The two sides of power in business-to-business relationships: implications for supply chain management

Vera Belaya, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO), Germany* Jon Henrich Hanf, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO), Germany

Power, one of the key elements of business-to-business relationships, has been viewed from two standpoints good and evil. Because supply chain management consists of both alignment of interests (cooperation) and alignment of actions (coordination), we assume that both sides of power can be used effectively to manage supply chain networks. We look at both views presented in the literature positive and negative and present a conceptual framework on how the different aspects of power can be used as mechanisms for chain management. Our goal is to develop a strategy that enables supply chain managers to select an effective mix of power mechanisms. Using literature review we develop a conceptual framework of how these two sides of power affect supply chain management with specific attention to coordination and cooperation issues, and how power can be used as a tool for supply chain management. Keywords Supply chain networks, Supply chain management, Power, Focal company

Introduction The role of power has lately received increasing attention in the business-tobusiness marketing literature (Hingley 2005; Kumar 2005; Sodano 2006). Cox (2001) says power is at the heart of any business-to-business relationship. Its importance is underlined by many scientists who refer to power as a key behavioural construct that influences performance (Reve and Stern 1979) and as an integrator that coordinates the supplier firms and their distributors (Wilkinson 1973), which plays a significant role in the supply chain (Maloni and Benton 2000). Several studies on marketing channels have shown that channel power has a significant impact on the buyer-supplier relationship and performance in channel distribution (Etgar 1978; Gaski and Nevin 1985; Liu

*Correspondence details and biographies for the authors are located at the end of the article. The Marketing Review, 2009, Vol. 9, No. 4, pp. 361-381 doi: 10.1362/146934709X479926

ISSN1469-347X print / ISSN 1472-1384 online Westburn Publishers Ltd.

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The Marketing Review, 2009, Vol. 9, No. 4 and Wang 2000; Lee 2001; Skinner et al. 1992). Many of the studies agree that investigating power in buyer-supplier relationships greatly important for understanding supply chain issues (Chatziaslan et al. 2005) and that power represents a very important issue when studying procurement relationships and marketing channels. The role of power is also crucial in the sense that it can seriously hamper cooperation through its interactions with other constructs of the relationship atmosphere. Nevertheless, the actual role of power in business-to-business relationships has been treated in contrasting ways in the literature. For many decades there has been a discussion about the positive and negative aspects of power (Craig and Gabler 1963). Intriguing and important research questions have arisen regarding how to distinguish among and deal with the two sides of power to avoid problems, and how to use power as an effective tool for supply chain management. Are there any criteria which determine when power has a negative and destructive impact and when is it positive and constructive? Our work aims to investigate the role of power in business-to-business relationships1 to develop a strategy that enables supply chain managers to select an effective mix of power mechanisms. We look at both views presented in the literature - positive and negative - and present a conceptual framework for how the different aspects of power can be used as mechanisms in chain management. Chain management consists of both the alignment of interests (cooperation) and the alignment of actions (coordination), so we explicitly discuss the positive and negative effects of power on cooperation and coordination issues. The two sides of power in business-to-business relationships The opinions about powers effects on exchange relationships are very contradictory. We apply the working definition of power by El-Ansary and Stern (1972), who define power as the ability of a channel member to control the decision variables in the marketing strategy of another member in a given channel at a different level of distribution. It is meaningless to talk about power in the generic sense; therefore, it is necessary to be specific about the nature of the power structure and how it is used (Kumar 2005). Furthermore, because the actual effect of power depends on its source (French and Raven 1959), we examine its effects in terms of different power bases using the expanded classification of power bases (French and Raven 1959) by Raven and Kruglanski (1970) and dichotomisation of power into coercive and noncoercive (Hunt and Nevin 1974) (Appendix 1). Figure 1 shows the positive and negative effects of power on supply chain management, depending on the power bases and cooperation/coordination issues.
1

Strictly vertically coordinated business-to-business relationships are the type most often considered in the context of supply chain management (Hanf and Khl 2005). Hence, in the following section we will also use the term supply chain network, and we speak about pyramidal-hierarchical relationships.

