The previous research results about power effects on exchange relationships are very contradictory. We follow the definition of power by French and Raven (1959), who state that power is “the ability to manage the perceptions of the other party.” This definition suits the context of the business-to-business relationships specifically because it implies that the more powerful firm can use power to manage the relationship with its business partners. However, talking about power in the generic sense is not enough. Rather, it is necessary to be specific about the nature of power structures to understand how power is used (Kumar 2005). Furthermore, because the actual effect of power depends on its source (French and Raven 1959), we examine its effects in terms of different power bases using the expanded classification of power bases (French and Raven 1959) by Raven and Kruglanski (1970)Footnote 2: coercive power, reward power, expert power, informational power, legitimate power, and referent power.
The dark side of power
The dark side of power is noted by a number of authors who view the concept of power as alien to the effective workings of exchange relationships and success and state that power negates cooperation (Bretherton and Carswell 2002; Doney and Cannon 1997). Naudé and Buttle (2000) express the common view of power as a negative influence and unhelpful in the building of relationship quality, an area in which the most important cited attributes of a good supply chain relationship are trust, integration, mutual understanding of needs, profit, and satisfaction. Kumar et al. (1998) also view power as the antithesis of trust. Many authors state that over time, the firm with the power advantage consistently abuses the other firm (Stern and Reve 1980) or that the manufacturer exploits the weaker suppliers to obtain superior economic returns (Dore 1983; Perrow 1970). Johnsen and Ford (2001) posit that according to the nature of power relationships, more powerful actors attempt to control the resources of the less powerful actors and limit their ability to take advantage of new opportunities, such as the development of new international markets and customer relationships. Some studies emphasize the necessity for symmetry and mutuality to foster longer-term relationships, while power asymmetries are associated with less stability and more conflict and are considered to be detrimental to sustaining a business relationship (Ganesan 1994; Rokkan and Haugland 2002). According to Kähkönen and Anni-Kaisa (2014), the relationships between buyers and sellers are mostly uneven. They state that buyers have usually more power and relationships of balanced power are rather rare.
Negative effect of power on the alignment of interests (cooperation)
Some researchers have been specific about the nature of power and argued that one who holds a high level of power will exploit the other party by frequently using relatively coercive influence strategies (Bannister 1969; Robicheaux and El-Ansary 1975; Stern and El-Ansary 1972). For example, one might use power to negotiate lower costs, higher quality, delivery times, and special exigencies (Maloni and Benton 1997), which is considered to be detrimental to the weaker actor (Stolte and Emerson 1976; Thompson 1967). Therefore, power imbalance in supply chain relationships creates opportunities for more powerful firms to act opportunistically by exercising coercion, which may ultimately undermine the trust within the relationship (Belaya and Hanf 2012). One likely consequence is that when one party is threatened by the imbalance of power, that weaker party will be more likely to seek alternative alliances (Ireland and Webb 2007) and the power holder may fail to reach its long-term goals. In other words, coercion is the classical example of the negative side of power. Exercising power against other members of the supply chain might provide short-term benefits for the focal organization but ultimately reduces its success in the long term (Cousins 2002). However, most of the studies on coercion measure the direct effects on the cooperating partners. The negative view on its effects on cooperation is altered if the indirect effects are taken into account (Fehr and Gächter 2002; Walter 2011). If in a group of cooperating actors a known free rider receives a punishment he deserves, the overall cooperativeness within the group increases (Carlsmith 2006; Carlsmith et al. 2002). Furthermore, in the context of deterrence, possible punishments help to avoid free riding (Falk et al. 2005; Fehr and Gächter 2000; Guzman et al. 2007). Etgar (1976) states that expert, referent, and legitimate power sources may be less effective than coercive and reward power sources because they are less flexible and are often viewed as being unrelated to specific performance by chain members. Furthermore, their effectiveness may decline over time. As for legitimate power, it is difficult to predict the reaction of a weaker party because the latter may choose not to enter the relationship if it feels intimidated. French and Raven (1959) state that legitimate power stems from internalized values which dictate that there is a legitimate right to influence and an obligation to accept this influence. Giebels et al. (1998) express the opinion that when there is a power imbalance, there appears to be difficulty in fostering the information flow, which is a precondition for the successful negotiation of an exchange. Gaski (1986) argues that the use of informational power involves manipulative aspects. Stern and El-Ansary (1992) also support the statement that informational power is likely to have a negative effect on cooperation in distribution channels. They argue that channel participants do not necessarily view each other as partners, but rather as rivals, and therefore, the use of informational power in this case is not well received. In the literature, reward power has been seen as having a mixed effect on the buyer-supplier relationship (Maloni and Benton 2000; Zhao et al. 2008). It was suggested that reward power has a positive effect when the culture supports cooperative and supportive relationships. However, it can be assumed that reward power may have an element of coercion in it and therefore have the same effect as coercive power on relationships. Overuse of reward power is likely to damage relational norms (Boyle et al. 1992) and cooperation (Skinner et al. 1992). Furthermore, Goldsmith and Dhar (2013) showed that negatively rather than positively framed incentives motivate people to work harder.
