The impacts of collaboration on relational performance evidence from furniture SMEs in a developing country

Finally,opportunismmayrelatewithrelationalperformance.Channelpartner’sopportunismre ferstoaself-interestseekingwithguileWilliamson,1975andthisinvolvestheriskofpartiesnotactingintheintere

TheImpactsofCollaboration onRelationalPerformance:EvidencefromFurnitureSMEsina

DevelopingCountry

IMadeSukresn aMahfudz AugustyTaeFerdinand

UniversitasDiponegoro,Semarang,Indonesia

Abstract

Businessa n d marketingliteratureh a s documentedcollaborationimprovesp e r f o r m a n c e i n t h

e s u p p l y c h a i n context,includingwithinsmall-mediumenterprises(SMEs).However,

littlestudieshavebeendoneinc a p t u r i n g t h e i m p a c t ofcollaborationonr e l a t i o n a l perform ancea n d thel i n k a g e pathsa m o n g t h e m Inaddition,littlehasbeendoneinthecontextofdevel opingeconomies.Thisstudyaimstofillthevoidsbye m p i r i c a l l y investigatingt h e i m p a c

t ofc o l l a b o r a t i o n onr e l a t i o n a l p e r f o r m a n c e betweens m a l l

-m e d i u -m furniture-manufacturersandtheirretailersatJeparaDistrict,a-mainfurnitureclusterinIndonesia Researchesr e v e a l furnitureSMEs across Jeparaexperiencecontinuousdrawback andassuchcollaborationmay

becomea solution.UsingStructuralEquationModelinganalysison199usableresponses,thestudyfindscolla borationi n fl u e n c e s firm’sagility,relationalperformance,andopportunism.Onthecontrary,agilit yandopportunismd o notinfluencerelationalperformance.Thislikelyindicatesmanufacturerspre fertocollaboratewiththeirr e t a i l e r s eveninaminimumlevel,regardlessthepresenceofr isksfromopportunism T h e absenceoftheinfluenceofopportunismandagilityonrelationalperfor manceprovidesavenueforfutureresearch

Keywords:SMEs,collaboration,agility,opportunism,relationalperformance,Indonesia

JELcode:M31

1.Introduction

Businessandmarketingliteraturehasacknowledgedtheimportanceofcollaborationwithinsupplych aini n improving channel pe rf or ma nc e ( G o n z á l e z b e n i t o , M u ño z ga l l e go , &Ga rc ía -zamor a, 20 16; Narayanan,Narasimhan,&Schoenherr,2015;Ralston,Richey,&Grawe,2017) Inthisarea,small-medium-enterprises( S M E s )

andlarge-sizedbusinesseslikelyexhibitdifferentresponses.SMEsgainmoreadvantageofchannelcollaboratio n,whilel a r g e

s i z e d companiesbenefitmoref r o m c o n s u l t i n g a d v i c e collaboration( G o n z á l e z

-benitoetal.,2016).ThedifferencemayberelatedtomostSMEs’preferencetogroupinacloselygeogra

phicregion(intra-networkties),especiallyinemerging-economysettings,whichenablethemtomoreeffectivelyshareknowledgeandmarketaccess(Berry,R odriguez,&Sandee,2001;Gunawan,Jacob,&Duysters,2016)

Despitethepositiveimpactofcollaborationonperformance,Ralstonetal

(2017)identifysomecollaborationprojectsfailed.Thesemaystemfromamerelyfocusonfina ncialobjectivesofcollaboration, insteadofa l s o a n a l y z i n g beneficialf a c t o r s l i k e e x t e r n a l p

a r t n e r p r e s s u r e , I T incompatibility,i n n o v a t i o n d e v e l o p e d , oroperationalefficiencie sachieved(Kampstra, Ashayeri,&Gattorna, 2006;Richey,Adams,& D a l e l a , 2012).Assuch ,Ralstonetal.(2017)suggestrelationalperformanceperhapsalsobevaluable.Todate,

littlee mp i r i c a l s t udi e s ons u p p l y chai n collaboratione m ph a s i z e thei mp a c t ofcollaborationo

n r e l a t i o na l performance

Inaddition,Ralstonetal

(2017)noteformerresearchshareslittleconsensusonthelinkagepathsbetweencollaborationandperfor mance.Athoroughinvestigationiswarrantedtocaptureeitherthereisdirectimpactf r o m collaborati ontoperformanceorthereisotherfactorsinterplaywithinbothconstructs

