A comparison of perceived quality in business relationships in Norway and Sweden

Similarities and differences

The Authors

Göran Svensson, Oslo School of Management, Oslo, Norway

Svante Andersson, Halmstad University, Halmstad, Sweden

Tore Mysen, Oslo School of Management, Oslo, Norway

Gabriel Baffour Awuah, Halmstad University, Halmstad, Sweden

Abstract

Purpose – The purpose of this paper is to compare similarities and differences in perceived quality of business relationships in Norway and Sweden.

Design/methodology/approach – The Norwegian and Swedish sampling frames consisted of 600 small- and medium-sized firms in each country. A response rate of 36.5 percent was achieved in Norway and 21 percent in Sweden. Leading executives from both countries were used as key informants because they are the primary decision-makers most knowledgeable about their firm's interactions with suppliers.

Findings – The findings indicate that there are a series of significant differences and associations between the perceived quality of business relationships in small and medium-sized firms in Norway and Sweden, though both countries resemble each other in both socio-economic indicators and cultural dimensions.

Research limitations/implications – One suggestion for further research is to replicate the study in other industries, business relationships, and countries. Another is to undertake a longitudinal approach of the focal areas of “perceived quality” and “supplier criteria”.

Practical implications – This study is of managerial interest, as the framework may be applied by firms to monitor and evaluate ongoing supplier relationships and, in extension, their current customer relationships. It would be of interest to see if similarities exist amongst other cultures of the focal areas, and/or if there are differences across other countries that are decidedly different from those in Norway and Sweden.

Originality/value – This paper makes a contribution to inter-organizational theory since it outlines a conceptual framework of focal areas of “perceived quality” and “supplier criteria” for examining business relationships across industries and countries for the benefit of other researchers.

Article Type:

Research paper

Keyword(s):

Quality; Business policy; Trust; Norway; Sweden.

Journal:

Baltic Journal of Management

Volume:

Number:

Year:

2009

pp:

7-33

Copyright ©

Emerald Group Publishing Limited

ISSN:

1746-5265

Introduction

Alderson (1965) pointed out a long time ago the importance of the interface between organizations, and pronounced the quest for theory development in this area. Different research streams have included different aspects of organizations working together in their models and/or empirical studies, such as channel behaviors (Anderson and Narus, 1990), relational exchanges (Dwyer et al., 1987; Tzokas and Saren, 2004), transaction cost economics (Heide, 1994; Heide and John, 1990), interaction and networks (Håkansson, 1982; Håkansson and Snehota, 1995) and relationship quality (Dwyer et al., 1987; Lages et al., 2004).

In studies about firms' internationalization, Norway and Denmark were not unnaturally identified as the countries that were most similar to Sweden (Johanson and Vahlne, 1977, 1990). The internationalization process is seen as a causal cycle (Andersen, 1993) with the firm's knowledge as the explanatory variable (Johanson and Vahlne, 1990). Their model suggests that the average firm enters foreign markets that represent close psychic distance. The psychic distance concept may be defined by: factors preventing or disturbing the flows of information between firm and market. Examples of such factors are differences in language, culture, political systems, level of education, level of industrial development, etc. (Johanson and Wiedersheim-Paul, 1975, p. 308).

However, the above studies are not up to date and have not focused on quality in buyer-seller relationships. Hence, there seems to be a need to get a better understanding of whether or not there are similarities and differences in buyer-seller relationships in two countries that are regarded as psychic close to each other[1]. Several contributors have pointed to the influence of relationship quality on customer loyalty and market success (Rauyruen and Miller, 2007). However, in contrast of the importance of relationship quality in business-to-business, there is still no consensus of which factors that build or decrease the quality in business relationships (Naudè and Buttle, 2000; Huntley, 2006). This study aims to add to the description of relationship quality in business-to-business contexts in close psychic distant markets.

This study focuses on aspects that may affect the interface of perceived quality in business relationships. Previous research has addressed the interface in business relationships from the perspective of the buyer (Dwyer et al., 1987). Others have approached it from the perspective of the seller (Lages et al., 2004). Other specific relationships have been addressed, such as the travel agency-tourist perspective (Callarisa et al., 2007) and supplier-distributor perspective (Payan and Svensson, 2007). This particular study focuses on the buying firms' perspectives in business relationships with their suppliers. Furthermore, it addresses two different national contexts, which is an approach rarely undertaken in inter-organizational research, namely samples of business relationships in Norway and Sweden.

Literature review

A review of the literature shows that different variables associated with organizations working together may affect the perceived quality in business relationships, namely:

commitment (Anderson and Weitz, 1992; Bonner et al., 2007; Fullerton, 2003; Morgan and Hunt, 1994);
competitive intensity (Fynes et al., 2005);
cooperation (Gummesson, 2002; Håkansson, 1982; Morgan and Hunt, 1994);
coordination (Alter and Hage, 1993; Anderson et al., 1994);
market turbulence (Anderson, 1985; Skarmeas et al., 2008);
satisfaction (Aksoy et al., 2007; Duarte and Davies, 2004; Skinner et al., 1992);
specific assets (Rindfleisch and Heide, 1997; Weiss and Anderson, 1992); and
trust (Geyskens and Steenkamp, 1995; Razzaque and Boon, 2003).