Negative effect of power on the alignment of actions (coordination)
According to Mohr et al. (1996), coordination between parties is enhanced when a more standardized business format is applied. This idea is also mirrored in the studies of Lusch and Brown (1996) and Jap and Ganesan (2000), who state that contracts, which present clear guidelines and specify the rights and obligations of both parties, improve coordination. Clemons and Row (1993) showed that although it might seem that information could help improve coordination, the weaker party might not necessarily respond positively to the coordination attempts of the power holder, who is using information and expertise as a tool of its bargaining power.
Lee et al. (1997) also support the idea that coordination is different from information sharing. Information can be shared, but there may not be any alignment in terms of incentives, objectives, and decisions, as is required for coordination. Coordination exists for the purpose of decision-making in the best interest of the system (Zhao et al. 2002); however, some agents may have information which they do not want to share with the principal.
The bright side of power
Many authors state that power appears to be synonymous with oppression, coercion, and force, despite the fact that such negative approaches are just one aspect of power (Duke 1998). Despite criticism of power as the antithesis of trust, Kumar et al. (1995) contend that trusting partnerships can be built between unequals but only if the powerful party treats the weaker, vulnerable party fairly. A body of literature states that power can be used by the focal actor as an effective tool in coordinating and promoting harmonious relationships, solving conflicts, and, therefore, enhancing the performance of the whole network as well as its individual members. Some authors who have emphasized power’s positive aspects argue that possession of power does not suggest exploitation or frequent use of coercion (Blau 1964; Stern and Heskett 1969). Power does not necessarily imply coercion or use of force; it may involve any degree of compulsion, from the gentlest suggestion to absolute domination (Beier and Stern 1969).
Others argue that power is vital because it can take the relationship out of the realm of chance and give it purpose, order, and direction (Dwyer et al. 1987; Kumar 2005). Condliffe (1944) says that power, including the possible use of force, is not necessarily evil but may be used to achieve moral purposes. Other researchers have emphasized the role of power in the effective coordination of the exchange relationship, rather than its potential for exploitation. Blau (1964) provides the underlying foundation for this viewpoint. In a marketing channel context, Stern and Heskett (1969) theorize that the exercise of power can have a positive role in the achievement of integration, adaptation, and goal attainment within the channel system. Bierstedt (1950) suggests that power stands behind every association and sustains its structure; without power, there is no organization and no order.
Positive effect of power on the alignment of interests (cooperation)
The exercise of non-coercive power does not include any aggressive elements that may produce friction in the relationship. On the contrary, it fosters a relatively high level of agreement between the interacting parties because to a large extent, it contains the inherent desirability of performing certain actions (Frazier and Summers 1984). Moreover, the use of non-coercive power helps to increase financial and social benefits, through, for example, the offering of financial rewards, provision of assistance, and access to specialized information (Wilkinson 1979). Therefore, this type of power can help to promote common interests and collective goals within the relationship, as well as enhance a friendly and constructive atmosphere (Gagalyuk et al. 2013).