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Figure 1 Conceptual framework

Supply Chain Management

Coordination (alignment of actions) negative

positive + +

positive

Cooperation (alignment of interests) negative

Power

Coercive power Legitimate power

Non-Coercive power
Informational power

Referent power

The negative side of power The negative side of power is pointed out by a number of authors who view the concept of power as alien to the effective workings of exchange relationships and success, and state that power negates cooperation (Doney and Cannon 1997; Bretherton and Carswell 2002). Naud and Buttle (2000) express the common view of power as a negative influence and unhelpful in the building of relationship quality, an area in which the most important cited attributes of a good supply chain relationship are trust, integration, mutual understanding of needs, profit, and satisfaction. Kumar et al. (1998) also view power as the antithesis of trust, and only view it in a negative sense. It must be remembered that power imbalance might create opportunities for more powerful actors to act opportunistically, possibly dissolving the relational elements necessary for developing effective supply chain relationships. Many authors state that over time, the firm with the power advantage consistently abuses the other firm (Stern and Reve 1980) or that the manufacturer exploits the weaker suppliers to obtain superior economic returns (Perrow 1970; Dore 1983). Johnsen and Ford (2001) posit that according to the nature of power relationships, retailers attempt to control the resources of their suppliers and limit their ability to take advantage of new opportunities, such as the development of new international markets and customer relationships. Some studies emphasise the necessity for symmetry and mutuality to

Reward power

Expert power

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The Marketing Review, 2009, Vol. 9, No. 4 foster longer-term relationships, while power asymmetries are associated with less stability and more conflict and are considered to be detrimental to sustaining a business relationship (Rokkan and Haugland 2002; Ganesan 1994; Gummesson 1999). Negative effect of power on the alignment of interests (cooperation) Some researchers have been specific about the nature of power and argued that one who holds a high level of power will exploit the other party by frequently using relatively coercive influence strategies (Bannister 1969; Robicheaux and El-Ansary 1975). For example, one might use power to negotiate lower costs, higher quality, reasonable delivery times, and special exigencies (Maloni and Benton 1997), which is considered to be detrimental to the weaker actor (Thompson 1967; Stolte and Emerson 1976). Therefore, power imbalance in supply chain relationships creates opportunities for more powerful firms to act opportunistically by exercising coercion, which may ultimately undermine the trust within the relationship. Baldwin (1971) states that fear, anxiety, and resistance are typical responses to threats, if A uses negative sanctions today, B will tend to be less willing to cooperate with A in the future. One likely consequence is that when one party is threatened by the balance of power, that weaker party will be more likely to seek alternative alliances (Ireland and Webb 2007) and the power holder may fail to reach its long-term goals. In other words, coercion is the classical example of the negative side of power. Hunt and Nevin (1974) indicate that coercive power sources (punishments) are related positively to intra-channel conflict and inversely to dealer satisfaction, whereas noncoercive power sources exhibit the opposite relationships. Exercising power against other members of the supply chain might provide short-term benefits for the focal organisation, but ultimately reduces its success in the longterm (Lamming and Cousins 2002). Therefore, we assume that the use of coercive power will eventually decrease or perhaps destroy the willingness to cooperate, or will even hinder formation of cooperative relationships because the weaker party will react negatively to the punishing behaviour of the retailer. This leads us to our first assumption. H1a: Coercive power has a negative effect on cooperation. Etgar (1976) states that expert, referent, and legitimate power sources may be less effective than coercive and reward power sources because they are less flexible and are often viewed as being unrelated to specific performance by channel members. Furthermore, their effectiveness may decline over time. For example, expert advice, once given, may provide the channel member with the ability to operate without such assistance in the future. High degrees of identification between dealers and suppliers also may be associated with less channel control. Another major disadvantage of expert, referent, and legitimate power sources is that they may have a more limited in their applicability than rewards and penalties. As for legitimate power, it is difficult to predict the reaction of a weaker party, because the latter may choose not to enter the relationship if it feels intimidated. French and Raven (1959) state that legitimate power stems from internalised values which dictate that there is a legitimate right to

