0019-8501/01/$–see front matter
Industrial Marketing Management
, 365–377 (2001)
© 2001 Elsevier Science Inc. All rights reserved.
655 Avenue of the Americas, New York, NY 10010
Value Creation in Buyer–
Theoretical Considerations and Empirical
Results from a Supplier’s Perspective
Hans Georg Gemünden
The essential purpose for a supplier and customer firm en-
gaging in a relationship is to work together in a way that cre-
ates value for them. Various important functions of business
relationships in creating value for the partner firms are widely
assumed in the literature. However, there is a lack of empirical
studies due to the absence of conceptual definition. Further-
more, there is a strong concentration on value for customers
neglecting that value is also created for suppliers. In this study,
the authors take the supplier’s perspective and conceptualize
value creation as a set of direct and indirect functions of cus-
tomer relationships. The functions are characterized with re-
spect to performed activities and employed resources of a cus-
tomer firm. The findings from an empirical study of more than
200 firms show that both direct and indirect functions of cus-
tomer relationships contribute to the value perceived by the
supplier. The results of this study have considerable conse-
quences for the management of inter-organizational relation-
ships and networks regarding the process of how value can be
created in business markets. © 2001 Elsevier Science Inc. All
The concept of value in business markets has recently
attracted attention from both academics and managers
Address correspondence to Achim Walter, Institute of Corporate Strategy
and Innovation Management, University of Karlsruhe (TH), PO Box 6980,
D—76128 Karlsruhe, Germany. Tel.;
49 721 608 3433: fax:
49 721 608
6046; E-mail: firstname.lastname@example.org
and it has been widely used in the marketing discipline
[1–4]. The basic notion is that business markets can only
be understood applying the concept of value. Anderson
and Narus  regard value “as the cornerstone of busi-
ness market management because of the predominant
role that functionality or performance plays in business
markets.” Given the fundamental nature of value in busi-
ness markets, it is critical for firms to comprehend the
mechanisms and means of value creation [6, 7].
In short, value can be regarded as a trade-off between
benefits and sacrifices [6, 8]. Some define value in busi-
ness markets monetarily [2, 5] whereas others use a
broader value definition, which also includes non-mone-
tary revenues, such as competence, market position, and
social rewards [4, 7, 8]. In the context of this study we
as the perceived trade-off between mul-
tiple benefits and sacrifices gained through a customer
relationship by key decision makers in the supplier’s or-
ganization. Those benefits and sacrifices can result from
the relationship under question as well as from connected
relationships on which the focal relationship has an im-
pact or is effected by those other relationships.
For the majority of current industrial marketing re-
search concerned with value creation, the focus is on the
customers’ value [1, 4, 8–10]. Reasoning behind such
concentration is the assumption that supplier firms will
only succeed in the marketplace once they offer “more”
value to their customers compared to their competitors
[5, 11, 12]. Customers are becoming a key source of
competitive advantage because, in addition to revenues,
suppliers can gain product ideas, technologies, and/or
market access, etc. from their customers [7, 13–16].
A growing number of researchers point to the pivotal
importance of business relationships for
[8, 9, 13, 17]. Value creation is regarded as the essential
purpose for a customer firm and a supplier firm engaging
in a relationship [1, 7, 18]. This does not only apply to
customers but also to suppliers. Empirical results indicate
that suppliers focussing on a few selected customers
achieve higher profitability in long-term relationships by
reducing their discretionary costs to a greater extent than
supplier firms who employ a transactional approach to
deal with customers . In this article we take the sup-
plier’s perspective because an important contribution for
corporate success can be gained from customer relation-
ships. In our understanding, the supplier needs to offer
value to the customer but also needs to gain benefits from
the customer at the same time. For the sake of their own
survival, suppliers need to understand how value can be
created through relationships with customers.
Despite the growing trend toward considering and us-
ing business relationships as means of value creation, the
marketing literature is deficient in some important ways.
There is a high concentration on profit as value at the ex-
pense of other possible contributions relationships can
make. Up to now, the lack of systematic investigation
makes it difficult to evaluate value creation in business
relationships. Even less developed is the understanding
of how a focal customer–supplier relationship creates
value for other connected relationships of the partner
firms . Our study helps fill these gaps by developing a
model of functions of customer relationships, by relating
these functions to value creation and by testing this
The article is organized as follows. First, we provide an
overview of the literature on functions of relationships and
develop a conceptual framework. Then we present results
from an empirical study exploring functions of customer
ACHIM WALTER is assistant professor at the Institute of
Corporate Strategy and Innovation Management, University of
Karlsruhe (TH), Germany.