Although they are frequently included in inter-organizational research, all eight focal constructs have not, to our knowledge, been included and compared in the same empirical study of perceived quality in business relationships. Our objective, therefore, is to compare similarities and differences in perceived quality of business relationships in Norway and Sweden.

The rest of the paper is organized as follows:

the frame of reference is first described;
the methodology is then outlined and described;
the findings and implications of the study are presented; and
conclusions and suggestions for further research are provided at the end of the paper.

Frame of reference

In this section, we discuss the focal constructs of this study, all of which we consider important when comparing the perceived quality in business relationships in a cross-cultural setting.

Cooperation and coordination

This study includes both cooperation and coordination, two terms which are not usually used in the same study of perceived quality in business relationships. One reason may be because they are often viewed as one construct or merely synonymous (Alter and Hage, 1993; Anderson et al., 1994; McNeilly and Russ, 1992; Morgan and Hunt, 1994; Mulford and Rogers, 1982). Yet other researchers conceptually outline potential differences between cooperation and coordination based on:

time frame perspectives (Dabholkar et al., 1994);
normative vs outcome orientations (Day and Klein, 1987);
attitude/behavior orientations (Alter and Hage, 1993; McNeilly and Russ, 1992); and
goal orientations/decision rules (Mulford and Rogers, 1982).

Most of these theoretical distinctions describe cooperation as more norm-related, more of an attitude, and more goal-related than coordination; in other words, cooperation is a broader and more all-embracing construct than coordination. Cooperation is about the orientation of one organization's working with another's, and in contrast to the broader construct of cooperation is often described as a specific structure, process, or outcome between organizations (McNeilly and Russ, 1992). The predominant approach in marketing studies is a focus on coordination as an outcome (specific joint activities) rather than as a coordinating structure or process. The establishment of a structure or a process between organizations is in itself a coordinative outcome, because it entails a joint action between organizations in order to establish the structure or to establish the process.

From the perspective of cooperation as a broad working orientation, and coordination as specific joint activities, evidence of coordination is not always caused by a spirit of cooperation. Day and Klein (1987) note that coordination can occur without cooperation:

if coordination happened during an earlier era of goodwill; or
if the coordination was imposed through the exercise of power.

In other words, coordination has many other related constructs (e.g. power) that may operate independently from the influence of cooperative orientations. As a result of the discussion above, this study supports there being a value in considering separate focal constructs of cooperation (i.e. as a working orientation) and coordination (i.e. as specific joint activities) in the comparison of perceived quality in business relationships.

Specific assets

Specific assets are rarely included with cooperation and coordination in the same study (Payan and Svensson, 2007). However, occasionally joint action and specific assets are included in the same study (Heide and John, 1990; Joshi and Stump, 1999). Furthermore, only one of these three constructs (cooperation on specific activities) was included in one of the most comprehensive inter-organizational models in the literature, the key mediating variable (KMV) model (Morgan and Hunt, 1994).

On occasions, coordinated activities and specific assets (also labelled specific investments or idiosyncratic investments) are viewed similarly when specific assets are interpreted as dedicated activities and resources are employed jointly between organizations (Anderson et al., 1994). Specific assets are a key variable used in transaction cost analysis (TCA) models (Anderson, 1985, 1988; Heide and John, 1988, 1990, 1992; John and Weitz, 1989; Klein, 1989; Weiss and Anderson, 1992), and represent assets with a high amount of specificity that have little value outside of a particular exchange relationship (Rindfleisch and Heide, 1997).

There are four predominant types of specific assets:

physical locations;
specific physical assets;
specific dedicated assets; and
specific human assets.

Although all four of these types of assets may entail some joint activity to implement, human assets are the most important in regard to potentially ongoing joint activities (Day and Klein, 1987). Examples of specific human assets include:

services predicated on customized professional know-how and skills (Erramilli and Rao, 1993);
customized knowledge and working relationships built up over time (Anderson and Coughlan, 1987);
employees trained specifically for the product line of a particular exchange partner (Heide and John, 1988); and
a tailored delivery routine to meet the particular needs of a buyer (Sriram et al., 1992).

This study takes the position that both coordination and specific assets are joint activities, and may be related. However, because specific assets connote a high degree of customization between organizations compared to coordination, specific assets are predicted to be distinct from coordination in terms of relationship patterns with other inter-organizational constructs of interest in the comparison of perceived quality in business relationships, where both focal constructs are seen as important.

