Controlling transaction costs in buyer supplier relationships: the role of distributive capability and absorptive capacity

Firm interdependence within modern supply chains continues to grow. This is driven by the need to leverage tangible and intangible resources within the supply chain for innovation, process management, customer satisfaction... [ view full abstract ]

Firm interdependence within modern supply chains continues to grow. This is driven by the need to leverage tangible and intangible resources within the supply chain for innovation, process management, customer satisfaction and meeting diverse stakeholder expectations. This research expands our understanding of supply chain collaboration through the study of knowledge-based constructs that operationalize the abilities of a firm to transfer knowledge. These abilities are referred to as distributive capabilities. The distributive capabilities of an organization represent its ability to transfer commercially relevant knowledge through collaboration to a known recipient firm. Earlier research in this domain has focused on the abilities of a recipient to absorb knowledge, absorptive capacity and has blurred the roles of the source and recipient. This research addresses the relationship between distributive capabilities and absorptive capacity with transaction costs, relationship effort, monitoring, problems and advantage, in buyer-supplier collaborations. It is proposed that distributive capabilities of the source of knowledge in tandem with the absorptive capacities of the recipient of knowledge have direct and significant affects on levels of transaction costs between supply chain partners. Steeped in transaction cost economics and the knowledge based view of the firm, this research expands our understanding of the knowledge transfer process and how that process can be proactively managed in order to reduce complexity and uncertainty in the supply chain and thereby positively affect transaction costs. Propositions are presented that address the affect of knowledge transfer constructs, specifically distributive capabilities and absorptive capacities, to elements of both opportunism and bounded rationality.