THOMAS RITTER is associate professor at the Department of
International Economics and Management, Copenhagen
Business School, Denmark.
HANS GEORG GEMÜNDEN is professor and chair for
Technology and Innovation Management at the Technical
University of Berlin, Germany.
Relationships fulfill crucial
functions for suppliers.
relationships from the suppliers’ perspective. We conclude
with a discussion of the empirical results and their implica-
tions for relationship management and theory.
FUNCTIONS OF BUSINESS RELATIONSHIPS
Researchers have developed several models and
frameworks of relationship functions in the last two de-
cades [13, 20–22]. In the functionalist paradigm [23, 24]
the term function can be used in various way, however
“in societal functionalism, the term function generally re-
fers to the contribution of an element to a larger system
of which it is part” . In the present study functions of
a customer relationship refer to performed activities and
employed resources of the customer (i.e., what the cus-
tomer is contributing to the relationship and as such also
to the wider network). Functions of business relation-
ships can basically be distinguished into
(also called primary or first-order functions) and
(also called secondary or second-order func-
tions) [13, 21, 22]. It is argued that direct functions have
an immediate effect on the partner firms. Indirect func-
tions are supposed to have an oblique effect on the part-
ners, because their relationship is directly or indirectly
connected to other relationships. In the following we use
this distinction to structure suggested functions.
The direct functions of customer relationships include
activities and resources of the supplier firm and customer
firm that may create value to the supplier without being
dependent upon other (connected) relationships. Of cru-
cial importance to most suppliers are “cash flow custom-
ers” . These are large, loyal customers purchasing a
steady volume of products and thus providing the sup-
plier with a regular cash flow. But a distinction should be
made between a
and a high
The realization of profit is a necessary precondition for
the survival of a company and, thus, is a very important
function of customer relationships . Any supplier
must have profitable customer relationships if he wants
to survive in the long term. This is called a
Furthermore, the cash generated by these relation-
ships helps to subsidize other relationships which fulfill
different, but in many situations equally important, func-
However, profits cannot or should not be made with all
transactions. Most companies need to surpass a certain
threshold in the utilization of capacities in order to
achieve economies of scale. Thus, suppliers are inter-
ested in a certain quantity of products they sell and not
only profit they make. Also, customer retention can be a
major determinant of supplier’s profitability and is essen-
tial, given the trend among firms to use fewer suppliers
. Therefore, it could be expected that suppliers make
concessions in prices to handle customers who purchase
comparatively large portions of the suppliers’ produc-
tion. In those cases we will talk about a
Another important direct function of a customer rela-
tionship is the
. The safeguard
function improves the cost-efficiency of the supplier.
Given the uncertainties in competitive markets, suppliers
establish certain customer relationships that are held as
insurance against crises or difficulties with other custom-
ers . Especially under depressed market conditions
suppliers may end up in situations where selling agree-
ments are not fulfilled. For these instances suppliers need
“emergency customers” who provides some business al-
though it may well be a relatively unfavorable deal. Re-
ducing sacrifices and efforts the supplier has to undertake
in order to store, sell, and deliver products contributes to
a reduction of supplier’s costs. This in turn leads to a bet-
ter overall profitability of the supplier’s organization.
The discussed three functions of relationships all con-
tribute to the profitability of suppliers. All functions are
direct in the sense that the effect is derived within a given
Functions of relationships can be divided
into direct and indirect functions.
relationship. It is reasonable to assume that fulfillment of
at least one function contributes to the overall value a
supplier attaches to the relationship under question.
The more a customer relationship fulfills direct func-
tions, the greater the value of the relationship perceived
by the supplier.
Indirect functions of business relationships capture
connected effects in the future and/or in other relation-
ships—the wider network. “A business network can be
defined as a set of two or more connected business rela-
tionships, in which each exchange relation is between
business firms” . Connected means the extent to
which “exchange in one relation is contingent upon ex-
change (or non-exchange) in the other relation” .
Thus, indirect functions are important because they posi-
tively impact on exchange in other relationships.
Suppliers establish relationships with customers who
are seen to be at the forefront of technology or whose
product expertise are high. In such situations suppliers
often discount short-term financial gains for the long-
term benefits of networking
28, 29]. Product and process innovations developed to-
gether with a customer may improve the value of the sup-
plier’s offerings to this customer in the future as well as
to other customers [30, 31].