Trust

Trust is the expectation that another business can be relied on to fulfill obligations and will act and negotiate fairly when the possibility for opportunism is present (Zaheer et al., 1998). Geyskens and Steenkamp (1995) suggest that trust reduces uncertainty in a relationship; if an organization trusts another, it will attribute co-operative intentions to the trusted organization. From another perspective, Andaleeb (1995) suggests that trust provides reasonable assurances that desired goals and outcomes will be achieved, and that it should lead to a greater inclination to cooperate. Some studies have found that inter-organizational trust leads to a cooperative orientation between organizations (Andaleeb, 1995; Duarte and Davies, 2004; Razzaque and Boon, 2003).

Empirical research shows that trust and joint activities between organizations are associated, though the direction of causality has been controversial (Wilson and Nielson, 2000; Weitz and Jap, 1995; Wiertz et al., 2004). Based on a cross-cultural methodology, this study takes the position of those researchers who suggest that trust is necessary in inter-organizational joint activities (Deutsch, 1962; Duarte and Davies, 2004; Morgan and Hunt, 1994; Smith and Barclay, 1999; Pruitt, 1981; Wiertz et al., 2004). Boersma et al. (2003) point out that competence-based trust can start simply from public information (knowledge of a partner's previous history and/or reputation) and can be the basis of a coordinative activity with another organization. From another perspective, Wiertz et al. (2004) explain that any joint activity entails at least some increased vulnerability, and organizations will not accept this increased vulnerability without believing in the integrity of each other. In discussing the TCA perspective, Young and Wilkinson (1989, p. 111) state. When exchanges take place in an atmosphere of trust and common purpose, transactions are less costly to complete. According to Chiles and McMackin (1996), this happens because trust reduces the perception of opportunism, therefore lowering its associated transaction costs. This study considers trust as an essential focal construct in the comparisons of perceived quality in business relationships.

Commitment

This study defines commitment as an enduring desire to maintain a relationship. According to Anderson and Weitz (1992), commitment to a relationship will result in a desire to develop a stable relationship and a willingness to make sacrifices to maintain that relationship. The willingness to make sacrifices is linked to a cooperative orientation (or a spirit of willingness to work with another organization). When parties in an exchange relationship find the relationship to be mutually meaningful they become committed to the relationship (Gummesson, 2002). Hence, cooperation in the relationship assumes importance for the parties. The KMV model reasons that commitment also leads to coordination because a committed counterpart will participate in joint activities out of a desire to make the relationship work. According to Dieke and Karamustafa (2000), organization commitment is also hypothesized to affect strategic response based on the knowledge that a committed organization is likely to spend more time and effort on developing effective strategies and environmental scanning (as cited by Dickinson and Ramaseshan, 2004, p. 74). The relationship between commitment and coordinative activities is supported in empirical research (Dickinson and Ramaseshan, 2004; Evangelista, 1994; Faulkner, 1995; Morgan and Hunt, 1994), in consequence of which this study positions commitment as an important focal construct in the comparison of perceived quality in business relationships.

Satisfaction

The KMV model does not directly measure satisfaction and only alludes to it as a relationship benefit. Geyskens et al. (1999) define satisfaction as the positive effective state resulting from the appraisal of all aspects of an organization's working relationship with another, Satisfaction is typically positioned as an important construct in inter-organizational research (Duarte and Davies, 2004). This is supported in empirical research (Duarte and Davies, 2004; Skinner et al., 1992). Similarly, McNeilly and Russ (1992) suggest that as organizations experience success with coordinated joint activities, over time, they will subsequently experience satisfaction, in part because of perceptions of compatibility between organizations (Anderson and Narus, 1990). In their study of the travel agency – tourist relationship quality, Callarisa et al. (2007) found out that satisfaction with the agency is a determining factor in a tourist's trust. Satisfaction in this study is also considered to be an important focal construct in the comparison of the perceived quality in business relationships.

Market turbulence and competitive intensity

Market turbulence refers to the unpredictable variations in customer demand as experienced by parties in a supply chain (Fynes et al., 2004). Competitive intensity is characterized by aggressive competitors, short product life cycles, cost reductions, consistent high quality and customization (Fynes et al., 2005). Market turbulence and competitive intensity are encompassed by the higher order construct of “environmental uncertainty”, and it is suggested by the political economy paradigm that business relationships are a function of not only the contract, but also of the environmental conditions in which the manufacturers, distributors and the suppliers interact (Stern and Reve, 1980).

However, proposed theoretical underpinnings and empirical results in previous research reveal that there is still a need for further examination of how environmental uncertainty affects the quality of relationships. Supply chain relationships that are embraced by environmental uncertainty may experience reduced relationship quality because external uncertainty allows information asymmetry to develop, entailing passive or active opportunistic behavior by either the manufacturer, the distributor, or the supplier (Wathne and Heide, 2000). Environmental volatility, given bounded rationality, may inspire parties in a relationship to distort information, shirk responsibilities and/or break promises. Increased information asymmetry increases difficulties in assessing the other party's performance, thus raising the temptation towards seeking self-interest with guile (Williamson, 1985). Moreover, environmental uncertainty may generate a reluctance to invest additional time and resources in the working relationship (Hedaa, 1993).