InSMEs’context,Clercq,Dimov,andThongpapanl(2013)andGunawanetal

(2016)findcollaborationd i m i n i s h e s riskthatchannelpartnerswillbehaveopportunisticall y.However,Zhou,Zhang,Zhuang,andZhou(2015)furtherrevealsuchcollaborationhasacontinge nteffectonachannelpartner’sopportunism.Ad i m e n s i o n ofcollaborationinhibitsopportunism whenthelevelofrelationalnormsislow.Onthecontrary,theotherdimensionofcollaborationexacerbate sopportunism.SinceZhouetal.(2015)’studywasconductedi n

thelarge-sizedbusinessescontext,theroleofpartneropportunismwarrantsfurtherinvestigationinthecont extofSMEs

Collaborationmayalsointerplaywithagility(Gligor,Esmark,&Holcomb,2015;Gunawanetal., 2016;N a r a y a n a n e t a l , 2 0 1 5 ) I n thee m e r g i n g

-e c o n omyS M E s ’ s -e t t i n g , G u n a w a n -e t a l ( 2 0 1 6 ) findS M E s whocollaborat-ewithth-eir-extra- whocollaboratewiththeirextraclustertiessuccessfullystimulatetheirproactivenessinimprovingperformance.P r o

-a c t i v e n e s s , whichm-ainlyrefersto-activem-an-agementofnewopportunities(Lumpkin&-amp;Dess,19

96)mayincludeafirm’sabilitytomeetcustomer-relatedobjectives,theverycoreofagility(Gligoretal.,2015).Assuch,collaborationcouldrelatetoag ility

Furthermore,Gunawanetal

(2016)notetherewereonlylimitedSMEs’studiespertainingtocollaborationwithextra-clustertiesindeveloping country setting.T he

membersofextra-clustertiesinGuna w a n eta l

( 2 0 1 6 ) ’studyalsowastoovaried.Athoroughresearchonafirm’scollaborationwithaspecificpartnerwi thinextra-clustertiesthereforemaybeofimportance

Thisstudy aims tofill thevoidsoftheformerresearchoncollaboration,withinIndonesian SMEscontext.T h e furniturei n d u s t r y i n theJ e p a r a D i s t r i c t ( J a v a I s l a n d )

-a cre-ativeindustryw i t h l o w tointermedi-atetechnology-

tointermediatetechnology-ischosenasaresearchsettingsincethisclusterisconsideredtobethecenteroffurnitureclusteri n Indo nesia(Purnomoetal.,2016).Nevertheless,JeparaSMEsexperiencesignificantdecreasesince2005 intermofthenumberofmanufacturers,exportvolume,andemployment(Purnomoetal.,2016).Prestvik(200 9),a s c i t e d i n M e l a t i , Purnomo,a n d Shantiko( 2 0 1 3 ) identified5 0 % ofs m a l l

-s c a l e furniturem a n u f a c t u r e r -s p e r c e i v e d marketacce-s-s tobetheirmainproblem.A-s-su ch,P u r n o m o , Achdiawan, Parlinah, Irawati,andM e l a t i (2009)suggestcollaborationactivitie salongthevaluechaintoproducenewproductsorservicesandtoensureimprovements invaluea dded.Majorfurnitureretailers,which commonlyreside outsideJepara cl us t er , a r e thefi r

s t gatei n gatheringcustomerinformationtothef u r n i t u r e m a n u f a c t u r e r s Againstt h e b a c k

g r o u n d , thiss t u d y c a p t u r e s thei m p a c t s ofcollaborationonr e l a t i o n a l p e r f o r m a n c

e b e t w e e n s m a l l - m e d i u m manufacturerswithinJeparaandtheirretailers