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influence and an obligation to accept this influence. Therefore, we posit that cooperation will be affected negatively when legitimate power is perceived by the target as a form of dictatorship. H3a: Legitimate power has a negative effect on cooperation. Channel members may accept the control of a channel leader but only in specific, well-defined areas of operation. Thus, they may be willing to accept decisions about the introduction of new products if the leader is perceived to be an expert in the field. However, they may resist his attempts to impose controls over such decision areas as pricing or promotion. We assume that depending on the characteristics and goals of the participating parties, as well as the environment (e.g. highly competitive environment), the weaker party may grow jealous of the power holder and abstain from entering a cooperative relationship with him. In this case, the expert power will have a negative effect on cooperation. H5a: Expert power has a negative effect on cooperation. Giebels et al. (1998) expresses the opinion that when there is a power imbalance, there appears to be difficulty in fostering the information flow, which is a precondition for the successful negotiation of an exchange. Gaski (1986) argues that the use of informational power involves manipulative aspects. He draws his argument from Tedeschi and Bonoma (1972), who have shown that one source of power is based on As ability to control critical aspects of Bs environment to the point of manipulating Bs strategies in the desired direction, which they called opportunistic. This use of power has been defined self-interest with guile (Williamson 1975). This definition concerns possession and dissemination of valuable information and is based on deceit and opportunism of the power holder. Stern and El-Ansary (1992) also support the statement that informational power is likely to have a negative effect on cooperation in distribution channels. They argue that channel participants do not necessarily view each other as partners, but rather as rivals, and, therefore, the use of informational power in this case is not well-received. As a result, informational power may destroy or have an overall negative effect on cooperation if it is used for manipulative purposes and is based on deceit and opportunism. H6a: Informational power has a negative effect on cooperation. In the literature, reward power has been seen as having a mixed effect on the buyer-supplier relationship (Maloni and Benton 2000; Zhao et al. 2008). It was suggested that reward power has a positive effect when the culture supports cooperative and supportive relationships. However, it can be assumed that reward power may have an element of coercion in it, and therefore have the same effect as coercive power on relationships. Overuse of reward power is likely to damage relational norms (Boyle et al. 1992) and cooperation (Skinner et al. 1992). It may lead to distrust, suspicion, and eventual abstinence from a trustful relationship by a weaker party because unrealistically high discounts or other rewards that are unusual for the culture or mentality of the latter may be associated with corruption or bad purposes.

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The Marketing Review, 2009, Vol. 9, No. 4 In this case, reward power will have a negative effect on cooperation. H7a: Reward power has negative effect on cooperation. Negative effect of power on the alignment of actions (coordination) In this section we theorise about another aspect of the negative side of power, this time with respect to coordination. Our attempts to find well grounded empirical studies that have tested the effects of power on coordination have been very rewarding. Most of the reviewed literature points out the negative effects of power on cooperation but not coordination. We base our arguments on the following statements found in the previous studies on power with respect to coordination: According to Mohr et al. (1996), coordination between parties is enhanced when a more standardised business format is applied. This idea is also mirrored in the studies of Lusch and Brown (1996) and Jap and Ganesan (2000), who state that contracts, which present clear guidelines and specify the rights and obligations of both parties, improve coordination. Examples of such contracts include price inflation clauses in industrial purchasing and express warranties that address product failure. First, they reduce uncertainty about behaviours and outcomes by providing formal rules and procedures to govern the relationship. Second, the weaker party must consider the legal and economic consequences of violating explicit written contracts. Because non-coercive power implies the use of other mechanisms than the standardised procedures, rules, and guidelines derived from coercive and legitimate power, we assume that non-coercive power - including referent and reward (in this case not including coercive elements, thus, being noncoercive in nature) power - will have a negative effect on coordination. H2a: Non-coercive power has a negative effect on coordination. H4a: Referent power has a negative effect on coordination. H7b: Reward power has a negative effect on coordination. Clemons and Row (1993) showed that although it might seem that information could help improve coordination, the weaker party might not necessarily respond positively to the coordination attempts of the power holder, who is using information and expertise as a tool of its bargaining power. In fact, the weaker party may be plagued by the fear that its economic benefits will be reduced. Lee et al. (1997) also support the idea that coordination is different from information sharing. Information can be shared but there may not be any alignment in terms of incentives, objectives, and decisions, as is required for coordination. Coordination exists for the purpose of decision-making in the best interest of the system (Zhao et al. 2002); however, some agents may have information which they do not want to share with the principal. Therefore, we assume that expert and informational power will have a negative effect on coordination. H5b: Expert power has a negative effect on coordination. H6b: Informational power has a negative effect on coordination.

