(1 suppl.), pages 35-50.
    20. Steven Crawford & Ying Huang & Ningzhong Li & Ziyun Yang, 2020. "Customer Concentration and Public Disclosure: Evidence from Management Earnings and Sales Forecasts†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 131-159, March.
    21. Werner Bönte & Lars Wiethaus, 2005. "Knowledge Transfer in Buyer-Supplier Relationships – When It (Not) Occurs," RWI Discussion Papers 0034, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    22. Oll, Grete, 2014. "Opportunistic Disclosure in the Inter-Organizational Relationships," Discussion Papers on Economics 21/2014, University of Southern Denmark, Department of Economics.

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