Business Service Triads: A New Area for Service Research Wendy van der Valk a*, Arjan J. van Weeleb a
Eindhoven University of Technology; School of Industrial Engineering; Innovation, Technology Entrepreneurship & Marketing Group; P.O. Box 513, Pav. L0.11; 5600 MB Eindhoven, the Netherlands; T: +31 40 247 26 29; F: +31 40 246 80 54; E:
[email protected] b
Eindhoven University of Technology; School of Industrial Engineering; Innovation, Technology Entrepreneurship & Marketing Group; P.O. Box 513, Pav. L0.16; 5600 MB Eindhoven, the Netherlands; T: +31 40 247 26 29; F: +31 40 246 80 54; E:
[email protected] *Corresponding author
Abstract This paper clarifies the need for studying service triads. As organisations increasingly outsource service delivery to specialist providers, service triads become more and more abundant. The paper reviews existing literature on service procurement and triads to come up with a research framework to guide service triad research. We conclude that research on triads is much needed and invite interested researchers to join us. Keywords: Business services, service triads, research model The authors gratefully acknowledge the useful comments made by Gerrit Rooks and Fredo Schotanus.
Introduction Services nowadays account for over 70% of advanced countries‟ Gross Domestic Product (Ostrom, Bitner, Brown, Burkhard, Gaul, Smith-Daniels, Demirkan and Rabinovich, 2010). The main driver of growth of the service sector is the increase in business-to-business services1 (Axelsson and Wynstra, 2002; Ellram, Tate and Billington, 2007; Wölfl, 2005), the importance of which is also reflected in the purchasing spend of individual organisations. A recent US survey study showed that firms spend between 39% to nearly 90% of total purchasing spend on services (Ellram et al., 2007; 2008). Developments like the increased outsourcing and off-shoring of processes and functions like IT development, call centers and even product design, and the general trend towards „servitization‟ of goods, have only added to this share of services in total purchase volumes (Murray and Kotabe, 1999). At the same time, many organisations still face substantial problems in effectively organizing the transactions and relations involved in sourcing services (Ellram et al., 2007; 2008; Van der Valk and Rozemeijer, 2009). This is highly problematic, as various authors note that the impact of professional service procurement is substantial. Stradford and Tiura (2003) forecast substantially higher cost savings for service procurement versus goods commodity purchasing. As a result, the potential of a high-quality purchasing process followed by appropriate contract management activities is substantial (CAPS Research, 2003).
1
“Business-to-business” services as used here includes “business-to-government” services.
1
Dobler and Burt (1996) furthermore argue that the impact of professional service procurement is far more than the dollars spent, as a service provider‟s performance may substantially affect business performance. Think for example of IT services, which have become critical to many organisations‟ operations: a failure in IT can disrupt the production process of a large chemicals company, or prevent consumers from performing online-banking activities resulting in decreased customer satisfaction. This effect is even stronger for the growing category of services that are directly delivered by external service providers to the buying organisation‟s customers. Van der Valk, Wynstra and Axelsson (2009) and Wynstra, Axelsson and Van der Valk (2006) refer to such services as component services. Examples are in-field maintenance bought by a capital equipment manufacturer like Stork, luggage-handling performed by an external party on behalf of Air France/ KLM, or the healthcare sector, in which health insurers are contracting care providers to take care of their customers (i.e. insurants). In all these cases, the providers deliver these business-to-business services directly to the final customer, without intervention of the buying organisation. Simultaneous production and consumption of services thus occurs between the service provider and the customer, outside the direct control of the buying organisation. Rather than a service supply chain, it is better to speak of a triad (Figure 1), in which the customer (C) requests service from the buying organisation (B), which has outsourced service production to a specialist provider (S), who in turn produces the service in direct interaction with the customer. S
B
C
B
C S
Figure 1 Service supply chains versus service triads
A service triad -in our view- differs substantially from a service supply chain in two important ways. First, as mentioned, a buying organisation operating in a service triad has no control over service delivery. This is because while services in service supply chains go through a chain of consecutive buyer-supplier relationships, services in triads bypass the buying organisation and go directly from provider to customer. Second, in service supply chains, the power resulting from having customer contact usually remains with the same actor (in our research: the buying organisation). In contrast, in service triads, the direct link between service provider and customer may lead power to shift over time from buying organisation to service provider (Li and Choi, 2009), as the service provider is the one with increasing customer contact. The service provider may or may not be inclined to feedback customer information to the buying organisation; in case of the latter, the buying organisation‟s innovation capacity is hindered. Extant service supply chain/ service operations research does not sufficiently capture these unique characteristics of service triads. Peng, Lin, Martinez and Yu (2010) point out that neither the strategic management literature nor the operations management literature address the triadic level in strategic network and supply network research. In our view, the increasing importance of component service purchasing and the important differences between service triads and traditional (service) supply chains suggest that service triads are an important empirical phenomenon that warrants scholarly research. To date, it is insufficiently clear how triads operate, and how buying organisations should contract outsourced service delivery. It is also unclear to what extent this is beneficial for customer satisfaction, both in the short and in 2