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The positive side of power We now look at the positive side of power. Many authors state that power appears to be synonymous with oppression, coercion, and force, despite the fact that such negative approaches are just one aspect of power (Duke 1998). Despite criticism of power as the antithesis of trust, Kumar et al. (1995) contend that trusting partnerships can be built between unequals, but only if the powerful party treats the weaker, vulnerable party fairly. A body of literature states that power can be used by the focal actor as an effective tool in coordinating and promoting harmonious relationships, solving conflicts, and, therefore, enhancing the performance of the whole network as well as its individual members. Some authors who have emphasised the powers positive aspects argue that possession of power does not suggest exploitation or frequent use of coercion (Blau 1964; Stern and Heskett 1969). Power does not necessarily imply coercion or use of force; it may involve any degree of compulsion, from the gentlest suggestion to absolute domination (Beier and Stern, 1969). There are also a number of others who argue that power is vital, because it can take the relationship out of the realm of chance and give it purpose, order, and direction (Dwyer et al. 1987; Kumar 2005). Condliffe (1944) says that power, including the possible use of force, is not necessarily evil but may be used to achieve moral purposes. Other researchers have emphasised the role of power in the effective coordination of the exchange relationship, rather than its potential for exploitation. Blau (1964) provides the underlying foundation for this viewpoint. In a marketing channels context, Stern and Heskett (1969) theorise that the exercise of power can have a positive role in the achievement of integration, adaptation, and goal attainment within the channel system. Bierstedt (1950) suggests that power stands behind every association and sustains its structure; without power there is no organisation, no order. Positive effect of power on the alignment of interests (cooperation) Obviously, the exercise of non-coercive power does not include any aggressive elements that may produce friction in the relationship. On the contrary, it fosters a relatively high level of agreement between the interacting parties, because to a large extent it contains the inherent desirability of performing certain actions (Frazier and Summers 1984). Moreover, the use of noncoercive power helps to increase financial and social benefits, through, for example, the offering of financial rewards, provision of assistance, and access to specialised information (Wilkinson 1979). Therefore, this type of power can help to promote common interests and collective goals within the relationship, as well as enhance a friendly and constructive atmosphere. A number of scientists found that firm receiving the influence attempt experiences a greater level of satisfaction with the exchange relationship when non-coercive power, rather than coercive power, is used (Hunt and Nevin 1974; Lusch 1977). Scientists also found that non-coercive power sources are inversely related and coercive sources directly related to the existence of interfirm conflict (Lusch 1976; Wilkinson 1981), and that the use of non-coercive power sources is positively related to the performance of the firm that is subjected to the influence attempt (Sibley and Michie

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The Marketing Review, 2009, Vol. 9, No. 4 1981). Furthermore, scholars who have studied power suggested that noncoercive sources provide better alternatives for enhancing the satisfaction of less powerful trading partners (Hunt and Nevin 1974; Lusch 1976). Based on the arguments found in the literature, we assume that non-coercive power will positively effect cooperation. H2b: Non-coercive power has a positive effect on cooperation. The study conducted by Lee and Low (2008) indicates that legitimate power showed positive relationships with satisfaction. The legitimate power originates from a given position or existing norms or laws, so the supplier may take the protection offered by a retailers legitimised powerful position for an additional advantage. H3b: Legitimate power has a positive effect on cooperation. Dapiran and Hogarth-Scott (2003) emphasise that cooperation comes from the use of expert and referent power. Because referent power was ranked highest among other power bases in connection to satisfaction (Lee and Low 2008), and cooperation has been found to go hand in hand with satisfaction (Gaski 1984), we suppose that a retailers positive image and good reputation will impress the supplier and foster cooperation. Suppliers would also be more willing to comply with the requirements of internationally recognised retailers and fulfil their commands. For example, big multinational retailers usually have international recognition and a certain level of image when entering foreign countries, and suppliers would be more willing to cooperate with partners who have good and proven reputations. H4b: Referent power has a positive effect on cooperation. Acquiring special knowledge or technology to achieve a powerful position and using the expert power thus created will contribute to the positive development of cooperation within a supply chain relationship. Depending on the characteristics and goals of the weaker party, it may become more attracted to the power holder that is an expert in a given area and become increasingly motivated to enter a cooperative relationship. Drawing on the statement of Dapiran and Hogarth-Scott (2003), and using our own logic, we assume that expert power will have positive effect on cooperation. H7c: Expert power has a positive effect on cooperation. We now focus on the possible positive effects of informational power on cooperation. As noted by Eyuboglu and Atac (1991), depending on the channel, environment informational power will have different effects on cooperation. One may assume that in an environment in which participating parties view each other as partners and not as rivals, informational power will have a positive effect on cooperation, because it helps to build trust and enhances positive attitudes toward the long-term channel relationships. In addition, a power holder who possesses new and up-to-date information gains confidence in debating and thus increases his persuasive capabilities, which in turn may increase cooperation. H6c: Informational power has a positive effect on cooperation.