2.Literaturereview

Socialcapital

theorymayjustifytherelationshipsbetweencollaboration,agility,opportunism,andrelationalperform ance.Socialcapitalreferstoavaluableassetthatstemsfromaccesstoresourcesprovidedthroughsoc ialrelationships(Granovetter,1992).NahapietandGhoshal(1998)derivesocialcapitalinthreed i

m e n s i o n s : c o g n i t i v e , relational,andstructural

andunderstandingbetweenmembers;therelationaldimensionreferstotrust,friendship,respect,andrecip rocityd e v e l o p e d throughahistoryofinteractions;andthestructuraldimensiondescribesthepatternofr elationshipsa m o n g members(Villena,Revilla,&Choi,2011).Thisrecentstudyreviewsthelitera turepertainingonlytorelationaldimensionofsocialcapitalasitonly focuseson thecontinuousdevelopmentofrelationalbondingbetweenchannelmembers

Inther e l a t i o n a l d i m e n s i o n , Sukresnae t a l ( 2 0 1 6 ) a n d Villenae t a l

( 2 0 1 1 ) a r g u e t h r o u g h r e p e a t e d transactions,thec h a n n e l membersh a v e attainedt r u s

t w o r t h i n e s s a n d a ffi r m e d n o r m s offriendshipa n d r e c i p r o c i t y withintherelationship Trustislikelysynergisticwithcollaborationincurbinguncertaintieswithintherelationships(Dyer,1997;Naray ananetal.,2015)andthereforecollaborationisaconstructthatmaydeliverp o s i t i v e impactswithinchann elrelationships

2.1 Hypothesesdevelopment

2.1.1 Theeffectsofcollaborationonagility,opportunism,andrelationalperformance

Inthesupply c ha i n context,collaborationref er sto a l o

ng-t e r m relang-tionshipw he r e membersge ne ra ll y cooperang-teandshareinformang-tionandevenmodifyng-theirp racticesaimingtoimprovejoinperformance(Ralstone t al.,2017;Whipple,Lynch,&Nyaga,2010).Thede finitionimplysuchcollaborationpossesseslessdegreeofformalizationa n d controlthanotheri n t e r

-o r g a n i z a t i -o n a l s t r u c t u r e s l i k e c-ontractuals u p p l y c h a i n p a r t n e r s h i p s , su pplychainoperationalintegration,orjoinventures/strategicalliances (Ralstonetal.,2017)

Increasedcollaborationbetweenmanufactureranditsretailerfacilitatesamorefocusedefforti nrespondingtocustomerneeds,betterresourceallocation,andstimulatesanintensiveinformationex change( N a r a y a n a n e t a l , 2 0 1 5 ) I t m a y enablea fi r m t o befl e x i b l e a n d r e s p o n s

i v e i n dealingw i t h theb u s i n e s s e n v i r o n m e n t changes,de vel oping newpr o duc t s , dri vi n gagil it y pe r f o r ma nc e , a n d optimizingtr ansa ct io n v a l u e (Chen,Li,&Arnold,2013;Gunawan etal.,2016;Narayananetal.,2015).Assuch,thisstudyproposesthefollowinghypothesis:

H1.Collaborationpositivelyinfluencesagility.

Bettercollaborationalsoreducespartner’sopportunism,contingenttothedegreeofrelationalnorms(Zhoue

t al.,2015).Here,positiveoutcomesoccurwhenactualactivitiesmatchtheexpectationsformedviarelation aln o r m s a n d v i c e v e r s a M o r e o v e r , a s collaborationi m p r o v e s trusta n d r e l a t i o n a l a s p

e c t s betweenc h a n n e l

members,itcouldinhibitopportunisminthelong-run(Narayananetal.,2015;Wang,Li,RossJr,&Craighead,2 0 1 3 ) Thus,thefollowinghypothesisisadvance d:

H2.Collaborationnegativelyinfluencesopportunism.

