Benevolent dictatorship and buyer-supplier exchange☆

Abstract In this research, we identify and advance the concept of benevolence as a key social exchange mechanism in buyer-supplier exchange. Specifically, we (1) advance a theoretical model of benevolence to include affective, calculative, and normative dimensions, (2) highlight specific actions and resources that a focal firm uses to promote the perception of benevolence, including concessions, idiosyncratic investments, and reputation, and (3) identify how these perceptions, mediated by its own rising commitment to the exchange, impact the focal firm's economic response (i.e., concessions and idiosyncratic investments). In particular, we explore the possibility of “benevolent dictators” in exchanges marked by power asymmetry. Our model and conclusions are drawn from the confidential reports of over 500 informants at the boundaries of firms across multiple industries. Our results demonstrate the differential effects of a partner firm's actions and reputation on the three forms of benevolence and find evidence for how powerful partner firms can signal their benevolence to weaker firms through the use of concessions, dedicated investments and marketplace reputation. Moreover, we show that the responses of the partner firm to the focal firm's benevolence are not simply a reciprocation of the focal firm's actions, but are instead mediated through the enhanced commitment of the focal firm with implications for theory and management practice.