On the other hand, market turbulence and/or competitive intensity can inspire parties in the supply chain to build strong relationships, developing and using supplementary resources (Fynes et al., 2005). Market turbulence and competitive intensity imply an uncertainty of both demand and timing that in turn may lead to a forecasting error and either excess inventory or shortages. Such shortcomings reduce relationship performance, and invite manufacturers, distributors and suppliers to establish strong relationships, allowing the manufacturer and supplier to draw necessary resources from the partner to sustain performance (Fynes et al., 2005).

Empirical results do not show consistent results in how market turbulence and competitive intensity influence relationship quality. For example, Leonidou et al. (2006) found that relationships characterized by high external uncertainty showed low relationship quality, and a low degree of adaptation in particular. They stated that firms felt less sure about making adjustments on matters of structure, process, or other issues (Leonidou et al., 2006, p. 582). In contrast, positioning environmental uncertainty as market turbulence, the investigation by Skarmeas et al. (2008) yielded results that did not support the hypothesis that relationships surrounded by high market turbulence would necessarily be of low quality. Market turbulence did not have any significant influence on relationship quality. On the other hand, Fynes et al. (2005) found that growing competitive intensity improved the influence of relationship quality on performance in their original equipment manufacturer sample. Hence, this study considers market turbulence and competitive intensity as essential constructs in comparing relationship quality in supply chain relationships.

Final remarks

Consequently, not only does this study incorporate KMV's key focal constructs (Morgan and Hunt, 1994), it also adds a number of others in the comparison of perceived quality in business relationships. Thus, we pose that commitment, competitive intensity, cooperation, coordination, market turbulence, satisfaction, specific assets, and trust are all essential focal constructs in relationships where organizations are working with other organizations. The previous frame of reference is reflected in the following definitions:

Commitment refers to an enduring desire to maintain a relationship.
Competitive intensity refers to aggressive competitors, short life-cycles and customization.
Cooperation refers to an orientation that reflects a spirit of willingness of one organization to work with another organization.
Coordination refers to general joint activities that take place between organizations.
Market turbulence refers to unpredictable variations in customer demand as experienced by the manufacturer.
Satisfaction refers to the positive effective state resulting from the appraisal of all aspects of an organization's working relationship with another organization.
Specific assets refers to the dedicated activities that are tailored for use between specific organizations.
Trust refers to the expectation that another business can be relied upon to fulfill its obligations.

Socio-economic indicators: Norway and Sweden[2]

The Norwegian economy is an interesting example of welfare capitalism that maintains a combination of free market activity and government intervention. The government controls essential areas of the society and the marketplace (e.g. the petroleum sector, through large-scale government-owned businesses). The country has a variety of natural resources (e.g. petroleum, hydropower, fish, forests, and minerals) and is taking advantage of its oil production and international oil prices, with oil and gas accounting for one-third of its exports. Norway is not a member of the European Union (EU) – a decision taken after a referendum in the mid-1990s, but it is an integrated member of the European marketplace. In fact, Norway contributes to the economy of the EU. The state imposed initiatives of privatization. Norwegian oil production has stabilized, but natural gas production is increasing. Norwegians have foreseen that once their offshore production of petroleum products ends the country will confront decreasing income from oil and gas. The country has, therefore, been allocating its revenues from oil and gas into a fund, which is invested abroad and is now valued at more than $250 billion. After a dip of growth of less than 1 percent in 2002-2003, gross domestic product (GDP) growth picked up to 3-5 percent in 2004-2007, partly due to higher oil prices. Norway's economy remains excellent. The domestic economy is, and will be, the main cause of growth, supported by high consumer expectations and strong investment spending in the offshore oil and gas industry. Norway's strong financial position and low unemployment in 2007 illustrate the strength of its economic position going into 2008. In sum, Norwegian business relationships appear to have a prosperous future ahead, though inclined to rely on the domestic market.

Sweden, on the other hand, having been out of war and neutral for a long time, has managed to achieve a standard of living under a combination of capitalism and welfare benefits. The country has an efficient distribution system, recent technology in internal and external communications, and a knowledgeable labor force. Timber, hydropower, and iron constitute the resource base of an economy heavily oriented towards export to other countries. The private sector corresponds to about 90 percent of industrial output, of which the engineering sector accounts for about half of the country's output and exports. Agriculture corresponds to only 1 percent of GDP and 2 percent of employment. Sweden is in an era of sound economic development due to domestic demand and competitiveness in export. This and solid state finances have made it possible for the government to implement reform programs aimed at increasing employment, reducing welfare dependence, and streamlining the state's role in the economy. The current government plans to sell assets during the next few years to further stimulate growth, raise state income and reduce federal debt. Sweden is member of EU since 1995 but in 2003, a Swedish referendum disagreed to entering the European Monetary Union system, mostly because of the feared impact on the national economy, and on the country's financial independence. In sum, Swedish business relationships appear to have an attractive market situation and the tradition of international experiences.

