The Roles of Business Ethics in Conflict Management in Small Retailer–Supplier Business Relationships

Abstract

Any ongoing relationship involves conflict. While facing conflict can be a serious matter for small firms with limited resources and capabilities, little is known about conflict management or the role of an ethical foundation, or business ethics, for small businesses. This study examines some influential factors regarding conflict management and the role of business ethics in satisfactory business relationship building in the context of small retailer–supplier relationships. The proposed model identifies (1) the relative importance of business ethics and role performance as antecedents and (2) two dimensions of satisfaction (social and economic) as consequences. The data, collected from small apparel retailers in the United States, clearly demonstrate the powerful role of business ethics. The positive perceptions of small retailers regarding supplier business ethics significantly reduces retailer–supplier conflict and increases retailer–supplier social satisfaction. Supplier role performance does not contribute to a reduction in retailer–supplier conflict as perceived by small retailers, but it does enhance the economic satisfaction of retailers, which further increases their social satisfaction. The functional benefits of conflict provide interesting insight. Providing several meaningful implications, this study demonstrates the unique aspects of conflict management within small retailer–supplier relationships.

Notes

1 A caution needs to be noted in that a firm's successful role performance does not always reflect the firm's business ethics. For example, even if a company, such as a supplier, successfully performs its roles, the company's ethics are not guaranteed if such a performance results from the motivation of taking competitive advantages in the market, rather than following ethical standards.

2 In small businesses, owners perform multiple functions, including buying or interacting with suppliers (Arbuthnot 1997). It was found that the owners who participated in this study had very small annual sales volumes—$1.3 million—which is smaller than the average annual sales volume of our total sample—$1.4 million—and much smaller than $9 million, the standard annual sales volume for men's and women's clothing stores (SBA 2008). Thus, we believe that these owners deal with their suppliers and that they were therefore knowledgeable enough to respond to our questionnaire.

3 We employed path analysis with single, formative, and latent constructs to test the proposed model. As shown in Table 3, two control variables, length of relationship and power, were measured with a single indicator. Using a single item is acceptable when the construct being measured is sufficiently narrow or unambiguous to the respondent and therefore a low risk for error (Sackett and Larson 1990; Wanous, Reichers, and Hudy 1997). Thus, it is legitimate to measure the length of relationship with a single item due to its low level of error risks. In this study, power represents the small retailers' ability to influence behaviors of their suppliers. Our respondents were asked to choose one of three cases: whether they had a similar power with the supplier or whether they had more or less power than the supplier. Because they had continued business relationships with their suppliers for an average of 9.21 years, we believe that they had enough experiences to answer the question. In other words, the question about power is unambiguous and easy for our respondents to answer. Thus, we believe that a single measure of power is acceptable to measure the construct. Regarding supplier role performance, channel researchers have treated it as a formative construct because role performance is determined by each measurement item (i.e., each indicator) rather than reflected by them (e.g., Gassenheimer, Sterling, and Robicheaux 1996; Yilmaz, Sezen, and Kabaday 2004). The mean value of role‐performance indicators, therefore, was used in the data analysis.

Additional information

Notes on contributors

Jiyoung Hwang

Jiyoung Hwang is Assistant Professor of Marketing in Bryan School of Business & Economics at The University of North Carolina at Greensboro.

Jae‐Eun Chung

Jae‐Eun Chung is Associate Professor, Department of Consumer & Family Sciences at Sungkyunkwan University.