VALUE CREATION AND CAPTURE IN BUYER-SUPPLIER RELATIONSHIPS: A NEW PERSPECTIVE

This research paper develops and tests a new model for value creation and capture in buyer-supplier relationships. In addition to including both value creation and capture in the same model, value creation is unraveled by the identification of its sources, both intrinsic and relational. Intrinsic value is the set of benefits derived from resources belonging to one party that can be captured by another party if there is a relationship between them, even if this relationship is non-collaborative. Relational value encompasses the mutual benefits that are generated as the collaboration between buyer and supplier increases. The model was tested using a survey of 127 dyads (buyer and supplier). The results indicated that both sides benefit from the total value created by the relationship, but the degree of value capture varies. The value perceived by the supplier is greater than that perceived by the buyer, which consequently encourages the former to boost its efforts even further to ensure that the relationship continues.

KEYWORDS:
Value creation; value capture; buyer-supplier relationships; relationship value; value-based strategy

Index	Value creation model	Value capture model	Recommended value
CMIN/DF	1.18	1.22	< 2.00
χ² p-value	0.16	0.21	> 0.05
GFI	0.92	0.95	> 0.90
NFI	0.90	0.91	> 0.90
CFI	0.98	0.98	> 0.90
RMSEA	0.04	0.04	< 0.05

Construct	Items	Loadings
Buyer’s intrinsic value AVE = 0.52 CR = 0.81 (Helm & Salminen, 2010Helm, S., & Salminen, R. T. (2010). Basking in reflected glory: Using customer reference relationships to build reputation in industrial markets. Industrial Marketing Management, 39(5), 737-743. doi:10.1016/j.indmarman.2010.02.012 https://doi.org/10.1016/j.indmarman.2010... ; Jalkala & Salminen, 2010Jalkala, A., & Salminen, R. T. (2010). Practices and functions of customer reference marketing: Leveraging customer references as marketing assets. Industrial Marketing Management, 39(6), 975-985. doi:10.1016/j.indmarman.2010.06.017 https://doi.org/10.1016/j.indmarman.2010... ; Walter et al., 2001Walter, A., Ritter, T., & Gemünden, H. G. (2001). Value creation in buyer-seller relationships: Theoretical considerations and empirical results from a supplier's perspective. Industrial Marketing Management, 30(4), 365-377. doi:10.1016/S0019-8501(01)00156-0 https://doi.org/10.1016/S0019-8501(01)00... )	The reputation of the supplier increases by having the buyer as a customer	0.80
	The supplier builds stories of success with the buyer	0.69
	Having the buyer as a customer allows the supplier to develop innovative products and processes	0.79
	The buyer provides useful learning to increase the supplier’s ability to compete	0.59
Supplier’s intrinsic value AVE = 0.40 CR = 0.72 (Möller & Törrönen, 2003Möller, K. K., & Törrönen, P. (2003). Business suppliers' value creation potential: A capability-based analysis. Industrial Marketing Management, 32(2), 109-118. doi:10.1016/S0019-8501(02)00225-0 https://doi.org/10.1016/S0019-8501(02)00... ; Walter et al., 2001Walter, A., Ritter, T., & Gemünden, H. G. (2001). Value creation in buyer-seller relationships: Theoretical considerations and empirical results from a supplier's perspective. Industrial Marketing Management, 30(4), 365-377. doi:10.1016/S0019-8501(01)00156-0 https://doi.org/10.1016/S0019-8501(01)00... )	The supplier assures the compliance of supplying contracts	0.49
	The supplier contributes to the buyer’s profitability	0.84
	The volume required is supplied in the short and long terms	0.44
	The supplier shares information about the market	0.69
Relational value AVE = 0.61 CR = 0.89 (Chatain, 2011Chatain, O. (2011). Value creation, competition, and performance in buyer-supplier relationships. Strategic Management Journal, 32(1), 76-102. doi:10.1002/smj.864 https://doi.org/10.1002/smj.864... ; Jap, 1999Jap, S. D. (1999). Pie-expansion efforts: Collaboration processes in buyer-supplier relationships. Journal of Marketing Research, 36(4), 461-475. doi:10.2307/3152000 https://doi.org/10.2307/3152000... ; Wagner et al., 2010Wagner, S. M., Eggert, A., & Lindemann, E. (2010). Creating and appropriating value in collaborative relationships. Journal of Business Research, 63(8), 840-848. doi:10.1016/j.jbusres.2010.01.004 https://doi.org/10.1016/j.jbusres.2010.0... )	The reliability in demand and delivery forecasts has increased	0.75
	There have been more savings and mutual gains due to the interaction between the parties	0.77
	The relationship facilitates the expansion of the business between both firms and between them and their suppliers and customers	0.78
	The flexibility to develop mutual solutions for the business has increased	0.80
	The level of learning brought from the relationship has increased	0.81
Value captured by the buyer AVE = 0.44 CR = 0.76 (Crook & Combs, 2007Crook, T. R., & Combs, J. G. (2007). Sources and consequences of bargaining power in supply chains. Journal of Operations Management, 25(2), 546-555. doi:10.1016/j.jom.2006.05.008 https://doi.org/10.1016/j.jom.2006.05.00... ; Krause et al., 2007Krause, D. R., Handfield, R. B., & Tyler, B. B. (2007). The relationships between supplier development, commitment, social capital accumulation and performance improvement. Journal of Operations Management, 25(2), 528-545. doi:10.1016/j.jom.2006.05.007 https://doi.org/10.1016/j.jom.2006.05.00... ; Walter et al., 2001Walter, A., Ritter, T., & Gemünden, H. G. (2001). Value creation in buyer-seller relationships: Theoretical considerations and empirical results from a supplier's perspective. Industrial Marketing Management, 30(4), 365-377. doi:10.1016/S0019-8501(01)00156-0 https://doi.org/10.1016/S0019-8501(01)00... ).	The supplier is an important source of competitiveness	0.64
	Relevant time and effort are needed to develop an equivalent supplier	0.63
	It is difficult to buy the volume with the same acquisition cost from a different supplier	0.73
	The supplier is an important source of joint development	0.64
Value captured by the supplier AVE = 0.50 CR = 0.83 (Crook & Combs, 2007Crook, T. R., & Combs, J. G. (2007). Sources and consequences of bargaining power in supply chains. Journal of Operations Management, 25(2), 546-555. doi:10.1016/j.jom.2006.05.008 https://doi.org/10.1016/j.jom.2006.05.00... ; Krause et al., 2007Krause, D. R., Handfield, R. B., & Tyler, B. B. (2007). The relationships between supplier development, commitment, social capital accumulation and performance improvement. Journal of Operations Management, 25(2), 528-545. doi:10.1016/j.jom.2006.05.007 https://doi.org/10.1016/j.jom.2006.05.00... ; Walter et al., 2001Walter, A., Ritter, T., & Gemünden, H. G. (2001). Value creation in buyer-seller relationships: Theoretical considerations and empirical results from a supplier's perspective. Industrial Marketing Management, 30(4), 365-377. doi:10.1016/S0019-8501(01)00156-0 https://doi.org/10.1016/S0019-8501(01)00... ).	Relevant time and effort are needed to develop an equivalent customer	0.71
	Losing the buyer will bring a negative impact in the market due to its relevance	0.66
	It is difficult to restore the volume with the same profitability from a different customer	0.67
	Losing the buyer will lead to process adaptations in order to try to recover previous gains	0.67
	The buyer is an important source of joint development	0.81