the long run. The latter has to do with the buying organisation maintaining their innovation capacity. The main research question is therefore how a buying organisation, over time, can manage in triads to achieve maximum short-term (customer satisfaction) and long-term (innovation) success. The time-perspective is important here, as to capture the shift in power that over time takes place in service triads. The objectives of this paper are twofold: 1) to propose a research framework and agenda; and 2) to invite researchers with similar interests to join us in investigating triads. Service triads as an empirical phenomenon Increasingly, a service provider‟s service proposition makes up an important part of its customer‟s value proposition. The importance of this category of services is growing rapidly, as more and more organisations are sourcing „front-end‟ service activities from external providers (Balakrishnan, Mohan and Seshadri, 2008). At the same time, there is not much literature focusing on these „direct‟ services (Jackson and Cooper, 1988; Nordin and Agndal, 2008). Van der Valk et al. (2009) empirically investigated the ongoing interactions between buyers and sellers of „component services‟: services that are directly delivered to end customers by external service providers. A limitation of these studies is that they involve at most two companies, namely the service provider and the buying organisation. In the case of component service purchasing however, it is clear that a third actor is involved: the end customer. Component services furthermore do not pass through a chain of consecutive buyerseller relationships. Rather, they bypass the buying organisation and go directly from provider to customer. Component service exchange is therefore most appropriately depicted as a triad, consisting of three actors (a service provider, a buying organisation and a (business) customer) and the links between them (Figure 1). Consider the situation in which an Original Equipment Manufacturer (OEM) has outsourced the maintenance for its advanced capital equipment to a specialist service provider, where the equipment is located on the customer‟s premises. Here, the customer has a contract with the OEM, and payment flows from customer to OEM upon successful service delivery (by the service provider). The OEM sources maintenance services from an external service provider, with whom he has a contract and to whom payment will flow upon successful service delivery. The buying organisation needs to integrate information about the status of the equipment, the customer‟s location, but also customer preferences regarding maintenance with information on the way the OEM would like the provider to organize and conduct the maintenance, but also on how the OEM would like to work with the service provider in terms of information sharing, invoicing, et cetera and transfer that to the service provider. Once the provider starts maintaining the customer‟s equipment, the customer directly provides inputs in the form of the machinery to the service provider. Furthermore, the customer may start to make direct arrangements with the service provider, for example to maintain machinery overnight, while it was originally planned during the day. The OEM may or may not be informed about this. Examples of business service triads are abundant: besides the examples already mentioned in this section, one could think of outsourcing of the maintenance to road networks by the Dutch Ministry of Infrastructure and the Environment for the benefit of motorists, or the execution of the Dutch law on societal support (in Dutch: Wet Maatschappelijke Ondersteuning (Rijksoverheid, 2010)), whereby Dutch municipalities purchase services like domiciliary care for their citizens. These examples show that the service triad is not purely a phenomenon occurring in the private sector, but certainly also in the public sector. Therefore, from a managerial point-of-view, the increasing importance of component service purchasing calls for more scholarly research on service triads. 3
The unique characteristics of service triads The situation in which a service provider directly interacts with and receives inputs from the (business) customer has not been explicitly acknowledged in service supply/ service operations literature (Peng et al., 2010). This is counterintuitive, since a service triad is substantially different from a service supply chain in two important ways: 1) in terms of service flows; and 2) in terms of who has power. Regarding service flows, in a service supply chain, service is delivered by the service provider to the buying organisation, who in turn passes this service on to the customer. Any inputs going upstream follow a similar path: the customer provides inputs to the buying organisation, which in turn passes these inputs on to the service provider. The buying organisation is thus the linking pin between service provider and the customer. In network language, this means that the buying organisation bridges the “structural hole” (Burt, 1992), referring to the lack of a direct link between service provider and customer. Services that move through service supply chains have been referred to as semi-manufactured services: services that “are transformed before they become part of the buying company‟s offering to end customers (e.g. daily weather forecasts procured by an airline to create detailed flight plans)” (Van der Valk et al., 2009, p. 809). In contrast, component services involve a direct service production/ consumption link between the service provider and the customer. Rather than passing through the consecutive relationships in a service supply chain, component services bypass the buying organisation and go directly from provider to customer. The contracted service provider is to deliver a performance on behalf of the buying organisation, which cannot be influenced by that buying organisation itself. The presence of a direct link between the service provider and the customer furthermore implies that the service provider becomes directly involved in the buying organisation-customer relationship. The buying organisation is highly dependent on the service provider, not only for final customer satisfaction but also for customer contact, customer-induced innovation and organisational learning. In terms of power, in a status quo situation, the power in service supply chains more or less remains with one party over time. The buying organisation, which bridges the “structural hole” between service provider and customer, takes power from the control over information and the access to resources, and is able to maintain this powerful bridge position over time. In service triads, the buying organisation will initially have a bridge position, as the links between service provider and customer still need to be established. However, over time, as the service provider has positioned itself in the relationship between buying organisation and customer, the direct link between service provider and customer may become stronger. This may especially be the case in business-to-business-to-business triads, where the business-tobusiness relationship between service provider and customer may be characterized by rather strong integration. At the same time, as Li and Choi (2009) suggest, the lack of direct interaction between buying organisation and customer will lead the link between them to become weaker (“bridge decay” (Burt, 1997)). Ultimately, the power in the triad will shift to the service provider (“bridge transfer” (Burt, 1997)). As the service provider enjoys the leverage of being the bridge, the buyer is confronted with performance risks (Li and Choi, 2009). Such a shift therefore fundamentally changes the position and associated possibilities of the buying company. Indeed, Peng et al. (2010) found that when a focal actor occupies different structural positions in the triad, this actor may adopt different contractual and coordination mechanisms for managing the triad. The changing structure of service triads between the pre-contract and post-contract stages thus warrants different management mechanisms from the buying organisation. For example: in case of luggage-handling being outsourced by an airline, the service provider is usually not very visible to the passengers. In their eyes, they are dealing with the airline, not its subcontractor. This may be an example of a mechanism aimed at maintaining the link with the customer. Another example may be related 4
