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Scientific review of the relational view theory and its contribution to critical sourcing decisionmaking

Turkmen, Hazar (2013) Scientific review of the relational view theory and its contribution to critical sourcing decisionmaking.

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Abstract:This paper made an attempt to identify the contribution of the relational view theory to critical sourcing decisions. The paper of Dyer and Singh (1998) is first explored in different levels of depth to get a thorough understanding of the theory. The theory implies that relational rents can be generated from the joint efforts of alliance partners that invest in relation-specific assets, share knowledge, combine complementary resources and use effective governance mechanisms. These activities forge an idiosyncratic relationship that is difficult to imitate for competitors, thus giving a competitive advantage. In this paper the theoretical framework of relational rents is applied to four critical sourcing decisions. The aim is to fill a gap in the academic literature for the practical relevance of the relational view to purchasing decisions. Relevant literature on the sourcing decisions are linked to the key concepts of the relational view where identical implications and similar propositions suggested a strategy to achieve relational rents across the four decision points. In the make-or-buy decision, outsourcing is considered to be more effective in creating relational rents from networks. This is because a firm in isolation, which reflects the make situation, is not part of a network and is therefore not able to generate relational rents (Dyer and Singh, 1998, p.662). According to Kraljic’s (1983) matrix strategic purchasing items account for value creation and the relationship with these suppliers should be safeguarded in the long-term. These items have the best fit with the relational view theory, as intense collaborative efforts with these suppliers secure supply and at the same time generate relational rents. Investments in relationships in other commodity types are solely based on continuity rather than value creation. Supplier portfolio decisions involve a reduction in the supply base and the focus on strategic suppliers on the long term. When contracts are awarded, informal contracting mechanisms have the ability to facilitate trust, loyalty and cooperation and at the same time reduce transaction costs.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/64248
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