Brito,Brito,andHashiba(2014)findsomepartsofcollaborationimproveseveraldimensionsofch annelperformance.Inthissense,collaborationwithsuppliersandcustomersimprovesgrowtha ndprofitability.Others t u d i e s c o r r o b o r a t e consistentr e s u l t s , i n w h i c h collaborativea c t i v i

t i e s increasecollaborativeperformance(Cao&Zhang,2011)aswellasimproveproductivityandgr owth(Allred,Fawcett,Wallin,&M a g n a n , 2011).Againstthebackdrop,afollowinghypothesisispr oposed:

H3.Collaborationpositivelyinfluencesrelationalperformance.

2.1.2 Theeffectsofagilityandopportunismonrelationalperformance

Agilityreferstoaneffectiveresponsetochange(Holsapple&Jones,2005)andassociatedwiththeex

tenttowhichcustomer-relatedobjectiveshavebeenmet(Gligoretal.,2015).Agilefirmswhooperateunderhigherl e v e l s ofen vironmentalmunificence,dynamism,andcomplexitycouldimprovetheirchannelperformanceth antheywhoactwithinlowerlevels(Gligoretal.,2015).ThisreinforcesSwafford,Ghosh,andMurthy(2008)’fin dingthatsupplychainagilitydirectlyincreasesperformance.Assuch,theproposedhypothesisis:

H4.Agilitypositivelyinfluencesrelationalperformance.

Finally,opportunismmayrelatewithrelationalperformance.Channelpartner’sopportunismre

ferstoaself-interestseekingwithguile(Williamson,1975)andthisinvolvestheriskofpartiesnotactingintheinterestofth erelationship(Narayananetal.,2015).Theriskcausesthefocalfirmtoobtainalowerlevelofbenefi

tsf r o m therelationship(Wangetal.,2013)asthefirmlosessignificantleveloftrustandcommitmenttowar ditsp a r t n e r (Mysen,Svensson,&Payan,2011).Thus,theproposedhypothesisis:

H5.Opportunismnegativelyinfluencesrelationalperformance.

H4 (+) H1 (+)

Relational Performance

H2 (+)

Collaboration

H5 (+)

Opportunism

H3 (-)

ThehypothesizedpathwaysaredepictedinFigure1

Figure1.Thehypothesizedpathwaysofcollaboration,agility,opportunism,andrelationalpe rformance.

3.Researchmethod

3.1.Measures

Thisstudyd e p l o y s fourconstructs:collaboration,a g i l i t y , o p p o r t u n i t y , a n d relationshippe rformance.Collaborationactsasantecedentwhiletherestarepositedasoutcomesofchannelrelationshi ps.Allmeasuresa r e

anchoredin5-pointsLikertscale(totallyagree-totallydisagree).Theagilityconstructcapturesperceptionsofthemanufactureraboutitself,whiletherest recordthemanufacturer’sperceptions abouttherelationshipwithitsconnectingretailer

Adaptedfromliteratures(Claro,Hagelaar,&Omta,2003;Liu,Wei,Ke,Wei,&Hua,2016;Narayanan eta l , 2 0 1 5 ) , collaborationconsistsofeighti t e m s B a s e d onthem e a s u r e s f r o m Gligore t a

l

(2015),agilitye n c o m p a s s e s sevenitems.OpportunismconsistsoffiveitemsadaptedfromWang etal.(2013)andZhouetal

( 2 0 1 5 ) Relationalperformancereferstotheextenttowhichthemanufacturerreceivesbenefit sasaresultoftherelationshipwithitsconnectingretailer.ThemeasureadaptsthescaleofSanders(2008 )andVillenaetal.( 2 0 1 1 ) anditconsistsoffiveitems