to the decision of whether or not to have the service provider use their own uniforms, or to have them wear buying organisation uniforms. In case of the latter, the visibility of the service provider to the end customer is reduced. Thus, from a theoretical point-of-view, these characteristics of service triads make them a unique empirical phenomenon that warrants scholarly research. Prior research on triads Although a relatively new phenomenon, the number of studies on triads has been increasing in recent years. Within this literature, three streams can be identified. The first and largest stream of triad research focuses on triads consisting of one buyer and two suppliers. A second stream focuses on triads with other actor compositions, like for example two buyers and one supplier. Table 1 provides an overview of the research conducted in these two streams. Table 1 Overview of prior triad research Stream Source Topic 1 Wu and Choi (2005) Relationship between five archetypes of relationships between two competing and to the buyer equally important suppliers and: 1) buyer sourcing strategies; 2) supply structures between the two suppliers; and 3) the characteristics of the suppliers to be involved in these relationships. 1 Choi and Wu (2009a) Use balance theory to identify nine buyer-supplier-supplier archetypes. 1 Wu, Choi and How buyers actively manage the relationships between suppliers Rungtusanatham and investigate the performance of different supplier-supplier (2010) relationships in triads. 1 Peng et al. (2010) The relationship between the structure of buyer-supplier-supplier triads and their cooperative performance. They found that the buyer‟s structural position in the triad affects perceived cooperative performance as well as the management mechanisms adopted. 2 Choi and Kim (2008) The dynamics within a triad consisting of a focal buyer, a supplier and another buyer by illustrating how what goes on in the relationship with one buyer affects the relationship with the other buyer. 2 Rossetti and Choi Buyer-service provider-buyer‟s customer triad in the context of (2008) an Original Equipment Manufacturer (OEM) contracting specialist service providers for aftermarket sales and service activities2
Both these triad research streams have two things in common. Firstly, the majority of studies herein are most appropriately viewed as supply network studies, involving suppliers that have comparable roles in the triad. In contrast, business service triads can be considered a closedloop supply chain, in which service provider, buying organisation and (business) customer have very distinct roles. Secondly, all studies were conducted in the manufacturing arena. In contrast, literature on service triads is scarce. In this third stream of triad research, the most important theoretical contribution comes from Li and Choi (2009), who explicitly discuss the phenomenon of service triads as defined here. The authors focus on performance risks associated with the transfer of the bridge position 2
Note that in this study, the buyer acts as the intermediary between the specialist service provider and the customer. As there is no direct link between the service provider and the OEM‟s customers, this is not considered a service triad study.
5
from the buyer (before the contract is signed) to the service provider (after the contract has been signed). These performance risks may occur in the short term as a result of the buying organisation being unable to effectively control the interactions between the service provider and the customer, and in the long term, in case the link between the service provider and the customer becomes so strong that the buying organisation is more or less excluded from the triad (supply chain disintermediation (Li and Choi, 2009)). Niranjan and Metri (2008) draw attention to service quality in triads consisting of a buyer, a service provider and consumers. They present the triad as a pyramid upside-down, with the service provider at the bottom, thereby illustrating that the service provider usually has to do a careful balancing job: if the relationships with the buying organisation on the one and with the business customer on the other hand are not balanced, the triad will topple over. Empirical studies on service triads involving three organisations are nearly non-existent. Tate, Ellram, Bals, Hartmann and Van der Valk (2010) use the term Agency Triad to denote a service triad consisting of three individuals, namely a marketer, a supply manager and a marketing supplier representative. This study thus concerns a triad involving an internal rather than an external customer, and hence comprises two organisations in a buyer-seller dyad. This makes this study slightly different from service triads as defined here earlier: according to our definition, service triads involve three organisations. Although the importance of all three organisations is acknowledged in the definition of component services, studies on these services (Van der Valk et al., 2009) usually draw on data collected at only two actors and thus more closely resemble traditional dyadic buyer-supplier relationship studies. Thus, there is ample opportunity for particularly empirically-based studies on service triads. Conceptualising business service triads We have explained that we define a service triad as consisting of three actors, namely a service provider, a buying organisation and a (business) customer, and the links between them (Figure 3). This definition follows Madhavan et al. (2004, p. 918), who define a triad as “subsets of three network actors and the possible ties among them”. The fact that multiple links need to exist between all three actors is in line with Peng et al. (2010), who argue that a single connection among three actors should be defined as a dyad, not a triad. Peng et al. (2010) identify six triangular constellations (Figure 4). The black circle in the various constellations denotes the focal actor (which in our research would be the buying organisation), while the white circles represent two other actors.
