Pie-Expansion Efforts: Collaboration Processes in Buyer–Supplier Relationships

The business press has coined the term “pie expansion” to refer to the collaborative process of creating mutually beneficial strategic outcomes between buyers and suppliers. In this research, the author provides an explanation of this process, hypothesizing that such outcomes are achieved through the use of coordination efforts across organizational boundaries and specialized investments. The author investigates the facilitating roles of various environmental, interorganizational, and interpersonal conditions in this process. The results of a longitudinal survey of more than 220 buyers and suppliers indicate that the collaboration process is worthwhile, with coordination efforts and investments leading to enhanced profit performance and the realization of competitive advantages over time. Environmental dynamism and demand motivate suppliers to form collaborative exchanges with buyers and facilitate the dyad's willingness to create idiosyncratic investments. Goal congruence and interpersonal trust facilitate coordination effort, and complementary capabilities facilitate both effort and investments.