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Modularity and the Impact of Buyer-Supplier Relationships on the Survival of Suppliers

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  • Glenn Hoetker

    (University of Illinois at Urbana-Champaign, College of Business, 350 Wohlers Hall, 1206 S. Sixth Street, Champaign, Illinois 61820)

  • Anand Swaminathan

    (Graduate School of Management, University of California at Davis, One Shields Avenue, Davis, California 95616-8609)

  • Will Mitchell

    (Fuqua School of Business, Duke University, P.O. Box 90120, Durham, North Carolina 27708)

Abstract

Modularity in product design and flexible supply chains is increasingly common in buyer-supplier relationships. Although the benefits of supply chain flexibility and component modularity for end-product manufacturers are accepted, little is known about their impact on suppliers. We advance the literature on modularity by exploring how three aspects of a supplier's relationships with its customers affect the supplier's survival: duration of buyer-supplier relationships, autonomy from customers, and links to prominent buyers. We compared the effects of these aspects of buyer-supplier relationships for low- and high-modularity components. Using data on U.S. carburetor and clutch manufacturers from 1918 to 1942, we found that suppliers of high-modularity components benefited more from autonomy provided by potential customers, whereas suppliers of low-modularity components benefited more from ties to higher status customers. Both benefited from autonomy generated by existing customers. Thus, relationships that require trust and extensive sets of interfirm routines, as do those for low-modularity components, led to both greater relationship benefits and greater constraints.

Suggested Citation

  • Glenn Hoetker & Anand Swaminathan & Will Mitchell, 2007. "Modularity and the Impact of Buyer-Supplier Relationships on the Survival of Suppliers," Management Science, INFORMS, vol. 53(2), pages 178-191, February.
    • Handle: RePEc:inm:ormnsc:v:53:y:2007:i:2:p:178-191
    DOI: 10.1287/mnsc.1060.0630
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    References listed on IDEAS

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    2. Anna Cabigiosu, 2018. "When do modular dominant designs emerge? A theoretical framework," Working Papers 05, Venice School of Management - Department of Management, Università Ca' Foscari Venezia.
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    4. Bouncken, Ricarda B. & Pesch, Robin & Gudergan, Siegfried P., 2015. "Strategic embeddedness of modularity in alliances: Innovation and performance implications," Journal of Business Research, Elsevier, vol. 68(7), pages 1388-1394.
    5. Hales, Douglas N. & Chakravorty, Satya S. & Sridharan, V., 2009. "Testing Benford's Law for improving supply chain decision-making: A field experiment," International Journal of Production Economics, Elsevier, vol. 122(2), pages 606-618, December.
    6. Wu, Cheng-Han, 2012. "Product-design and pricing strategies with remanufacturing," European Journal of Operational Research, Elsevier, vol. 222(2), pages 204-215.
    7. Ashish Arora & Michelle Gittelman & Sarah Kaplan & John Lynch & Will Mitchell & Nicolaj Siggelkow & Chi-Hyon Lee & Manuela N. Hoehn-Weiss & Samina Karim, 2016. "Grouping interdependent tasks: Using spectral graph partitioning to study complex systems," Strategic Management Journal, Wiley Blackwell, vol. 37(1), pages 177-191, January.
    8. Anna Cabigiosu & Arnaldo Camuffo, 2012. "Beyond the “Mirroring” Hypothesis: Product Modularity and Interorganizational Relations in the Air Conditioning Industry," Organization Science, INFORMS, vol. 23(3), pages 686-703, June.
    9. Andrew V. Shipilov & Stan Xiao Li, 2012. "The Missing Link: The Effect of Customers on the Formation of Relationships Among Producers in the Multiplex Triads," Organization Science, INFORMS, vol. 23(2), pages 472-491, April.
    10. Jooyoung Kwak & Hyunjoo Min & Peishan Lee, 2010. "Supplier Relationship in Product Development: A Survey of the Chinese Automobile Industry during the Growth Period, 2005–2007," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 13(2), pages 143-166, June.
    11. Caridi, Maria & Pero, Margherita & Sianesi, Andrea, 2012. "Linking product modularity and innovativeness to supply chain management in the Italian furniture industry," International Journal of Production Economics, Elsevier, vol. 136(1), pages 207-217.
    12. Cheng, Liang-Chieh (Victor), 2011. "Assessing performance of utilizing organizational modularity to manage supply chains: Evidence in the US manufacturing sector," International Journal of Production Economics, Elsevier, vol. 131(2), pages 736-746, June.
    13. Hasan A. M. Hamdan & Luitzen Boer & Poul Houman Andersen, 2023. "The architecture of procurement in sustainable and zero-emission neighborhood projects—strategic challenges and new realities," Environment Systems and Decisions, Springer, vol. 43(3), pages 472-488, September.

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