Constellation 1
Constellation 2
Constellation 3
Constellation 4
Constellation 5
Constellation 6
Figure 4 Triangular constellations
Peng et al. (2010) argue that constellations 3, 5 and 6 comprise multiple links, and can therefore be considered true triads. In constellations 1 and 4, the focal actor is viewed as being an isolate; in constellation 2, there is only one link between two of the three actors, hence the label dyad. In order to determine the number of links, it is important to define when a link is present or not. For defining links in triads, we draw on the Interaction Model (Håkansson, 1982), which defines four basic elements of industrial marketing and purchasing: 1) the interaction process; 6
2) the participants in the interaction process; 3) the environment within which interaction takes place; and 4) the atmosphere affecting and affected by the interaction. Regarding the interaction process, a distinction is made between the episodes (individual transactions) that take place in a relationship and the long-term characteristics of the relationship which may affect or be affected by the outcome of episodes. During episodes, four elements are exchanged: (product or) service exchange, financial exchange, information exchange, and social or relational exchange. Building on the Interaction Model, we argue that the links in the service triad constitute different types of exchange. It is important to note that not all types of exchange will occur on each link. For example: financial exchange takes place between the customer and the buying organisation, and between the buying organisation and the supplier, but not between the customer and the supplier. The contracts between the parties coincide with the money flows. Service exchange in contrast takes place only on the customer-supplier link. Connecting the different triangular constellations to time, the development of business service triads may look like the sequence depicted in Figure 5.
Phase 1 (Constellation 3)
Phase 2 (Constellation 6)
Phase 3 (Constellation 5)
Phase 4 (Constellation 4)
Figure 5 Development of business service triads over time
Point of departure, or phase 1, is constellation 3: a service provider has been contracted3, but service delivery has not yet started. Here, the buying organisation bridges the structural hole. In phase 2 (constellation 6), the service provider has started to deliver service to the (business) customer. The buying organisation maintains to bridge the structural hole. In phase 3 (constellation 5), the service provider has been delivering service for quite some time, and the relationship between the service provider and the (business) customer has become stronger. In this phase, the brokerage function has shifted to the service provider, who is now bridging the structural hole. The buying organisation moves into a peripheral role. Finally, in phase 4 (constellation 4), supply chain disintermediation has occurred and the buying organisation has been excluded from the triad (no role). Our research will focus specifically on phases 1-3. In phase 1, the buying organisation has to establish a contract that supports the intended service delivery and select appropriate management mechanisms to manage ongoing service delivery. We then continue to study the situation in which the provider is delivering service to the (business) customer. Finally, we are interested what happens when the service provider becomes increasingly powerful in the triad and the link between the buying organisation and the (business) customer becomes weaker. In our field research, we may come across triads that evolve into situation of supply chain disintermediation, as phase 4 may quite immediately follow phase 3. However, we are mainly interested in what the buying organisation can and should do when power has shifted to the service provider; including phase 3 would be sufficient to study the effects of power shifts on
3
Although searching and selecting a service provider is an important step when outsourcing service delivery, we are here most interested in how to make a triad work. Hence, we assume a provider has been contracted and focus on the development of the triad from the moment the provider starts delivering service.