Referrals and/or recommendations from current cus-
tomers support a supplier to enter new markets and to es-
tablish commercial relationships . Not only the first
customers in a particular market may have a
. Especially large and prestigious customers
which are known to apply stringent criteria to their selec-
tion of supplier companies may have a valuable reference
effect even though they are not the first customers.
we emphasize another signifi-
cant indirect function. To be successful, suppliers must
obtain meaningful information from others outside of the
organization [23, 33]. Customers often gather and dis-
pose of information about market developments that is
relevant to the supplier’s business earlier than the sup-
plier would be able to . Thus, customers are scouts in
In business-to-business markets official authorities,
chambers, banks and/or trade associations can play an al-
most dominant role. Sometimes, customers’ experience in
dealing with such actors can be of considerable help for a
supplier to reduce time- and money-consuming licensing
procedures, business negotiations, etc. . As such cus-
tomer relationships can also fulfill an
Our theoretical considerations have shown that re-
sources (e.g., technological know-how, market informa-
tion, goodwill) utilized, developed, and/or gained in a
specific customer relationship may have implications for
the supplier’s exchanges in other relationships. It is rea-
sonable to assume that the fulfillment of these indirect
functions will positively contribute to the overall judge-
ment of the overall relationship value.
The more a customer relationship fulfills indirect
functions, the greater the value of the relationship per-
ceived by the supplier.
It should be noted that a customer relationship may serve to
fulfill more than one direct and/or indirect function. The im-
portance of different functions varies from customer to cus-
tomer and to the same customer over time [13, 26]. Further-
more, in a given supplier–customer relationship, indirect
functions can be as important as the direct ones, or even
more so. A supplier might be prepared to accept a lower vol-
ume and/or margin than normal, regarding this as costs of
technical know-how, market access, or information.
The conceptual framework is shown in Figure 1.
Data Collection and Sample
In a first step we evaluated 30 buyer–supplier relation-
ships by conducting partly structured interviews with em-
Volume, profit and safeguard functions are
direct value creators.
ployees of supplier firms in Germany. In 12 cases, field
interviews were carried out with the corresponding cus-
tomers in France, and in seven cases with the customers
in Great Britain. The purpose of these interviews was to
develop a set of items that tap each of the relevant con-
structs and to provide an initial test of some of the mea-
sures. Furthermore, we modified several items that were
extracted from various previous studies and verified them
for their relevance to the context of the present study
through the interviews with CEOs, sales managers and
Data for the study were obtained from managers re-
sponsible for relationship and network management
tasks. We gathered the addresses of their firms from a
commercial address list, including industrial goods man-
ufacturers. Potential key informants for this study, usu-
ally the CEOs or sales managers of the companies, were
initially contacted by phone and were asked to participate
in the study. The telephone contacts were also made to
ensure that the persons were best able to report on the in-
vestigated constructs. The data were collected in stan-
dardized personal interviews in supplier companies. For
the purpose of this study, 247 questionnaires were suffi-
ciently completed, resulting in a response rate of 43.6%
(of the 567 companies contacted).
The sample can be described as follows: On average,
the business relationship had been in existence for 13.3
years. The responding suppliers were all located in Ger-
many and primarily operated in the fields of mechanical
engineering (34%), the electronics industry (30%), the
metal-processing industry (12%) and the chemical indus-
try (11%). Their customers were located in Great Britain
(20%), France (22%), and Germany (58%). They worked
in sectors such as the electronics industry (26%), me-
chanical engineering (17%), the chemical industry
(17%), and vehicle manufacturing (10%). For the most
part, suppliers were small and medium-sized enterprises
(SMEs), which is reflected in an average of 445 employ-
ees per firm. The customers employed 1076 persons on
Innovation, market, scout and access
functions are indirect value creators.
FIGURE 1. Functions of a customer relationship.
For the purpose of this study, respondents seemed to
be appropriate as key informants who deal with relation-
ship and network management and hold personal con-
tacts to customers themselves. In 46% of our cases, the
key informants were members of the firm’s top manage-
ment. Forty percent of the respondents were from middle
management, and only 14% of the interview partners
were members of lower management. The key infor-
mants had been actively involved in the respective cus-
tomer relationships for approximately seven years on av-
erage. They met employees from the customer firms
approximately nine times per year on average.
