What motivates suppliers to share knowledge with their buyers?

Suppliers sharing knowledge with buyers is a key source of supply chain performance; it can foster new product development, shorten time-to-market, and reduce production costs. However, given the risks of buyer opportunistic behaviour, such as leaking knowledge to other suppliers or demanding price reductions, motivating suppliers to share knowledge remains a critical factor in effective collaboration.

Previous research has focussed on three main factors that affect suppliers’ motivation to share knowledge:

1. The effects of relational elements (e.g. trust) on knowledge sharing. However, other factors, such as the extent to which a supplier relies on a buyer (i.e., supplier dependence), play a central role in supplier attitudes and behaviour.
2. Expected returns, either as economic value (e.g. sales revenue), relational value (e.g. satisfaction with the collaborative nature of the relationship), or learning value (e.g. the supplier learning from the buyer). These motives have rarely been studied together so little is known about their relative influences on the overall level of motivation.
3. The anticipated future relationship. The effect of the future relationship can be affected by the current relationship status.

Key findings

By using a scenario-based role-playing experimental method, our study addressed limitations in previous research, listed above, exploring how the effects of economic, relational and learning motives are relative to each other. In the experiment, participants were recruited to play a role in a scenario carefully constructed to approximate real-life decision-making situations so that natural behaviour could be observed. We also investigated how the effect of a supplier's anticipated future dependence on a buyer on their motivation to share knowledge may be affected by the current relationship status.

A supplier's anticipated future dependence on a buyer may affect their motivation to share knowledge by increasing the three motives. A supplier may be more motivated to share knowledge with that buyer to increase their chances of: obtaining sales from them (economic motive), strengthening a collaborative relationship (relational motive), and learning from them (learning motive) so that they can keep up with their competencies.

However, such effects could be affected by the current embeddedness of the relationship (i.e., their joint dependence). When a buyer and a supplier are only weakly embedded, they tend to have fewer interactions and keep a more distant relationship. In contrast, if they are highly embedded, the parties will give heightened attention to each other, care for each other’s needs and goals, and build a higher quality of relationship. As such, highly embedded relationships tend to be more collaborative. But highly embedded relationships can also be dysfunctional. They can:

• Increases a supplier’s financial risks associated with disruptions and pressure on cost reductions.
• Increase relational overload, e.g., a supplier may experience pressure to accept unnecessary obligations for the sake of the relationship.
• Reduce the likelihood of learning from each other. In highly embedded relationships, partners tend to have intensive interactions which can lead to “group thinking”.

Therefore, when a relationship becomes too close, the benefits of the relationship start to decrease, and the costs increase. As such, the positive relationship between a supplier's anticipated future dependence on a buyer and the economic, relational, and learning motives will be weaker in a highly embedded relationship compared to a less embedded relationship.

Interestingly, our results show that the current embeddedness of the relationship has negative moderation effects only on economic and learning motives, but not on the relational motive. This suggests that a supplier perceives less economic and learning value in a highly embedded relationship, which is in line with the discussion of the “dark side” of buyer-supplier relationships (e.g. leaking knowledge). However, it seems that suppliers still see the value of building a collaborative relationship even when the relationship is highly embedded.

Implications for buyers

The decision to share knowledge with a buyer is associated with a strategic outlook. The implication is that even if a buyer is currently very important to a supplier, a supplier may reduce knowledge sharing if it does not anticipate such a relationship continuing for future business. Therefore, buyers can encourage suppliers to share knowledge by involving them in future business plans and offering them a long-term vision of the relationship, sending a clear message of commitment.

Our research shows that relational and learning motives could be more important than economic incentives for knowledge sharing, especially over an extended timeframe. Suppliers perceive knowledge sharing as a key relationship-building mechanism, and this increases the consequential impact of buyers’ reciprocal behaviour. Suppliers recognise this reciprocity as a signal that buyers value this relationship, which will further enhance suppliers’ willingness to share knowledge.

Small buyers, even if unable to promise big spending, can still facilitate knowledge sharing by offering expertise that suppliers consider valuable.

It may not be optimal for firms to stop building collaborative relationships even if they are highly embedded. Therefore, managers have the challenging task of continuing to build relationships whilst concurrently managing the potential downsides of highly embedded relationships. This can be done by taking steps such as de-embedding for a short time, or specifying roles and responsibilities in explicit contracts.

Implementing these mechanisms may not be easy, but this relational competence is important for firms to maximize the benefits of the relationship.

Read the journal article: “Supplier motivation to share knowledge: an experimental investigation of a social exchange perspective”, Jie Chen, Xiande Zhao, Michael Lewis, International Journal of Operations & Production Management.