7
the buying organisation‟s management mechanisms. It would also allow us to find buying organisations that do not enter into phase 3, that have found ways of maintaining a relationship with the customer as to prevent becoming peripheral. Business service triads: a research model Business service triads are an increasingly important empirical phenomenon. These triads have unique characteristics. First, in triads, service delivery occurs between the service provider and the (business) customer, without intervention by the buying organisation. Second, over time, the power in the triad may shift from buying organisation to service provider, as the latter deals with the (business) customer with increasing intensity, leading the former to more or less loose customer contact. As mentioned, we are interested in how buying organisation‟s can achieve maximum performance, and can continue to do so over time. These observations suggest three important concepts in the study of business service triads: 1) the buying organisation‟s role in the triad; 2) the management mechanisms adopted; and 3) performance. These three concepts are brought together in our research model in Figure 6. Let us now elaborate on each of these three concepts. Role in triad
Management mechanisms
Triad performance
Figure 6 Research model
Role in the triad The concept of the buying organisation‟s role in the triad directly relates to the issue of who holds the power position in the triad. In our phase 1, the buying organisation clearly has a „brokerage role‟ in the triad (Peng et al., 2010), meaning that the buying organisation sits on the structural hole between provider and customer. In phase 2, the triad is „fully connected‟ (Peng et al., 2010), as the provider has begun to deliver service to the (business) customer. After bridge decay and bridge transfer, the buying organisation has a „peripheral role‟ in the triad (Peng et al., 2010), meaning that the buying organisation is connected to only one of the two other actors. In our research, the connection between the buying organisation and its customer would become weaker, leaving the buying organisation only connected to the service provider. As such, this concept encompasses the time perspective that we deem important in this research. By studying a triad across the phases 1 to 3, we are able to capture different buying organisation‟s roles/ power distributions in the triad, and study their effects on the management mechanisms adopted and eventually performance. Management mechanisms The most important management mechanisms included in our study will be the type of contract the buying organisation puts in place with the service provider, as well as what kind of contract management activities (i.e. monitoring, social contracts, relationship management) the buying organisation adopts. We focus on the type of contract used, since contracts provide a way to document the service to be delivered and the way in which it is to be delivered in advance of the purchase. We focus on the type of monitoring activities employed, since Van der Valk et al. (2009) argue that in service procurement, the work only starts after the purchase. Appropriate monitoring of the (ex-ante designed) ongoing buyer-seller interactions during service is therefore highly important for successful service procurement. Agency Theory addresses under which contractual arrangements the relationship between a buying organisation (the principal) and a service provider (the agent) operates most efficiently 8
(Eisenhardt, 1989a). It suggests that trade-offs need to be made between outcome-based contracts and behaviour-based contracts. Outcome-based contracts build on measurable results and are more likely to lead the agent to behave in the interests of the principal (Eisenhardt, 1989a; Zsidisin and Ellram, 2003). In contrast, behaviour-based contracts focus on the processes, tasks and activities needed to accomplish these results and are most appropriate when the agent‟s behaviour can be readily monitored and measured at a reasonable cost. Agency Theory furthermore provides suggestions on the type of monitoring activities to be performed by the buyer. Monitoring is defined as one party‟s effort to measure the performance of another (Heide, Wathne and Rokkan, 2007), and can be output-based or behaviour-based (Anderson and Oliver, 1987). The first involves measuring the visible consequences of the agent‟s actions, while the latter involves evaluating the processes that are expected to lead to the desired outcomes. Heide et al. (2007) claim that output-based monitoring reduces supplier opportunism, while behaviour-based monitoring has the opposite effect. Following Heide et al. (2007), it is also important to include in our study the presence of social contracts4. When social contracts are present, the impact of behaviour-monitoring on supplier opportunism turns from negative to positive. With output-based monitoring, the presence of social contracts decreases supplier opportunism even further. It is important to note that Agency Theory has mostly been applied to dyadic buyer-seller relationships (Logan, 2000). In service triads however, the service provider directly deals with the buying organisation in contracting and service design and with the customer in service delivery. Hence, the agent is confronted with two principals who may each have their own specific and possibly conflicting objectives. This double-principal situation has hardly been addressed in supply management research, with the exception of Tate et al. (2010), who studied a situation of one agent versus two principals working for the same (buying) organisation. This implies that the generic content of Agency Theory needs to be translated to the specific context of business service triads 5. Performance For the buying organisation, outsourcing service delivery has the purpose of working with specialist providers to achieve the best performance towards their customers, both in the short and in the long term. However, outsourcing service delivery may come at the expense of customer intelligence and innovation. However, in triad research, we deem it inappropriate and insufficient to look at performance from the perspective of the buying organisation only, as high performance for the buying organisation does not necessarily imply high performance for the service provider or the business customer. Indeed, Neely (2005) suggests that the nature of performance measurement across networks, rather than within organisations, is a major issue for researchers in this field. However, the overall performance of a network is difficult to measure, as network performance only equals the sum of the performance of individual actors when these actors are aligned. However, buyer-supplier alignment in practice is not easy, as the example provided earlier about outsourced maintenance services clearly shows. Here, the OEM benefits most when the equipment is up and running, which is also what the business
4
Social contracts are micro-level agreements that are purposely designed within an individual exchange relationship (Dunfee, T.W., Smith, C.B., Ross Jr, W.T., 1999. Socials contracts and marketing ethics. Journal of Marketing 63 (July), 14-33, John, G., 1984. An empirical investigation of some antecedents of opportunism in a marketing channel. Journal of Marketing Research 21 (August), 278-289). 5 We have conducted some preliminary work in this direction. Due to the fact that this paper is currently under review at a journal, we prefer to omit referring to it here.