Appendix 1 contains the measures and items of the
study. The psychometric quality of the measures was as-
sessed using procedures suggested in the measurement
literature. We purified our proposed measures by assess-
ing their reliability and unidimensionality. All items per-
taining to the same function were submitted to an explor-
atory factor analysis. Items with low factor loadings were
eliminated. In a next step item-to-total correlations were
computed for each of the items. Items for which these
correlations were not significant at the .01 level were
dropped. After that, Cronbach’s alpha was computed
and, if it was smaller than .7, the item with the smallest
item-to-total correlation was removed until the require-
ment of alpha being at least .7 was met. Next, the remain-
ing items were subjected to an exploratory factor analy-
sis. The factor-loading matrix revealed the necessity of
further deleting items.
We have conceptualized functions of customer rela-
tionships as a two-dimensional construct (direct and indi-
rect functions). Therefore, the remaining 21 items repre-
senting functions through a customer relationship were
inputs of a second-order confirmatory factor analysis
(CFA). By the means of a second-order CFA model “the
proposed dimensions of a multidimensional construct are
explicitly represented and parameters related to each di-
mension can be used to examine useful properties of the
measurements” . The maximum likelihood (ML)
method in LISREL VIII was used to estimate model pa-
rameters with the covariance matrix as data input. Each
of the 21 items is hypothesized to load on one of seven
first-order factors, depending on its meaning. Variance
common to all measures and reflecting meaning at a
higher level of abstraction is captured through the influ-
ence of the two second-order factors termed “direct func-
tions” and “indirect functions.”
The overall fit indices obtained for the model were as
.04. Given the model
is quite complex, the fit statistics suggest that the overall
model is acceptable [35, 36]. Our assessment of the over-
all model was also confirmed by the Q-plot of standard-
ized residuals that is characterized by points falling ap-
proximately on a 45
Table 1 contains standardized ML parameter estimates
for the measurement model, proportions of variance ex-
tracted, construct reliability values, and Cronbach’s alpha
values. All items exhibit reasonably high reliabilities. All
Cronbach’s alphas except one exceed the threshold value
of .7. The average variance extracted and all of the con-
struct reliabilities exceed the threshold values of .5 and .7,
respectively . Discriminant validity between the seven
factors and the two second-order constructs respectively is
given applying the criterion suggested by Fornell and
Larcker . The squared correlations between the seven
relationship functions ranged between 0.05 and 0.39. The
squared correlation between the construct’s direct func-
tions and indirect functions is 0.37. Thus, the measurement
model results can be interpreted as acceptable.
For our further analysis the arithmetical means of the
three multi-item scales, profit function, volume func-
tions, and safeguard function, were used to measure the
construct direct functions of a customer relationship. The
arithmetical means of the four multi-item scales, innova-
Both direct and indirect functions impact on
overall value perception.
tion function, market function, scout function, and access
function, were used to measure the construct indirect
functions of a customer relationship. For the assessment
of supplier-perceived value within a relationship setting,
we selected one item that embraces the two critical com-
ponents of the relationship value: benefits and sacrifices.
The key informants were asked to rate the profitability of
the customer relationships in question considering all
Second-Order Confirmatory Factor Analysis Results
Profit function (F1)
1 .68*** .65 .78 .77
Volume function (F2)
1 .88*** .55 .78 .77
Safeguard function (F3)
1 .64*** .51 .75 .74
Innovation function (F4)
1 .63*** .62 .86 .86
Market function (F5)
1 .79*** .66 .85 .85
Scout function (F6)
1 .81*** .59 .81 .81
Access function (F7)
1 .65*** .52 .76 .76
Direct value functions
F1 .70*** .50 .74 .67
Indirect value functions
F4 .82*** .52 .81 .75
Parameter estimates are significant at the .001 level.
Relationships can be classified according to
their value creation.
revenues and costs associated with the relationships on a
We tested the two hypotheses using causal modeling
by means of LISREL VIII. Because it is unreasonable to
assume that the error variance of the supplier-perceived
value measure is zero, we included a 15% measurement
error in this measure. Table 2 contains the parameter esti-
mates of the structural model.
The overall fit measures were all met in our structural
analysis, which suggests that the models fit the data well.