The economies of both countries (Table I) are well developed (CIA, 2008). For example, the GDP in Norway and Sweden are, respectively, US $257 billion and US $331 billion (Table I). In both countries, the services sector generates the majority of the GDP. In Sweden the services sector generates 69 percent of the GDP, and in Norway 54 percent. The labor force in both countries is largely situated in the services sector (Sweden: 74 percent; Norway: 74 percent). There is a substantial difference in the GDP per capita for each country (Sweden US $36,900 and Norway US $55,600). In 2007, the inflation rate also differed. In Norway it was 0.4 percent, and in Sweden 2 percent (Table I).

The similarities and differences between both countries are brought about by a number of factors. First, both economies are well developed (OECD members). Secondly, Norway and Sweden are small players in their regional marketplaces, surrounded by larger economic entities. Thirdly, historically, Sweden has had to expand its horizons outside its home markets in order to survive and forge economic growth, while Norway has depended mostly upon its oil and gas-production. Fourthly, whereas the financial situation in Sweden is deemed to be satisfactory, that in Norway is excellent. Fifthly, since 1995 Sweden has been a member of EU, but Norway has not, and still is not. (However, via the EES-agreement Norwegian companies can act on the EU market as EU companies with the exception of companies in the agriculture and food sector). One would expect that the historic and current differences of both countries may affect ongoing business relationships. For example, one might expect that some of the focal construct examined in this study may differ between the two countries. It is possible that the dependence on export in Swedish firms compared to Norwegian ones may be affecting their views on the focal areas (i.e. “perceived quality” and “supplier criteria[rdquo ],; p. 8) of this cross-cultural study. It may also be the opposite, that the Norwegian firms are benefiting from the boost of the domestic economy and may invest more resources than do the Swedish ones.

National culture: Norway and Sweden

Norway and Sweden were among the countries studied by Hofstede in developing his dimensions of national culture. In that seminal study, he identified the following four dimensions of national culture:

individualism vs collectivism (IC);
large or small power distance (PD);
strong or weak uncertainty avoidance (UA); and
masculinity vs femininity (MF) – (Hoftstede, 1983a, p. 78).

Hofstede's research, involving a data bank of 40 countries and 116,000 questionnaires, allowed him to assign an index value (between 0 and about 100) on each of the four dimensions. Scores on these dimensions for Norway and Sweden are shown in Table II.

On IC, a measure of the relationship between an individual and his fellow individuals, Sweden (71) is the slightly stronger country of the two (Norway: 69). On PD, a measure of the unequal distribution of power in society, Norway (31) and Sweden (31) have an equal level on this measure. UA, which is a measure of how a society deals with uncertainty, is related to the propensity of a culture to establish laws and formal rules. Societies strong on UA are more likely to establish formal rules to deal with unpredictability. On the UA index, Norway (50) has a significantly higher value than Sweden (29): the implication being that the Norwegian society is more likely than the Swedish one to establish formal rules to create security. The final measurement in Hofstede's dimensions of national culture, MF, is a measure of the division of roles between the sexes in society. The score for Norway (8) is slightly higher than Sweden's (5). In fact, Norway and Sweden were the most feminine of the countries studied by Hofstede, meaning that it puts relationships with people before money, minding the quality of life and the preservation of the environment, helping others, in particular the weak, and “small is beautiful” (Hofstede, 1983a, p. 85).

A point of interest is that each one of these countries has entered into the international marketplace with gusto and therefore may well have had their cultures modified by such an involvement. When Hofstede (1983a, b) carried out his study, the degree of internationalization by these countries would have been much less than it was at the time this present study was administered a couple of decades later. Furthermore, the Norwegian oil and gas revuenue was much less at the time and the today's revenues may have changed the mindset of firms, whereas Swedish firms appears to be fairly oriented towards the international marketplace.

In sum, we do not argue that Norway and Sweden are identical, but they appear to be similar in some aspects when it comes to socio-economic indicators, and very similar in relation to their national cultures. The question is whether this resemblence also applies to the focal constructs that may affect the perceived quality in business relationships in Norway and Sweden. We contend that this is a topic of great interest, as Hofstede's estimates of the different dimensions of national cultures may be somewhat out of date, based as they are upon domestic data almost three decades ago. Therefore, we have formulated two hypotheses as follows:

H₁. There are no differences between “perceived quality” in business relationships in Norway and Sweden.

H₂. There are no associations between “perceived quality” and “supplier criteria” in business relationships of either Norway or Sweden.

By “perceived quality” we refer to focal constructs such as:

commitment;
competitive intensity;
cooperation;
coordination;
market turbulence;
satisfaction;
specific assets; and
trust.

By “supplier criteria” we refer to:

how long the firm has been working with the supplier in focus;
what percentage of the firm's sales does the supplier in focus account for;
what percentage of the firm's profit does the supplier in focus account for; and
with respect to sales volumes, how large is the firm relative to the supplier in focus.