Themeasuresdevelopmentstartedfrompoolingexistingmeasuresfromrelevantliteratures.Suc

hc o l l e c t i o n s werethenunderwentfacevaliditytestbydiscussionswiththeacademicexperts,fol

lowedbyin-depthdiscussionswiththreeeligiblemanufacturers.Priortothein-depthdiscussionswiththemanufacturers,themeasuresweretranslatedintoIndonesianlanguagebyatrain edtranslator.Thesestepsensure

relevancyofitemsaswellaswordsclarityofthequestionnaireinstrument

3.2 Samplinganddatacollection

Theunitofa n a l y s i s fort h i s r e s e a r c h i s thefi r m a n d thep r e f e r r e d targetrespondentsa r e s e

n i o r

-l e v e -l m a n a g e r s orownerw i t h k n o w -l e d g e ofb u s i n e s s r e -l a t i o n s h i p w i t h t h e fi r m ’ s c

o n n e c t i n g r e t a i l e r A

non-

randompurposivesamplingisemployedsincethedirectoryofJepara’ssmall-medium-manufacturerswasincomplete.BasedonHairetal

(2010)’suggestiononsampleforMaximumLikelihood(ML)estimation(100-2 0 0 samples),ther e s e a r c h targets(2010)’suggestiononsampleforMaximumLikelihood(ML)estimation(100-2 0 0 respondentsa s sample.S u c h r e s p o n d e n t s a r e t h

e s m a l l m e d i u m

-m a n u f a c t u r e r s whichselltheirproductsinatleastanexternalretaileroranexternalshop(aretail erthatisnotinvolvedinonegroupofcompanywiththemanufacturer)

Thequestionnairesaredeliveredin-handbyfivetrainedsurveyors.Theyaccompanytherespondentsinfillingthequestionnairesinacco rdancetoavoidmisperceptionsandthusthismethodensuresaveryhighr e s p o n s e rate.All201 distributedquestionnairesarereturned,inwhichonlyonequestionnairedoesnotmeetthecriterion(abig-sizedcompany).Hence,thefinalandusablequestionnairesare200units

3.3.Dataanalysis

Thedataanalysisstartswithdatacleaningtoavoidmissingdataandoutliers.Onlyonemissingdatawa sfoundandthisisremediedbysupplyinganaveragevaluetotheparticulardata.Onlyoneoutlierisconsidereda

s aseriousproblemandmustbedroppedforfurtheranalysis.Next,thenormalitycheckisperformedsinc ethestatisticalpr o c e s s us e s M L estimation( C u n n i n g h a m , 2 0 0 8 ) Al l indicatorsr e v e a l properl inearitya n d tolerablerangeofskewness(closeto0)andkurtosis,andthustheseindicateacceptednor mality.Hence,thefinalsampleis199responses

Theanalysisthenunderwenttwo-stepsStructuralEquationModeling(SEM)byconductingConfirmatoryFactorAnalysis(CFA),followedbystr ucturalanalysis(Anderson&Gerbing,1988)

4.Results

Demographicsshow95%aremaleandthemajorityishigh-schoolgraduates(60%).Mostrespondentsaretheownerofthebusiness(85%)whiletherestareseniorma nagers.Mostcompaniesagedmorethan10years( 7 0 % )

andsmall-

sizedbusinesswiththenumberofemployeesbetween10-20people(71%).Theirsalesmostlybelow100millionrupiah(81%)whichmayindicatetheyaremostlysmal l-sizedbusiness.Themajorityofthem a n u f a c t u r e r s

engagewith1-

5retailers(83%)withrelationshipdurationof1-5years(90%).Theconnectingr e t a i l e r s mostlycontributea minimumof2 0 % totalsalesofthem

a nuf a c t ur e r s ( 8 6 % ) a nd hencethismay indicateagreaterdependenceofthemanufacturertowardit sconnectingretailers