Construct pair	Free model		Nested model		χ² difference
Construct pair	χ²	d.f.	χ²	d.f.
Buyer’s intrinsic value
Supplier’s intrinsic value	48.0	26	144.4	27	96.4^* * Significant at p < 0.01
Relational value	46.6	34	160.4	35	113.9^* * Significant at p < 0.01
Value captured by the buyer	48.4	34	199.8	35	151.4^* * Significant at p < 0.01
Value captured by the supplier	54.7	34	184.1	35	129.4^* * Significant at p < 0.01
Supplier’s intrinsic value
Relational value	27.0	26	116.1	27	89.2^* * Significant at p < 0.01
Value captured by the buyer	19.8	26	116.2	27	96.4^* * Significant at p < 0.01
Value captured by the supplier	42.7	26	136.0	27	93.3^* * Significant at p < 0.01
Relational value
Value captured by the buyer	41.0	34	184.9	35	143.9^* * Significant at p < 0.01
Value captured by the supplier	65.1	34	217.0	35	151.9^* * Significant at p < 0.01
Value captured by the buyer
Value captured by the supplier	45.7	34	205.7	35	160.0^* * Significant at p < 0.01

Constructs	1	2	3	4	5	Mean	SD
1. Supplier’s intrinsic value	1.00					5.08	0.81
2. Buyer’s intrinsic value	0.074	1.00				4.73	0.98
3. Relational value	0.206	0.504	1.00			4.72	0.66
4. Value captured by the buyer	0.046	0.144	0.180	1.00		4.12	1.43
5. Value captured by the supplier	-0.118	0.392	0.366	-0.021	1.00	3.74	1.51

Fundação Getulio Vargas, Escola de Administração de Empresas de S.Paulo Av 9 de Julho, 2029, 01313-902 S. Paulo - SP Brasil, Tel.: (55 11) 3799-7999, Fax: (55 11) 3799-7871 - São Paulo - SP - Brazil
E-mail: rae@fgv.br

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[TFN1] ^*
Significant at p < 0.01

Average annual revenue	Buyers	Suppliers
Less than R$2.4 million	26	10
From R$2.4 million to R$16 million	33	13
From R$16 million to R$90 million	27	14
From R$90 million to R$300 million	11	22
More than R$300 million	9	38
Do not know / Cannot say	21	30
Respondent department	Buyers	Suppliers
General Management	19	24
Sales / Marketing	1	95
Procurement	94	-
Finance	4	2
Manufacturing	3	3
R&D	5	3
Respondent position	Buyers	Suppliers
President or vice-president	2	2
Director	14	10
Manager	24	29
Coordinator	15	19
Supervisor	7	21
Buyer / Salesperson	65	46