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Gaski (1986) states that partner perceptions (such as expert, referent, and legitimate power sources) are managed through reward and coercive power sources to create harmonious and enduring interorganisational exchange relationships. If power is based on genuine rewards, the supplier will be willing to accept them and enter a trusting relationship. Thus, a retailer can continuously use reward power to give rewards to its suppliers who comply with its quality standards and deliver on time to promote cooperation and generate trust in the relationship. H5c: Reward power has a positive effect on cooperation. Positive effect of power on the alignments of actions (coordination) Some authors see a positive side of power in promoting coordination in supply chain relationships. Bachmann (2001) states that power can be regarded as a mechanism for coordinating social interactions efficiently and allowing relatively stable relationships to develop between cooperating social actors. Stern and E1-Ansary (1992) assert that channel members use power to determine who will undertake which marketing activities, coordinate the performance of these tasks, and manage conflict among themselves. For example, when incomplete contracts fail, power can intervene and let the transaction work out. As for the imbalance of power, relationships based on a perfectly stable balance may not always be possible, and weaker parties, for example, may tolerate the imbalance to gain and perhaps maintain lucrative business (Gummesson 1996). Therefore, the use of coercive power has an overall positive effect on coordination of the supply chain network. For example, as retailers impose a series of regular fees on suppliers, such as slotting allowances and promotion fees, these measures representing coercive power might have different effects on coordination the suppliers and their willingness to cooperate with such retailers. H1b: Coercive power has a positive effect on coordination. The positive effect of legitimate power has been observed as contributing to the effective coordination of exchange relationships as the distribution of power has become legitimate over time (Frazier and Antia 1995; Kalafatis 2000). Examples of formally recognised legitimate power include patent rights, trademarks, fair trade laws, and contractual agreements. This form of power is very visible in the contractual variant of vertical quasi-integration. For example, in franchise systems, it has been noted that the direction of power for most decisions is built into the franchisor-franchisee relationship by means of the franchise contract, which typically favours the franchisor (Ozanne and Hunt 1971). Therefore, we assume that formally recognised legitimate power can improve coordination. H3c: Legitimate power has a positive effect on coordination. When a customer uses reward or coercive power, the manufacturer is extrinsically motivated to commit to it and comply with the customers requirements to achieve favourable outcomes (Zhao et al. 2008). Therefore, if reward power is perceived as having an element of coercion or similar

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The Marketing Review, 2009, Vol. 9, No. 4 effects of coercive power, then we assume that reward power will have a positive effect on coordination. H7d: Reward power has a positive effect on coordination.

Figure 2 Theoretical model Step 1

H1a H2a Non-coercive power H2b

Cooperation (alignment of interests)

Figure 3 Theoretical model Step 2

Coercive power H1a

H1b

H3c Legitimate power H3a/H3b Referent power H4a H4b H5b H5a/H5c H6b Informational power H6a/H6c H7b/H7d Reward power H7a/H7c Cooperation (alignment of interests) Coordination (alignment of actions) Supply Chain Management

Expert power

Supply Chain Management

Coercive power

H1b

Coordination (alignment of actions)

