Technological uncertainty, buyer preferences and supplier assurances: An examination of Pacific Rim purchasing arrangements

We use the metaphor of the mutual assurance game to develop the notion that overseas suppliers may proactively manage uncertainty by making customized investments tp serve their buyers. Using this game-theoretic conceptualiza tion as a complement to the transactions cost analysis notion of credible c ommitments, we argue that such investments serve as assurances of commitmen t to the international buyer. The hypotheses are tested using data collecte d in a survey of U.S. purchasing managers regarding their relationships wit h their Pacific Rim suppliers. Consistent with our hypotheses, our primary results indicate that suppliers' relationship-specific investments are grea ter when technological uncertainty is high and buyers value supplier respon siveness. Further, our results suggest that relationship stability and buye r information sharing are greater when supplier relationship-specific inves tments are greater. These results provide some support for our argument tha t in the face of technological uncertainty, overseas suppliers may unilater ally commit to their buyers in attempts to obtain reciprocal benefits that help them manage external uncertainty.