9
customer desires. The maintenance provider on the other hand benefits most from performing as many maintenance activities as possible. These two objectives are clearly conflicting in nature. The primary performance variables in this research therefore are customer satisfaction and innovation. At the same time, there is a need to take into account additional performance measures. For example: high customer satisfaction combined with low outsourcer satisfaction means the triad is not performing well. Satisfaction and innovation are therefore evaluated through a number of measures. Building on Zollo, Reuer and Singh (2002), for satisfaction, these are each actor‟s perceived realisation of objectives and each actor‟s satisfaction with the relationships in which he is involved. Where possible, these measurements will be augmented with more objective measurements like actual performance relative to targets set and financial performance. Innovation will be evaluated by the number of product and/ or process improvements made as a result of customer-feedback (Zollo et al., 2002). This requires tracing back ideas from the service provider to the outsourcer. Peng et al. (2010) suggest to also include the performance of the triad as a whole. At the same time, some authors argue that performance cannot be considered an objective attribute of an alliance (de Rond and Bouchikhi, 2004), as different alliance partners are likely to hold different views on what performance is and how it should be measured. We therefore resort to individual actor data only, but will try to extrapolate that data for the purpose of making claims about the performance of the triad as a whole. To summarise, our detailed research model looks as follows (Figure 7): Buying organisation‟s role in triad: - Bridge - Fully connected - Peripheral
Buying organisation‟s management mechanisms: - Type of contract - Type of monitoring activities - Presence of social contracts
Each actor‟s performance: - Perceived realisation of objectives - Satisfaction with relationships - Perceived contribution to innovation and learning - Actual performance relative to targets set - Financial performance
Figure 7 Detailed research model
Concluding remarks This paper has made an argument for the increased importance and relevance of research into business service triads. To date, research on triads is limited, with research on service triads being nearly non-existent. We have developed a research model to investigate the effect of the buying organisation‟s role in the service triad on the buying organisation‟s selection of management mechanisms and eventually on performance of the individual triad actors and the triad as a whole. The next step is to empirically investigate our research model. Empirical studies of triads are considered an important contribution to both the strategic management and the operations management literature, as to date, such studies are limited. Furthermore, the triad is considered to constitute an intermediate level in network analysis (Choi and Wu, 2008; Madhavan et al., 2004), located between a single dyad and higher-order aggregations such as ego networks. Dubois (2009) suggests that triads can be considered as structural units of interest that need to be studied in their (network) contexts. The justification for triads then comes from the triad being “more specifically related to one or a limited number of particular issues, tasks or situations than any dyad” (Dubois, 2009, p. 268). In our view, the direct link 10
between service providers and (business) customers in business service triads is such a situation. As such, triads could extend the scope of current network studies. Methodologically speaking, research on business service triads can be considered empirically challenging. It implies collecting data at all three actors in the triad. Such an approach has not been widely adopted in business service research or research on business-to-business relationships in general (Chang and Grimm, 2006; Easton, 2000). Most studies on dyads even are based on data collected from a single respondent at a single organisation (Krause, 2009). Schoenherr (2008) however argues that this is not “an excuse to not do research in triads”. Spring (2008) argues that such studies require a different kind of research approach than classic Operations Strategy research, in which the unit of analysis (usually a plant about which data is collected to infer prescriptive insights) is clear-cut and always the same. He refers to the extensive studies conducted within the Industrial Networks tradition (Håkansson, 1982; Håkansson and Snehota, 1995) and suggests case research as a suitable method. Yet, the studies to be conducted should be aimed at developing prescriptive rather than descriptive frameworks (Spring, 2008). We propose to a research design broadly consisting of two phases. The first phase involves a case-based research strategy aimed developing hypotheses regarding the effects of the buying organisation‟s role in the triad on management mechanisms adopted and performance. Furthermore, we intend to refine our research model and the operationalisation of concepts. Since scholars are still in the stage of understanding the triadic supply relationship, a grounded theory-building effort is required (Choi and Wu, 2009b). Such an approach comprises building theory by combining data with grounding in existing theories (Danneels, 2002; Dubois and Gadde, 2002; Orton, 1997). Developing some preliminary propositions enable also deductive analyses. In order to establish validity and reliability in case research, the suggestions by Dul and Hak (2008), Eisenhardt(1989b), Voss, Tsikriktis and Frohlich (2002), and Yin (2009) are followed. The unit of analysis is the triad; the level of analysis is a service contract, which encompasses multiple service deliveries. Since we aim to investigate the effects of changing buying organisation roles in the triad, a longitudinal approach to data collection is suggested. This will also enable us to determine for what contingency factors we would need to control. The outcomes of the case research will be input for the development of a survey instrument, which will be used for large-scale data collection in our second research phase. The data obtained will be used to test our hypotheses. We have advanced business service triads as a new area for service research and proposed a research model to guide future empirical investigations of service triads. We hope this to be the start of a successful research endeavour, and gladly welcome others to join in. References Anderson, E., Oliver, R.L., 1987. Perspectives on behaviour-based versus outcome-based salesforce control systems Journal of Marketing 51 (October), 42-58 Axelsson, B., Wynstra, F., 2002. Buying business services. Wiley, Chichester Balakrishnan, K., Mohan, U., Seshadri, S., 2008. Outsourcing of front-end business processes: Quality, information, and customer contact. Journal of Operations Management 26 (2), 288 Burt, R.S., 1992. Structural holes: the social structure of competition. Harvard University Press, Cambridge, MA Burt, R.S., 1997. The contingent value of social capital. Administrative Science Quarterly 42 (2), 339 CAPS Research, 2003. Managing your Services Spend in Today's Services Economy - narrative summary", available at http://images.elance.com/images/ManagingServicesSpend.pdf. CAPS Research, Tempe, AZ Chang, L., Grimm, C.M., 2006. The Application of Empirical Strategic Management Research to Supply Chain Management. Journal of Business Logistics 27 (1), 1-56
11
Choi, T., Kim, Y., 2008. Structural Embeddedness and Supplier Management: A Network Perspective. Journal of Supply Chain Management 44 (4), 5-13 Choi, T., Wu, Z., 2009a. Triads in Supply Networks: Theorizing Buyer-Supplier-Supplier Relationships. Journal of Supply Chain Management 45 (1), 8-25 Choi, T.Y., Wu, Z., 2008. Taking the Leap from Dyads to Triads: Buyer-Supplier Relationships in Supply Network. http://nebula.bus.msu.edu/JOM/OSM1.asp, Choi, T.Y., Wu, Z., 2009b. Integrating the comments to “Taking the Leap from Dyads to Triads: Buyer-Supplier Relationships in Supply Network” by Choi T.Y. and Wu, Z. (2008). Journal of Operations Management OSM Forum, Comments posted January 2009, http://jom.typepad.com/my_weblog/2008/07/comment-here-on.html#comments. Danneels, E., 2002. The Dynamics of Product Innovation and Firm Competences. Strategic Management Journal 23 1095-1121 de Rond, M., Bouchikhi, H., 2004. On the Dialectics of Strategic Alliances. Organization Science 15 (1), 56-69 Dobler, D.W., Burt, D.N., 1996. Purchasing and Materials Management: Text and cases. McGrawHill, New York Dubois, A., 2009. To leap or not to leap:Triads as arbitrary subsets of networks of connected dyads Comment on „„Taking the leap from dyads to triads: Buyer–supplier relationships in supply networks‟‟ by Choi and Wu. Journal of Purchasing and Supply Management 15 (4), 267-268 Dubois, A., Gadde, L.-E., 2002. Systematic combining: an abductive approach to case research. Journal of Business Research 55 553-560 Dul, J., Hak, T., 2008. Case Study Methodology in Business Research. Butterworth-Heinemann: Oxford Dunfee, T.W., Smith, C.B., Ross Jr, W.T., 1999. Socials contracts and marketing ethics. Journal of Marketing 63 (July), 14-33 Easton, G., 2000. Case Research as a Methodology for Industrial Networks: A Realist Apologia, In: Fleetwood, S., Ackroyd, S. (Eds), Realist Perspectives on Management and Organisations. Routledge, London and New York Eisenhardt, K.M., 1989a. Agency Theory: An Assessment And Review. Academy of Management. The Academy of Management Review 14 (1), 57-74 Eisenhardt, K.M., 1989b. Building Theories From Case Study Research. Academy of Management. The Academy of Management Review 14 (4), 532-550 Ellram, L.M., Tate, W.L., Billington, C., 2007. Services Supply Management: The Next Frontier for Improved Organizational Performance. California Management Review 4 (4), 55-66 Ellram, L.M., Tate, W.L., Billington, C., 2008. Understanding Professional Services Outsourcing and Offshoring. Journal of Operations Management 26 (2), 148-163 Håkansson, H., 1982. International Marketing and Purchasing of Industrial Goods: An Interaction Approach. Wiley, London Håkansson, H., Snehota, I., 1995. Developing relationships in business networks. Routledge, London Heide, J.B., Wathne, K.H., Rokkan, A.I., 2007. Interfirm monitoring, social contracts, and relationship outcomes. Journal of Marketing Research 44 (3), 425-433 Jackson, R.W., Cooper, P.D., 1988. Unique aspects of marketing industrial services. Industrial