The inside story of relationship development: power asymmetry in a buyer–supplier relationship

The objectives of this paper are threefold: first, to explicate the role of power imbalance in buyer–supplier relationships; second, to analyse the inter-relationships among relational constructs from the perspective of both the buyer and supplier and lastly, to identify the benefits to the same. To accomplish these objectives, we identify and integrate variables and justifications from transaction cost economics, relational, and behavioural theories to develop a robust model. We propose that buyer and supplier power determines their respective level of commitment, which in turn, ascertains the level of power imbalance, fostering either arms-length or close relationships. The latter is likely to additionally reduce power imbalance and help partners accumulate trust and intellectual capital within organisations. Trust is posited to further enhance buyer and supplier intellectual capital through long-term relationships. The models of buyer–supplier partnerships presented in this paper add to the prevalent literature and provide further insights for managers.