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ABSTRACTHow and why is the association between historical supplier performance and strategic relationship dissolution moderated by an unintentional but serious supplier error? Adopting Assimilation‐Contrast Theory, we propose that this moderation effect can be either negative or positive. As an empirical test, we collected and analyzed data from 256 sourcing professionals participating in a scenario‐based role‐playing experiment. After confirming experimental checks, we fitted a general linear mixed effects model to the data with appropriate controls. We find, ceteris paribus, that a critical‐component supplier with stellar historical performance is less likely to be terminated by the manufacturer than one with marginally‐acceptable historical performance. However, when a critical‐component supplier with stellar historical performance errs, its likelihood of being terminated by the manufacturer increases by a greater extent than when a supplier with marginally‐acceptable historical performance commits the same mistake. This positive supplier performance penalty effect contributes to the buyer‐supplier relationship dissolution literature by identifying how and why the deterrence to relationship dissolution typically engendered by stellar historical supplier performance does not hold. Our results have implications for how manufacturers should evaluate critical‐component suppliers and how critical‐component suppliers should manage ongoing strategic relationships with manufacturers.

PurposePrior studies on major customer relationships (i.e. embedded ties) focus mostly on the ties between a focal firm and its immediate customers, hindering the understanding of the influence of indirect ties (both upstream and downstream) on a focal firm's operational performance. In this study, the authors analyze how a focal firm's upstream and downstream connectedness and network location affect its productive efficiency.Design/methodology/approachUtilizing Compustat segment files, the authors constructed large-scale major customer networks covering the period 2007–2013. The authors applied a fixed-effect panel stochastic frontier model to conduct estimation. Moreover, the authors applied an endogenous panel stochastic frontier model to ensure the robustness of the main analysis.FindingsThe authors found that a focal firm's upstream and downstream connectedness both have a positive influence on a firm's productive efficiency, whereas a focal firm's centeredness in the major customer network has a negative influence on productive efficiency. Moreover, it was found that centeredness lessens the positive influences of upstream and downstream connectedness on productive efficiency. The post hoc analysis further confirmed that a focal firm's indirect ties, both upstream and downstream, positively influence a focal firm's productive efficiency.Originality/valueThis study contributes to the literature by evaluating the relative effectiveness of a focal firm's direct and indirect major customer ties, both upstream and downstream. More importantly, this study suggests potential exploitation–exploration trade-offs (i.e. productive efficiency vs. innovation) triggered by a firm's network location.

Purpose
The purpose of this study is to assess the validity and predictability of insights from the investment model (IM) in the context of strategic manufacturer–industrial supplier relationships. IM is a theoretical model in social psychology pertaining to interpersonal relationship discontinuity. This formal empirical test of IM in a different context supports vertical theory borrowing and minimizes the risk of committing atomistic fallacy.


Design/methodology/approach
Data collected from 256 sourcing professionals participating in a scenario-based role-playing experiment were analyzed via structural equation modeling. The authors also performed bootstrapping to assess indirect effects.


Findings
The IM is generally applicable to the context of interfirm relationship dissolution. Relative to the original context of interpersonal relationship dissolution, three nuances are detected: investment size as an antecedent has lowered prominence in influencing commitment; satisfaction level, quality of alternatives and investment size have non-orthogonal effects on commitment; and satisfaction level influences relationship continuity through and beyond commitment.


Research limitations/implications
The empirical findings broaden boundary conditions for IM insights. Beyond interpersonal relationship dissolution, the IM appears to also describe, explain and predict interfirm relationship dissolution.


Practical implications
Keeping the manufacturer satisfied is critical. Moreover, suppliers should be cautious when entering joint product development agreements.


Originality/value
This study appears to be among the first to formally validate the applicability of IM insights as they pertain to the dissolution of strategic manufacturer–industrial supplier relationships.