Marketing Management 17 111-118 John, G., 1984. An empirical investigation of some antecedents of opportunism in a marketing channel. Journal of Marketing Research 21 (August), 278-289 Krause, D., 2009. Comments to “Taking the Leap from Dyads to Triads: Buyer-Supplier Relationships in Supply Network” by Choi T.Y. and Wu, Z. (2008). Journal of Operations Management OSM Forum, Comments posted January 2009, http://jom.typepad.com/my_weblog/2008/07/commenthere-on.html#comments. Li, M., Choi, T., 2009. Triads in services outsourcing: bridge, bridge decay and bridge transfer. Journal of Supply Chain Management 45 (3), 27 Logan, M.S., 2000. Using agency theory to design successful outsourcing relationships. International Journal of Logistics Management 11 (2), 21-32 Madhavan, R., Gnyawali, D.R., He, J., 2004. Two's Company, Three's a Crowd? Triads in Cooperative-Competitive Networks. Academy of Management Journal 47 (6), 918-927
12
Murray, J.Y., Kotabe, M., 1999. Sourcing strategies of U.S. service companies: A modified transaction-cost analysis. Strategic Management Journal 20 (9), 791-809 Neely, A., 2005. The evolution of performance measurement research: Developments in the last decade and a research agenda for the next. International Journal of Operations & Production Management 25 (12), 1264-1277 Niranjan, T., Metri, B., 2008. Client-vendor-end user triad: A service quality model for IS/ITES outsourcing. Journal of Services Research 8 (1), 123-138 Nordin, F., Agndal, H., 2008. Business service sourcing: a literature review and agenda for future research. International Journal of Integrated Supply Management 4 (3/4), 378-405 Orton, J.D., 1997. From inductive to iterative grounded theory: Zipping the gap between process theory and process data. Scandinavian Journal of Management Reflections on Conducting Processual Research on Management and Organizations 13 (4), 419-438 Ostrom, A., Bitner, M., Brown, S., Burkhard, K., Gaul, M., Smith-Daniels, V., Demirkan, H., Rabinovich, E., 2010. Moving Forward and Making a Difference: Research Priorities for the Science of Service. Journal of Service Research : Jsr 13 (1), 4 Peng, T.-J.A., Lin, N.-J., Martinez, V., Yu, C.-M.J., 2010. Managing triads in a military avionics service maintenance network in Taiwan. International Journal of Operations & Production Management 30 (4), 398-422 Rijksoverheid, 2010. Wet maatschappelijke ondersteuning (Wmo). http://www.rijksoverheid.nl/onderwerpen/wet-maatschappelijke-ondersteuning-wmo, 19 November, 2010 Rossetti, C., Choi, T., 2008. Supply Management Under High Goal Incongruence: An Empirical Examination of Disintermediation in the Aerospace Supply Chain. Decision Sciences 39 (3), 507540 Schoenherr, T., 2008. Comments to “Taking the Leap from Dyads to Triads: Buyer-Supplier Relationships in Supply Network” by Choi T.Y. and Wu, Z. (2008). Journal of Operations Management OSM Forum, Comments posted September 2008, http://jom.typepad.com/my_weblog/2008/07/comment-here-on.html#comments. Spring, M., 2008. Comments to “Taking the Leap from Dyads to Triads: Buyer-Supplier Relationships in Supply Network” by Choi T.Y. and Wu, Z. (2008). Journal of Operations Management OSM Forum, Comments posted August 2008, http://jom.typepad.com/my_weblog/2008/07/comment-hereon.html#comments. Stradford, D., Tiura, D., 2003. Keeping the savings you thought you were getting in services sourcing, 88th Annual International Supply Management Conference Proceedings, ISM, Tempe, AZ Tate, W., Ellram, L., Bals, L., Hartmann, E., van der Valk, W., 2010. An Agency Theory perspective on the purchase of marketing services. Industrial Marketing Management 39 (5), 806 Van der Valk, W., Rozemeijer, F., 2009. Buying Business Services: Towards a Structures Service Purchasing Process. Journal of Services Marketing 23 (1), 3-10 Van der Valk, W., Wynstra, F., Axelsson, B., 2009. Effective Buyer-Supplier Interaction Patterns in Ongoing Service Exchange. International Journal of Operations & Production Management 29 (8), 807-833 Voss, C., Tsikriktsis, N., Frohlich, M., 2002. Case research in operations management. International Journal of Operations and Production Management 22 (2), 195-219 Wölfl, A., 2005. The Service Economy in OECD Countries. OECD: Paris, OECD Directorate for Science, Technology and Industry Wu, Z., Choi, T., Rungtusanatham, M., 2010. Supplier-supplier relationships in buyer-suppliersupplier triads: Implications for supplier performance. Journal of Operations Management 28 (2), 115-123 Wu, Z., Choi, T.Y., 2005. Supplier-supplier relationships in the buyer-supplier triad: Building theories from eight case studies. Journal of Operations Management 24 (1), 27-52 Wynstra, F., Axelsson, B., Van der Valk, W., 2006. An Application-based Classification to Understand Buyer-Supplier Interaction in Business Services. International Journal of Service Industry Management 17 (5), 474-496 Yin, R.K., 2009. Case study research: design and methods, fourth ed. Sage Publications Inc., Thousand Oaks, California
13
Zollo, M., Reuer, J.J., Singh, H., 2002. Interorganizational routines and performance in strategic alliances. Organization Science 13 (6), 701-713 Zsidisin, G.A., Ellram, L.M., 2003. An agency theory investigation of supply risk management. The Journal of Supply Chain Management 39 (3), 15-27
14