TheCFAprocessesrevealfourEigenvalueshigherthan1.0andthisshowacceptedfactors.Moreover,t hes t a n d a r d i z e d residualcovariances,modelfit,constructreliability,discriminantvalidity,andaverage-varianceextracteda l s o d i s p l a y a v a l i d mo de l Table1 s u m m a r i z e s theC F A re s ul t s Al l i t e m l

o a ds a re sounda n d suitableforSEManalysis

Table2showstheresultsofSEManalysis.Thenormedchi-square(CMIN/

DF=1.80),CFI(0.96),TLI(0.95),R M S E A (),GFI(0.94), andAGFI(0.90)indicateanexcellentmodel ( H a i r etal ,2010) Modelvalidationisa p p r o a c h e d with2000bootstraps,andagainanexcelle ntp(Bollen) of0.148indicatesavalidandexcellentfitmodel

SEManalysisshowso n l y threepathsa r e significanta n d twopathsa r e insignificant.Collaborati

onp o s i t i v e l y influencesagility(H1),positivelyinfluencesrelationalperformance(H2),andne gativelyinfluenceso p p o r t u n i s m (H3).Inthefinaloutcomes,agilityandopportunismdoesnotinfl uencerelationshipperformance( H 4 andH5).

Structuralpaths Standardized

pathcoefficients Hypothesistesting

Table1.Scaleitems.

A.Agility(Cronbach'salpha:0.68)

We:

1.Canquicklydetectchangesinbusinessenvironment*.

2.Aresuccessfullyabletoobtaintheinformationwedemandfromourcustomers*.

3.Canmakedefinitedecisionstoaddressbusinessopportunities 2.020.65 0.57 4.Canmakefirmdecisionstorespondthebusinessthreats 2.130.67 0.91

5 Canadjust ouroperationsrequiredforexecutingdecisions 2.120.72 0.53 6.Canincreaseshort-termproductioncapacityasneeded(e.g.increasingworkhour)*.

7.Canadjustthespecificationofordersasrequestedbyourcustomers*.

B.Collaboration(Cronbach'salpha:0.77)

Regardingourworkingrelationshipwiththisretailer:

8.Wearecommitingtodeliverasuccessfulcollaboration*.

9.Therearesignificantefforts(e.g.addingfundorfacilities)todevelopasustainablecollaboration*.

10 Wecreatejointworkingplan.

11 Wejointlydealwithproblemsthatariseinthecollaboration*.

2.230.69 0.62 12.Weroutinelyexchangeinformationthroughinformalmechanisms*.

13.Weconductregularmeetingstoevaluatebusinessprogress*.

14.Weshareinformationthatlikelybenefittheretailer 2.370.68 0.72 15.Weensurethatbothofusalwaysreceiveinformationabouteventsthatmayinfluenceeachparty 2.340.72 0.85 C.Opportunism(Cronbach'salpha:0.92)

Regardingourworkingrelationshipwiththisretailer:

16.Sometimes,theretailerliesaboutcertainthingsinordertoprotecttheirinterests*.

17.Theretailersometimespromisestodothingswithoutactuallydoingthemlater 3.241.04 0.87 18.Theretailersometimestriestobreachouragreementstotheirbenefit 3.191.06 0.90 19.Theretailertriestotakeadvantageof'holes'inouragreementstofurthertheirowninterests 3.260.97 0.89 20.Theretailersometimesusesunexpectedevents(e.g.productsdelivery)toextractconcessionsfromus*.

D.Relationalperformance(Cronbach'salpha:0.76)

Inourcooperationwiththisretailer,wehavesuccessfully:

21.Creatednewgenerationofproducts*.

22.Openedupnewmarkets*.

23.Learnedaboutcustomers'wants*.

25.Improvedqualityoftheproductionprocesses 1.860.65 0.72

*DroppedduringtheCFAprocesses

Table2.Resultsoftestingtheresearchhypotheses.

H2:CollaborationRelationalPerformanceH 3

: CollaborationOpportunism

H4:AgilityRelationalPerformance

H5:OpportunismRelationalPerformance

*p<0.1

**p<0.05

***p<0.01

0.461*

**

-0.15*

-0.007 -0.077

SupportedSu pportedNots upportedNots upported