Scientists found that firms exposed to exercise of influence by a “partner firm” are more satisfied with the relationship if non-coercive power, rather than coercive power, is used (Hunt and Nevin 1974; Lusch 1977). Scientists also found that non-coercive power sources are inversely related and coercive sources are directly related to the existence of interfirm conflict (Lusch 1976; Wilkinson 1981) and that the use of non-coercive power sources is positively related to the performance of the firm that is exposed to exercise of influence by the “partner firm” (Sibley and Michie 1981). Furthermore, scholars who have studied power suggested that non-coercive power sources provide better alternatives for enhancing the satisfaction of less powerful trading partners (Hunt and Nevin 1974; Lusch 1976). The study conducted by Lee and Low (2008) indicates that legitimate power showed positive relationships with satisfaction. Legitimate power originates from a given position or existing norms or laws, so the supplier may take the protection offered by a buyer’s legitimized powerful position for an additional advantage. Dapiran and Hogarth-Scott (2003) emphasize that cooperation comes from the use of expert and referent power.
Because referent power was ranked highest among other power bases in connection to satisfaction (Lee and Low 2008), and cooperation has been found to go hand in hand with satisfaction (Gaski 1984), we suppose that a buyer’s positive image and good reputation will foster cooperation. Suppliers would also be more willing to comply with the requirements of internationally recognized retailers and fulfill their commands. As noted by Eyuboglu and Atac (1991), depending on the channel, informational power will have different effects on cooperation. Gaski (1986) states that partner perceptions (such as expert, referent, and legitimate power sources) are managed through reward and coercive power sources to create harmonious and enduring interorganizational exchange relationships.
Positive effect of power on the alignment of actions (coordination)
Some authors see a positive side of power in promoting coordination in supply chain relationships. Bachmann (2001) states that power can be regarded as a mechanism for coordinating social interactions efficiently and allows relatively stable relationships to develop between cooperating social actors. Stern and El-Ansary (1992) assert that channel members use power to determine who will undertake which marketing activities, coordinate the performance of these tasks, and manage conflict among themselves. The positive effect of legitimate power has been observed as contributing to the effective coordination of exchange relationships as the distribution of power has become legitimate over time (Frazier and Antia 1995; Kalafatis 2000). When a customer uses reward or coercive power, the supplier is extrinsically motivated to commit to it and comply with the customer’s requirements to achieve favorable outcomes (Zhao et al. 2007).
Framework of the effects of power on cooperation and coordination
Having examined the existing literature, our findings illustrate that power has two sides that play an important role in supply chain management. Based on the literature, we assume that both sides of power could be used effectively to achieve cooperation and coordination among supply chain actors. Thus, we develop the theoretical model of the effects of power on cooperation and coordination and formulate research hypotheses H1a–H6b with specific attention to cooperation and coordination issues (Fig. 1).
Researchers agree that the frequent use of power to force other partners into action will lead to the exploitation of the target (Bannister 1969; Robicheaux and El-Ansary 1975), which is detrimental to the quality of relationship (Gellynck et al. 2011; Stolte and Emerson 1976; Thompson 1967). Hunt and Nevin (1974) indicated that coercive power is related positively to intrachannel conflict and inversely to dealer satisfaction, whereas non-coercive power exhibits the opposite relationships. Exercising coercive power against other members of the supply chain might have short-term benefits for the focal organization but reduces its success in the long term (Cousins 2002). However, Stern and El-Ansary (1992) asserted that channel members may use power to determine who will undertake which marketing activities, coordinate the performance of these tasks, and manage conflict among themselves. Hamner and Organ (1978) suggested that punishment is one of the most readily available means for shaping (and maintaining) the behavior of subordinates. Other authors viewed coercive power as a mechanism for allowing relatively stable relationships to develop between cooperating social actors (Bachmann 2001; Stern and El-Ansary 1992).
Within a supply chain, the perceived use of coercive power will positively affect coordination (H1a) and negatively affect cooperation (H1b).
Gaski (1986) stated that it is through reward and coercive power that partner perceptions are managed to create harmonious and enduring relationships. If the use of power is based on genuine rewards, the supplier will be willing to accept them and enter a trusting relationship. If a buyer continuously uses reward power to give rewards to its suppliers who comply with its quality standards and deliver on time, it can promote cooperation and generate trust in this relationship. Assuming that reward power provides extrinsic motivation, which drives partners to comply with the requirements to achieve favorable outcomes (Zhao et al. 2008), it will have a positive effect on coordination. However, the overly frequent use of reward power is likely to damage relational norms (Boyle et al. 1992) and cooperation (Skinner et al. 1992). Therefore, the exaggerated use of reward power may lead to distrust, suspicion, and eventually abstaining from entering a trusting relationship by a target of influence; in other words, if unrealistically high discounts or other offered rewards are unusual for the culture or mentality of the latter, they may be associated with corruption or bad purposes.