Methodology

It has been shown in the previous sections that there are similarities and differences between Norway and Sweden based upon the socio-economic indicators and the dimensions of national cultures. Therefore, the cross-cultural approach in this study provides an unusual context to make the comparison of perceived quality between firms' business relationships in two neighboring countries.

Research context and sample

The Norwegian sampling frame (Kompass, Norway) consisted of a random sample of 600 small- and medium-sized firms. Nineteen governmental firms were excluded from the list. Consequently, a total of 581 surveys were mailed to respondents. Two hundred and twelve useable surveys were returned, a response rate of 36.5 percent. Statistics Sweden (SCB) supplied the names and addresses of 600 Swedish small- and medium-sized firms. One hundred twenty-four usable surveys were returned from the Swedish survey, a response rate of 21 percent. Leading executives from both countries were used as key informants because they were the primary decision-makers most knowledgeable about their firm's interactions with suppliers.

As suggested by Campbell (1955), two items were included in the survey as informant competency checks. The two items asked (Appendix, Table AI):

how much the informant knew about his/her firm's perspective of the study topics; and
how much the informant knew about specific experiences with this supplier.

A full 99.0 percent of the informants had knowledge of their firm's perspective and 99.5 percent also had knowledge regarding experiences with this supplier.

Measures

Subjects responded to five-point Likert-type scales for all focal constructs. These scales were anchored at (5) agree very strongly and (1) disagree very strongly (see Table I for details of all scale items). The source for each item of the comparison of perceived quality in business relationships was as follows:

Commitment – items were borrowed and modified from Morgan and Hunt (1994) and Anderson and Weitz (1992).
Competitive intensity – items were borrowed and modified from Fynes et al. (2005).
Cooperation – items were borrowed and modified from Skinner et al. (1992).
Coordination – items were borrowed and modified from Guiltinan et al. (1980) and Heide and John (1990).
Market turbulence – items were borrowed and modified from Anderson (1985) and Skarmeas et al. (2008).
Satisfaction – items were borrowed and modified from Andaleeb (1996).
Specific assets – items were borrowed and modified from Heide and John (1990).
Trust – items were borrowed and modified from Zaheer et al. (1998).

It should be noted that all items (Appendix) belonging to each focal construct have been summarized (i.e. no items have been excluded from the used questionnaire) and the average score for each focal construct has been calculated and used in the statistical analyses shown in Tables III-V that follows in the next main paragraph.

Empirical findings and the analysis thereof

Differences and similarities

The differences and similarities between perceived quality in business relationships in Norway and Sweden in this study were tested by using the independent-samples t-test (Norusis, 1993). The findings are shown in Table III.

As shown in Table III, there are a number of both differences and similarities in the perceived quality in business relationships as follows:

The level of “competitive intensity” is perceived to be significantly higher in Norway when compared to Sweden.
The levels of “cooperation” and “coordination” are also perceived as significantly higher in Norway than in Sweden.
The level of “specific assets” are perceived to be significantly higher in Sweden than in Norway.
The levels of “commitment”, “market turbulence”, “satisfaction”, and “trust” are perceived as fairly similar in both countries.

There are a number of possible reasons why these differences and similarities may have appeared in the comparison of perceived quality in business relationships in Norway and Sweden. For example, the levels of “competitive intensity” are most likely higher in Norway due to the current domestic economic situation (stronger than that in Sweden), which may be characterized by economic growth, high purchasing power and low redundancy rates. In other words, the financial wheels in Norway are spinning at full pace. Moreover, 99.7 percent of Norwegian firms have less than 250 employees. It seems as though Sweden's membership in the EU has had a lower effect on competitive intensity than the boost that oil production and higher oil prices have given the Norwegian economy. That is somewhat surprising, since in the debate in the two countries in connection with the referenda, competitive intensity was one of the important factors that were put forward as an argument for joining the EU. Compared to Sweden, Norway has a considerably larger number of small firms, and fewer multinationals. The results in a study by Moen (2002) indicate that these firms are engaging in internationalization at an increasing rate. The firms included in the study are establishing a global orientation much faster than previously, thus entering highly competitive markets. In a Swedish study, Andersson and Wictor (2003) had difficulties in finding new small firms with a global orientation right from inception (Born Globals). Their interpretation was that most small manufacturing companies in Sweden were suppliers to the large Swedish multinational companies (e.g. Volvo, Ericsson, Scania, and Electrolux). Swedish and Norwegian companies compete in international markets, but compared to Sweden's larger firms, the small Norwegian companies probably experience more competitive intensity because of their smaller size. When it comes to the levels of “commitment” it may have become an essential part of business in both countries – in Norway due to the intense economic boost domestically, and in Sweden due to a dependence upon the international marketplace. Norwegian firms may have been forced to “cooperate” and “coordinate” their business relationships to a larger extent in order to maintain their market position. In Sweden, firms have been dedicated to this for many years and it has therefore become a natural ingredient of business relationships.

