EXECUTIVE SUMMARY

Studies on long-term orientation and trust in retailer–supplier channel relationships have been conducted primarily in Western settings, and little information is available for regions with different cultural characteristics. Studying long-term orientation in a country like Japan can provide useful insight for the next generation of channel relationships in countries where long-term orientation is just developing. The Japanese have a strong preference for continuity of relationships. Retailers have a preferred group of vendors with whom they will do business for years. In our study, the average length of relationship was 24 years. In Japan, entering a relationship with a new supplier is something like entering a marriage: the partnership is expected to last a lifetime. The Japanese business community supports these long-term relationships by providing informal sanctions for channel partners who do not fulfill their obligations.

In this study, we use a national survey of Japanese retail buyers to test two models of channel relationships. In the first model, the traditional Japanese model, we place long-term orientation as an antecedent to trust and dependence, with trust leading to functionality of conflict and satisfaction. The rival model is what we would expect from the Western literature, where trust, dependence and satisfaction are antecedents to long-term orientation and then functional conflict. We report support for long-term orientation being an antecedent of trust, economic dependence and satisfaction. We hypothesize that trust—rather than being earned—is given because of the long-term nature of relationships. Channel members are expected to look out for the best interests of their partners, rather than continuously seek new partners. Trust is positively related to functionality of conflict and functionality of conflict is positively related to retailer satisfaction with suppliers. Again, like a successful marriage, partners learn to negotiate their differences rather than seek dissolution of the relationship. Likewise, partners are not expected to engage in quid pro quo exchanges which imply evaluation based on role performance rather than commitment to the relationship.

We liken the results of this study to arranged marriages. Partners enter into an arranged marriage with the expectation that it will last a life time, and love may develop because of this commitment. Likewise in our study long-term orientation comes before trust, it is not based on past positive interactions, but based on the institutional expectations of the partners. Trust, like love, may follow.

The backdrop for this study is based on hundreds of hours of interviews conducted by the second author. In these conversations retail buyers said over and over that it would be difficult to terminate one supplier in favor of another. They did indicate that new suppliers could be added if they provided unique merchandise that was unavailable from their current suppliers, however, since adding a new supplier is such a commitment they indicated that it was very important to make sure the new partner would view the partnership as a long-term relationship.

How does a supplier set the stage for this long-term orientation? In Japan, solidarity, mutuality, and flexibility are evident in everyday business interactions.  Such relational concepts can exist when each party has the desire to establish long-term relationships, views that outcomes are interdependent with partner outcomes, and expects joint outcomes to benefit the firm in the long run.  For example, mutuality is sharing business burdens and benefits.  One example of this mutual relationship is that Japanese suppliers often credit retailer accounts for unsold merchandise, and thus share the cost of insufficient consumer demand even if the initial agreement was for a direct (non-consignment) sale. In addition, Japanese channel members have solidarity in that the relationships with channel members continue, even during difficult times.  In Western channel relationships, on the other hand, support is often discontinued during times of strife. Likewise, many Western companies develop long-term relationships by locking channel members into a system through investment in transaction-specific assets. It may lead to long-term commitments, but the commitment is based on economic necessity, not truly relational intent.

We think that the lessons learned from this study are valuable for Western firms dealing with other Western firms who are moving their transactions to a long term focus.  The basis of these relationships is that commitment precedes the transactions. Trust is assumed, not earned.