Within a supply chain, the perceived use of reward power will positively affect coordination (H2a) and negatively affect cooperation (H2b).
Expert power is considered to be less effective than coercive and reward power due to being less flexible and unrelated to specific performance of supply chain members (Etgar 1976). In general, the acquisition of special knowledge or technology to achieve a powerful position and the use of expert power formed in this way will contribute to the positive development of cooperation within a supply chain relationship. Expert power is perceived as positive when solicited and given. Offering free advice through an agency and advisory staff as part of project implementation is seen to be a valuable incentive for the target of influence to get involved in the project (Davies et al. 2004). Furthermore, some authors emphasized that consultation and swapping of information might produce expectations of reciprocity and trust (Blau 1964; Coleman 1990). Thus, expert power could be most effective as an influence tactic when the objectives of the person being influenced match those of the leader.
Within a supply chain, the perceived use of expert power will negatively affect coordination (H3a) and positively affect cooperation (H3b).
Gaski (1986) argued that the use of informational power involves manipulative aspects. Stern and El-Ansary (1992) supported the statement that informational power is likely to have a negative effect on coordination in channels of distribution. They argued that channel participants do not necessarily view each other as partners but rather as rivals. Payan and McFarland (2005) found that information exchange has a lower likelihood of compliance with the requirements of the influencing. As noted by Eyuboglu and Atac (1991), depending on the channel, informational power will have different effects on cooperation. Information exchange could have a positive effect on cooperation, since it not only conforms to but also elevates the level of relationalism between parties (Boyle et al. 1992) and is based on mutual trust (Baldwin 1971; Raven and Kruglanski 1970). We assume that in an environment in which participating parties view each other as partners and not as rivals, informational power will have a positive effect on cooperation because it helps to build trust and enhances positive attitudes toward the long-term channel relationships.
Within a supply chain, the perceived use of informational power will negatively affect coordination (H4a) and positively affect cooperation (H4b).
The study conducted by Lee and Low (2008) indicated that legitimate power showed positive relationships with satisfaction. Effective coordination of exchange relationships has been observed as a positive effect of legitimate power (Frazier and Antia 1995; Kalafatis 2000), and a more standardized business format is applied, such as contracts (Jap and Ganesan 2000; Lusch and Brown 1996; Mohr et al. 1996). Boyce et al. (1992) suggested that in the effective operation of an agreement, it is the spirit rather than the written word that is important. The written word becomes significant when things are going wrong. According to this statement, legal contracts specifying formal written rules and obligations could be a harder form of legitimate power than the cooperative norm, which only refers to unwritten unofficial norms, unofficial values, norms, shared values, rules of conduct, and beliefs that guide actions and behaviors. Regulations and economic incentives play an important role in encouraging changes in behavior, but although these may change practices, there is no guaranteed positive effect on personal attitudes (Gardner and Stern 1996).
Within a supply chain, the perceived use of legitimate power will positively affect coordination (H5a) and negatively affect cooperation (H5b).
Because referent power was ranked highest among other types of power in connection to satisfaction (Lee and Low 2008), and since cooperation has been found to go hand in hand with satisfaction (Gaski 1986), we suppose that the use of a positive image and good reputation will foster the development of cooperation. Dapiran and Hogarth-Scott (2003) emphasized that cooperation comes about through the use of expert and referent power. Suppliers would also be more willing to comply with the requirements of internationally recognized buyers and fulfill their commands. However, high degrees of identification between buyers and suppliers may be associated with less channel control. Referent power might not be sufficient to motivate the target to the implementation of certain tasks because they do not represent an explicit statement of the desired behavior. Therefore, using referent power might not be sufficient to animate the target to the implementation of certain tasks.
Within a supply chain, the perceived use of referent power will negatively affect coordination (H6a) and positively affect cooperation (H6b).