As reported in Konjunkturinstitut (2005), the Swedish economy is in a period of high expansion and is even expected, parallel with the growth in the world economy, to do so well into 2008. This is supposed to lead to an expansion in the development of Swedish exports, which are very much dependent on global markets and their growth. The economic growth may have attracted foreign and competing firms to enter the marketplace. By tradition, Swedish firms are more recipient and used to adapting their business relationships in terms of “specific assets” than the Norwegian ones which historically have focused on the domestic marketplace. It is of interest that there are no differences when it comes to perceived “market turbulence”, nor in their levels of “trust”, and “satisfaction” in the studied business relationships. It is not surprising that firms in both countries perceive “market turbulence” today as, since their respective marketplaces are now open and exposed to keen international competition. It is also appealing that executive managers in both countries perceive high levels of “satisfaction” and “trust” in studied business relationships. Understandably, the current economic situation in both countries keeps everybody pleased and worries are somewhat distant at the moment. There is no evident need for actions that affect the levels of satisfaction, or that may be perceived as distrustful.

Associations between “perceived quality” and “supplier criteria”

The associations are tested by the aid of two different correlation tests (Norusis, 1993). One parametric test is applied, namely Pearson correlation coefficient. In addition, one non-parametric test is applied, namely Spearman rank correlation coefficient. The outcome is shown in Tables IV (Norway) and V (Sweden). There are both evident differences and similarities across focal areas of “perceived quality” in the studied business relationships and “supplier criteria”.

Business relationships in Norway

As shown in Table IV, there are some significant associations of the focal areas of perceived quality in the studied business relationships in Norway. For example, there are associations between the length of the business relationships and the levels of commitment and specific assets as well as the perceived competitive intensity. It appears that the relationships become more committed, as well as the specific assets dedicated to them, increase over time. A reason may be the competitive intensity that is perceived to surround relationships in Norway.

There are also associations between the suppliers' contributions to the firms' sales and the “specific assets” assigned to the relationships. In other words, more resources are invested in the supplier-relationships that are valuable to the firm. Furthermore, there are associations between suppliers' contributions to the firms' profits and the levels of “commitment” and “coordination” in studied business relationships.

It is of interest that as regards the length of the business relationship, the suppliers' contribution to firms' sales and profits appear to go hand in hand. This indicates an increasing financial value of the studied relationships over time. Relatively larger firms indicate themselves to be more satisfied with their suppliers, as well as having more trust and investing more specific assets in them.

The relative size between the firms in studied business relationships is associated with the length of the relationships, and their contribution to sales and profits. For example, the increasing relative size of the firms in relation to the suppliers appears to be more dedicated to long-term relationships. It appears to increase the suppliers' importance to the firms' profits, but not sales.

Business relationships in Sweden

As shown in Table V, there are some significant associations of the focal areas of perceived quality in the studied business relationships in Sweden. For example, it is rather unexpected to find no associations between the length of the business relationship and the focal areas of this study. One would expect that some of them would be related to the length of the business relationship. However, the Swedish business environment has become more volatile and demanding in recent years, where suppliers are continuously evaluated and, should performance be unsatisfactory, substituted by others. This change can be connected with environmental changes such as Sweden's membership in EU and that some of the largest Swedish companies are nowadays owned and controlled by foreign companies, a fact that has changed and internationalized the structure in many industries. As argued elsewhere (Ford et al., 2003; Dubois et al., 2003), business relationships which are normally associated with stability and longevity, when faced with new tasks and/or new supplier situations, can experience a break in relationship. This is especially true when new situations lead to the knowledge that the parties are no longer making any significant impact on each other's performances in the face of intense competition in our integrated markets. For Håkansson and Snehota (1995, p. 7), a long-term relationship between any business parties will be characterized by extensive use of the relationship by the involved parties, and also by mutually managing to match the rapid changes and developments which intense competition and market turbulence require. Hence, it is of little surprise that in the present study the length of relationships has not been a key parameter in these relationships.

On the other hand, there are numerous significant associations between the suppliers' contributions to the firms' sales and the levels of commitment, cooperation, coordination of specific assets and trust involved in the studied relationship. This is markedly different from the Norwegian business relationships.

There are also the same significant associations between the suppliers' contributions to the firms' profits and the level of commitment, cooperation, coordination of specific assets, and trust involved in the studied relationship. This is also notably more pronounced than in the Norwegian business relationships. Furthermore, the relative size between firms in studied business relationships is not associated with the focal areas of this study.

It is of interest that the length of the business relationship, the suppliers' contributions to firms' sales and profits, and the relative sizes are not associated to the same extent in the Swedish study as opposed to the Norwegian one. Probably, it falls back to the volatile and demanding environment in Sweden. It may indicate that suppliers may be easily replaced by others.

The relative size between the firms in studied business relationships is associated with their contribution to sales and profits. For example, the increasing relative size of the firms in relation to the suppliers appears to increase the suppliers' importance to the firms' profits, but not sales. Based on the empirical results and the analyses thereof, a number of conclusions can be drawn from the present study, some of which are provided below.

