Retailers are becoming increasingly involved with groups of firms to improve their effectiveness in performing business activities. This trend toward complex, inter-organizational relationships suggests that firm performance may be determined by competition between business networks rather than competition between individual firms. These networks are more than a set of firms involved in exchanges. The firms in a business network have relationships that are characterized by cooperation as well as competition.. Managing inter-organizational network relationships is a particular challenge since their very nature includes these conflicting objectives. Adding to this difficulty is the lack of a hierarchical control structure which means that inter-network performance is the responsibility of the network members themselves.

Perhaps the most widely discussed networks in retailing involve supply chain management. These networks are composed of a focal retailer, the retailer’s vendors, logistics suppliers, software and system providers, and organizations such as Voluntary Interindustry Commerce Standards (VICS) that provide standards to facilitate communications [see the special issue on Supply Chain Management in the Journal of Retailing, (2000)]. The diverse capabilities and resources possessed by parties in these retail networks provide the potential for improved performance. However, it is expected that there will be differences in perspectives on how to work together better. These differences in perspectives can create conflict. Thus conflict is certainly an ever-present and important aspect of network dynamics. Therefore, the management of conflict plays an important role in network performance.

The objectives of this research are to: (1) extend the research on conflict in channel relationships by considering effectiveness of conflict management styles in managing different types of conflict and (2) understand how the types of conflict and conflict management affect network outcomes. Building on previous research on conflict resolution we develop a framework describing different types of conflict and the effects of conflict management approaches on network outcomes. The hypotheses derived from this framework are tested using a simulation of 81 networks.

Findings from the network simulations support the conceptual framework. The results show that conflict can have negative effects on network outcomes. These negative effects can be reduced by the use of the appropriate conflict management approaches. The use of collaborative styles of conflict management is effective in addressing both inter-personal and task conflict. However, accommodative conflict management is effective only at reducing inter-personal conflict, and confrontation conflict management is effective only at reducing task conflict in networks where inter-personal conflict is low and task conflict is high.

These findings are important because the misuse of conflict management approaches can intensify the negative effects of network conflict on important network outcomes. Additionally, despite the fact that collaboration may be viewed as ideal in many situations, this research shows that collaboration is not the only conflict management style that produces positive outcomes. The results also emphasize the need to consider the multi-dimensional nature of conflict. Different types of conflict need to be approached differently. While both of these types of conflict have a negative effect on network outcomes, conflict management approaches are differentially effective in mitigating or exacerbating these effects.