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Having examined the existing literature, we have worked out hypotheses about the negative and positive sides of power with respect to cooperation and coordination issues in supply chain management (Appendix 2). We propose a theoretical model for testing our hypothesis in two steps. The first step includes testing the effects of coercive versus non-coercive power on cooperation and coordination (Figure 2). The more detailed effects of other power bases from the typology of French and Raven (1959) and Raven and Kruglanski (1970) can be examined in the second step (Figure 3). Our findings illustrate that power has two sides that play an important role in supply chain management. Based on the literature, we assume that both sides of power could be used effectively for achieving cooperation and coordination among supply chain network actors. Implications for supply chain management The knowledge of different power sources is essential to successfully managing business-to-business relationships Managers should be particularly aware that power, depending on its source, may have different effects on coordination and cooperation. Managers must assess the costliness of the chosen power based on the available source when solving coordination and cooperation problems. Our recommendations can help managers to understand different interactions of these factors and develop practices to successfully manage their business-to-business relationships. Next we present possible implications for supply chain management with specific attention to cooperation and coordination issues. We start our discussion with the observation that business-to-business relationships in the context of vertical procurement relationships (i.e. supply chain networks) almost always include power asymmetries due to their pyramidal-hierarchical structure. We first observe that although power (asymmetries) is inherent in such relationships, the literature that focuses on its managerial appropriateness is sparse compared to other constructs such as trust. Furthermore, if power is discussed at all, often it is reduced to its coercive nature, implying that power in general only means the probability of imposing ones own will, even when there is resistance and regardless of the basis for this probability (Weber 1947). Hence, although it may initially appear to be trivial, an important implication of this research on managerial decision making is that supply chain networks can be successfully managed by applying both coercive and non-coercive power. Furthermore, based on our findings, we advise managers to calculate the benefits of using non-coercive power instead of coercive power. We do not advise completely excluding coercive power. It can be particularly useful for addressing alignment of action problems. However, the potentially destructive nature of coercive power should not be overlooked when considering its role in and implications for successful supply chain management. Very often managers apply coercive power without calculating the long-term costs of maintaining the relationship. Coercive power, with its punishing and aggressive nature, should only be used when it is absolutely necessary; otherwise, it may destroy a cooperative relationship. While coercive power may not necessarily

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The Marketing Review, 2009, Vol. 9, No. 4 promote cooperation in supply chains, it has an enormous potential to be used very effectively by introducing strict rules that all members have to follow and maintaining order. On the other hand, non-coercive power, known for its soft nature, can help to achieve cooperation among the participating supply chain actors. Some types of non-coercive power can also be used to solve coordination problems. We assume that using reward power promotes a cooperative relationship, which eliminates the problem of aligning the interests of the supply chains individual actors. Reward power might help to promote faster and easier transactions among the supply chain members. In this case the power holder benefits by gaining confidence about the behaviour and coordination of the weaker party. Bear in mind that rewards should be adjusted to the situation, culture, and mentality of the power target and should not be exaggerated or used excessively. In general, coercive and reward power are seen as capable of improving the predictability of the supply chain members, because the hierarchal elements and authority mean that everyone in the network knows the results of the rules being observed or not. The weaker parties will either be rewarded for appropriate or outstanding behaviour or they will be punished or have their rewards withdrawn. The effect of expert power on cooperation can also be interpreted positively; therefore, it is best used as a tool for aligning interests and cooperation among the network actors. By providing training, information, or problem-solving assistance to weaker members of the chain, the power holder might provide an incentive for cooperation. However, the power holder should be aware that when using this kind of power, the weaker actor might become resentful and envious of the power holders expertise or knowledge or suspicious of the expert power holders influence or role as a rival. Legitimate power might stem from a strong market position (characterised by a high market share and/or effective entry barriers for new competitors), which can be skilfully used to achieve cooperation and coordination goals. The scale of legitimate power should be used very carefully when the power target might feel intimidated by the powerful position of the power holder, and it should be used in such a way that the power target perceives this as a protective advantage. Another important implication for managers is the use of referent power, which should be used to build trust. In addition to enhancing trust, referent power helps to reduce anonymity, increase transparency, and create identification with the supply chain network, which reduces the chance that individual players will behave opportunistically. Expert, referent, and legitimate power may be less effective than reward and coercive power sources because they are less flexible and can often be viewed as being unrelated to specific performance by supply chain participants. Their effectiveness may decline over time; for example, expert advice, once given, does not have the same value in the course of time. Power is not necessarily negative. It may have different effects on cooperation and coordination, depending on its origin, is not necessarily negative. It can destroy a cooperative relationship or help to solve problems

