Personal relationships and agency conflicts: case of buying and supplying firms in Australia

Personal relationships (i.e., friendships) have been the subject of a great deal of research in the business discipline, with most of the literature concentrating on either positive or negative firm-level results from such interactions. Scientific research, however, has yet to resolve the conflicts that occur between managers and their respective firms when there is a personal relationship between managers of buying and supplying firms in the supply chain. This paper addresses this important gap in supply chain literature. The research is qualitative in nature using the phenomenological approach for exploratory purposes. Overall, 30 semi-structured interviews are conducted with senior managers of purchasing and sourcing firms from Australia's manufacturing and service sector. Results from this study show that personal relationships between buying and supplying managers develop five different conflicts between managers and their respective firms with the potential to generate negative firm-level outcomes. Furthermore, findings from this study suggest that firms should remain cautious when relying on the personal relationships of managers within inter-firm relationships, as such relationships have the potential to divert managers from their firm's interests. The paper concludes by articulating its contribution to theory and practice, alongside the limitations and future research directions.