Conclusions

Our findings indicate that there is a series of significant differences and associations between the perceived quality of business relationships in small and medium-sized firms in Norway and Sweden, though both countries resemble each other in both socio-economic indicators and cultural dimensions. With regards to Norway, there are associations (Table IV) between the length of the business relationships and the levels of commitment and specific assets as well as the perceived competitive intensity. Apparently, the relationships become more committed, as well as the specific assets dedicated to them, the longer the relationship. A reason may be the competitive intensity that is perceived to surround relationships in Norway. In Sweden, on the other hand, there are also some significant associations (Table V) of the focal areas of perceived quality. However, quite unexpectedly, there were no associations between the length of the business relationship and the focal areas of this study. This is contrary to what was found in the Norwegian example. Comparing Norway and Sweden, the analysis yields:

significantly, the suppliers chosen by the Swedish manufacturers prove to contribute positively to sales and profits. In contrast, the Norwegian suppliers do not; and
the Norwegian manufacturer-supplier relationships show significantly more cooperation and coordination.

These two results indicate that, even when considering the relationships less important than the Swedish manufacturers, the Norwegian manufacturers seem to apply more resources into relationship building and maintenance through cooperation and coordination. This result ties well in with Hofstede's national culture clusters. Norway is by Hofstede considered more uncertainty avoiding – implicating that Norwegian manufacturers more easily engage in formal rules [cooperation/coordination] to create security. It may support the assumption that business relationships are unique (Gummesson, 2002). The differences between Norway and Sweden on this point suggest that managers building relationships with partners in Sweden and Norway should consider more emphasis on cooperation and coordination with Norwegian partners than with Swedish; even in the case of small and non-significant partners. Consequently, the formulated hypotheses may, in part, be rejected depending upon the focal area of “perceived quality” and “supplier criteria” in focus.

Some theoretical and practical implications

For various reasons we are confident that this study makes a contribution to theory and practice in the field of inter-organizational research. For example, it makes a contribution to inter-organizational theory as it outlines a conceptual framework of focal areas of “perceived quality” and “supplier criteria” to examine business relationships across industries and countries for the benefit of other researchers. It is also of managerial interest, as the framework may be applied by firms to monitor and evaluate ongoing supplier relationships and, in extension, current customer relationships. Furthermore, the items may be used as a foundation to adapt them to different kinds of business relationships, industries and countries. Making use of the items and the focal areas of “perceived quality” may, we believe, lead to an enhanced corporate monitoring and management of business relationships.

Taken together, our study shows that even if Norway and Sweden show a lot of similarities there are also a number of differences. Therefore, managers in both the studied countries and elsewhere need to be aware of these differences if they want to successfully handle relationships that include actors from both Norway and Sweden. Objective market knowledge, as portrayed elsewhere (Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne, 1990) about the close psychic distance between Sweden and Norway, can be tempting for a manager to handle, for example, supposing business relationships in Sweden to be exactly the same as they will be in Norway. Our study cautions against this generalization and instead recommends that managers be alert to specific circumstances that influence business relationships in any market.

Suggestions for further studies

This study has examined differences and similarities between a selection of focal areas of “perceived quality” and “supplier criteria” in business relationships in Norway and Sweden. We believe that there are some fruitful suggestions for further research which may provide guidance to stress some research limitations. For example, one suggestion is to replicate the study in other industries, and in other business relationships and countries. Another one is to undertake a longitudinal approach of the focal areas of “perceived quality” and “supplier criteria”. Furthermore, it would be valuable to incorporate additional focal areas of “perceived quality”, such as:

formalization;
dependence;
opportunism;
continuity;
competitive intensity; and
market turbulence.

Finally, an adapted replication of the study from the perspective of suppliers “perceived quality” and “buyer criteria” would provide different angles of insight into business relationships.

In sum, it would be valuable to examine the studied focal areas of “perceived quality” and “supplier criteria” in other countries and cultures that differ from and/or are similar to the two countries surveyed in this cross-country research effort. For this purpose, Hofstede (1983a) dimensions of national cultures may be used to target different national corporate samples. It would be of interest to see if there are similarities amongst other cultures of the focal areas and/or if there are differences across other countries that are decidedly different from the two countries under study in this paper.

Table INorway and Sweden: comparative economic and population statistics

Table IIDimensions of national culture

Table IIIDifferences and similarities in business relationships in Norway and Sweden

Table IVAssociations between focal areas of “perceived quality” and “supplier criteria” in business relationships in Norway

Table VAssociations between focal areas of “perceived quality” and “supplier criteria” in business relationships in Sweden

Table AI

References

Aksoy, L., Andreassen, T.W., Keiningham, T.L., Owen, B.C. (2007), "The value of different customer satisfaction and loyalty metrics in predicting customer retention, recommendation, and share-of-wallet", Managing Service Quality, Vol. 17 No.4, pp.361-84.