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of coordination and alignment of actions. The knowledge about these effects should be used skilfully for effective management of supply chain networks. From the managerial point of view, this means that actors who gain power from other parties must know that these parties still have some power that can be used opportunistically. Thus, knowing these sources can help to develop strategies for dealing with this behaviour. Furthermore, using power does not always imply that coercive actions must be taken. Instead, knowing that power also provides the ability to give rewards might lead to a change in behaviour, and thus enhance cooperation. This is particularly valuable because chain management encompasses the alignment of both actions and interests. We do not specifically suggest which combination of power mechanisms is appropriate, but we advise supply chain managers to be very cautious in choosing the appropriate power mechanism and to adjust the mechanism to the problem setting and strategic goals. Summary and conclusions Although power relationships are beginning to receive more attention from researchers, only a few scientific works have studied power in the context of supply chain networks. Because such networks have a pyramidal-hierarchical structure, they possess a focal company that has the power to align the actions of the network partners and the ability to coordinate the network. In this context, power represents one of the major elements of the supply chain management. By analysing the different sources of power (coercive, reward, expert, legitimate, referent, informational) we have also found that these sources can be classified as coercive and non-coercive. In doing so, we assumed that it would be necessary to distinctly classify power to determine its various effects on supply chain relationships. Using this classification, we have conducted a literature overview on power effects and have found that power has many multi-faceted effects on coordination and cooperation in supply chain relationships. Coercive power reflects the negative side of power if it is expressed through exploitation, abuse, or opportunistic behaviour. It is known for its punishing and aggressive nature and has a negative impact on trust and cooperation in general; therefore, it must only be used when absolutely necessary, or it may destroy a supply chain relationship. Reward power may also serve as a source of negative outcomes, if rewards are not adjusted to the situation, culture, and mentality of the power target or if they are exaggerated or used excessively manner. The scale of legitimate power should be used very carefully when the power target might feel intimidated by the power holder and it should be used so that the target perceives it as a protective advantage. Informational power, if manipulated or used unfairly, might also negatively affect supply chain relationships. The positive side of power is mainly seen when the power is not abused and it is used through non-coercive sources. Power, when it is not abused, always has the potential to influence the decision to cooperate. The use of reward, expert, and informational power generally promotes a trustful and cooperative relationship among actors and should be used with this intention.

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The Marketing Review, 2009, Vol. 9, No. 4 The effect of expert power can also be interpreted positively; therefore, it is best used as a tool for aligning interests and fostering cooperation among the network actors. Positive image and reputation form the basis for referent power, so it is also best used to develop cooperative desires among network actors and attract other companies to join a supply chain network. So again, power can be viewed as having both positive and negative effects on supply chain management, i.e. power has bad and good sides in supply chain networks. In this study we have mainly analysed power from the viewpoint of the power holder who manages the supply chain network. In the future we hope to examine the effects of power from the viewpoint of both power holders and power targets. References
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The Marketing Review, 2009, Vol. 9, No. 4 Appendix 1 Explanation of power bases in business-to-business relationship
Power base Coercive Description Coercive power is usually based on the expectation of punishments and/or threats and relies on the belief that punishments will be forthcoming or rewards will be withheld unless the requested behaviour is exhibited. Non-coercive sources (legitimate, referent, expert, informational, reward) come through the use of power in a positive manner such as applying positive sanctions, using its expertise, brand image or legitimate position on the market. Legitimate power stems from internalised values which dictate that there is a legitimate right to influence and an obligation to accept this influence. Example in a B-to-B relationship In the supply chain network context coercive power reflects the fear of a network member to be punished if he fails to comply with the requirements of the focal company. Non-coercive power is found in the supply chain network context in form of all other power sources (legitimate, referent, expert, informational, reward) except coercive.

Non-coercive

Legitimate

Referent

Referent power is based on the ability to be attractive for others and build loyalty and depends on the charisma and interpersonal skills of the power holder. Expert power is derived from the skills or special knowledge of an individual or a group in a specific subject. This knowledge applies to the restricted area in which the specialist is trained or qualified. The degree of power depends on the scarcity and the need of theses skills for others.

Expert

A power holder in this case should be recognised in the eyes of the network members as having a right to make specific decisions and expect compliance with regard to these decisions. In the supply chain context referent power is found in the form of brands and private labels or corporate social responsibility, which carry companys positive image. In case with a supply chain network the expert power of a power holder can be achieved if the network actors perceive or believe that it possesses a special knowledge valuable for them. For example, manufacturers are often expected to have special knowledge about new products and promotion to assist the dealers. Contd...

Belaya and Hanf The two sides of power in business-to-business relationships Power base Description Example in a B-to-B relationship If a retailer representing the holder of informational power has new information about the consumer demands, then it can use it to persuade suppliers to deliver their products and become a part of a supply chain network.

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Informational Informational power stems from the ability to explicate information not previously available and the ability to demonstrate the logic of suggested actions with this information. This kind of power does not demand to be an expert, but rather requires possession of new and up-todate information. Reward Reward power depends on the ability of the power holder to offer or mediate rewards to others. It is based on the degree to which the individual can give others a reward of some kind such as recommendations, desired gifts, and increases in pay or responsibility.

If a power holder can mediate rewards due to the access to resources which are valuable for other supply chain network actors, then it can make the actors to perform in the way the company desires.

Appendix 2 Summary of hypotheses

Power Coercive Cooperation H1a: Coercive power has a negative effect on cooperation. H2a: Non-coercive power has a negative effect on coordination. Coordination

Non-coercive

Legitimate

H3a: Legitimate power has a negative effect on cooperation. H4a: Referent power has a negative effect on coordination. power effect has H5b: Expert on a negative coordination. power effect has on

Negative side of power

Referent

Expert

H5a: Expert a negative cooperation.

Informational H6a: Informational power H6b: Informational power has a negative effect on has a negative effect on cooperation. coordination. Reward H7a: Reward power H7b: Reward power has a negative effect on has a negative effect on cooperation. coordination. Contd...

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Power Coercive Cooperation Coordination H1b: Coercive power has a positive effect on coordination.

Non-coercive

H2b: Non-coercive power has a positive effect on cooperation. H3b: Legitimate power H3c: Legitimate power has a positive effect on has a positive effect on cooperation. coordination. H4b: Referent power has a positive effect on cooperation. H5c: Expert a positive cooperation. power effect has on

Legitimate

About the authors and correspondence Vera Belaya is a Ph.D. student at Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO). Vera received her Diploma in Accounting and Auditing from the Department of Agricultural Economics of Kazakh Agrarian University, named after S. Seifullin, in Kazakhstan, and her Masters Degree in Business Administration in Agriculture from the University of Applied Sciences Weihenstephan in Germany. She worked as a coordinator of the Masters program in Agrarian Management at Voronezh State Agricultural University, named after K. D. Glinka, and as a manager in the logistics department of Trubatec GmbH in Russia before starting her Ph.D. studies at IAMO. Vera has published in the Journal of Relationship Marketing, Enometrica, Journal for East European Management Studies, and Central Asian Journal of Management, Economics and Social Research and presented a number of papers at international scientific conferences. Her research areas include supply chain management and business-to-business marketing. Corresponding author: Vera Belaya, Ph.D. student, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO), TheodorLieser-Str. 2, 06120 Halle (Saale), Germany T +49 (0)345 2928243 F +49 (0)345 2928299 E belaya@iamo.de

Positive side of power

Referent

Expert

Informational H6c: Informational power has a positive effect on cooperation. Reward H7c: Reward power H7d: Reward power has a positive effect on has a positive effect on cooperation. coordination.

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Jon H. Hanf is a senior researcher at Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO) and is responsible for the research group Consumer Behaviour, Marketing and Networks. He studied economics at the University of Stuttgart-Hohenheim and received his Ph.D. from Justus-Liebig-University Giessen (JLU), in the Chair of Food Economics and Marketing Department, while he managed the Institute of Cooperative Science at JLU. Jon has published in Agribusiness: An International Journal, Energy Policy, International Food and Agribusiness Management Review, International Journal of Cooperative Management, and Journal on Chain and Network Science, among others. His research interests include consumer behaviour studies, business-to-business marketing, and strategic management. Dr Jon Henrich Hanf, Senior Researcher, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO), Theodor-Lieser-Str. 2, 06120 Halle (Saale), Germany T +49 (0)345 2928246 F +49 (0)345 2928299 E hanf@iamo.de

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