All relationships predicted in the structural models are
found to be in a positive direction (H1 and H2 sup-
ported). Furthermore, the model explains a substantial
proportion of the variance in the endogenous variable:
supplier-perceived value 49%. In summary, these results
provide strong evidence for direct and indirect function’s
Value creation “can be regarded as the raison d’être of
collaborative customer–supplier relationships” . The
present study identified seven functions of customer rela-
contributes to the success
of the supplier by securing the necessary “break-even”
volume and, thus, allows the company to operate on a
profit-making basis. A positive cash flow to the supplier is
provided through the
of a customer rela-
tionship. Obtaining stability and control in sales terms
within a dynamic marketplace is represented by the
Those three functions are directly related
to a company’s performance. As such we label the identi-
fied functions as direct value-creating functions.
how and creative ideas are obtained from the customer.
Gaining access to new markets (i.e., new customers) is
represented by the
a customer relationship captures the possibility to gain
critical information through customers. The
allows access to third parties and makes those actors
reachable, open, and understandable. Those four func-
tions do not influence the performance of a company di-
rectly within that relationship or at a particular moment
in time, but are nevertheless important for the future de-
velopment of the company. Therefore, these functions
are summarized under the heading of indirect value-cre-
Creating value through business relationships is be-
coming one of the most discussed topics in the marketing
literature. Our further analyses show that the empirically
identified functions explain a very high proportion of the
overall value assessment by the supplier. This signals
that we have indeed captured the most important aspects
of this construct. It is the fulfillment of the functions with
creates value for the supplier. Given the high percentage
of explained variance of value we can conclude that the
discussed functions are the main drivers of value cre-
ation. As such, we suggest discussions about “value-cre-
ating functions of business relationships.” These findings
provide additional evidence to the growing body of
knowledge concerning the importance of business rela-
tionships for value creation.
Relationship management has to mirror the
functions fulfilled in the relationship.
supplier-perceived value .51
supplier-perceived value .28
However, some limitations of this study should be rec-
ognized and taken into account when interpreting its
findings. In our study, we mostly interviewed SMEs.
Those companies might be more dependent upon their
customers because each customer normally accounts for
a substantial proportion of their business. In particular,
the volume function and the safeguard function might be
of more importance to SMEs because an unreliable cus-
tomer could ruin the whole business. In contrast, larger
companies can reduce the level of dependency upon one
single customer and, in turn, emphasize the profit func-
tion. Therefore, the different functions can have different
importance levels as our study might suffer from a com-
pany size clustering bias. Furthermore, we only analyzed
rational functions (i.e. functions with an economic back-
ground). However, our work with the companies has con-
vinced us that there are not always rational or economical
reasons behind relationships.
Sometimes a supplier deals with a customer because of
a good past history, social support, and/or because of
“good feelings.” Such “soft value-creating functions”
also include fairness or trustful dealings. A richer picture
could be drawn by including non-economic functions
into our model as a third dimension (social functions).
Such aspects of a relationship are hard to capture within
an empirical study, especially, when more than one per-
son is involved in managing a single relationship, be-
cause different persons might see the social functions in
one relationship differently. The effect of such functions
on success measures is debatable as it could be positive
(e.g., increase of efficiency through less formalization) or
negative (e.g., through lock-in effects).
As a final limitation, we acknowledge the fact that our
sample only reflects relationships between manufacturers
and customers who use the product themselves. Even
though we strongly believe that the distinction between di-
rect and indirect value-creating functions stands true for
other relationships as well, other functions might be con-
sidered (e.g., in a manufacturer–distributor relationship).
We have seen that several value-creating functions of
customer relationships can be distinguished. An under-
standing of these functions is of paramount importance
for the supplier in order to gain the most out of his cus-
tomer relationships. Given that customers today expect to
be involved in relationships in order to gain benefits of
their own, suppliers need to understand the potential
which these relationships offer them in return. Such an
understanding will guide suppliers to a meaningful use of
relationships and prevent them from pure altruistic cus-
tomer orientation. An understanding of the functions ex-
plained in this article can serve as a guide for suppliers to
define what to ask a customer. Only attending the cus-
tomers’ interests without return is a one-way track to eco-
Managers can use the developed framework to classify
relationships which in turn will have managerial implica-
tions for the management of different groups of relation-
ships. In Figure 1 we used the two dimensions, direct
value-creating functions and indirect value-creating func-
tions, to develop a 2
2 matrix, useful to categorizing
value creation through customer relationships. Due to our
findings managers concerned with relationship and net-
work management tasks within supplier firms have to be
aware of these four types of customer relationships. In
the following we discuss the four different groups of cus-
tomer relationships and their management implications in
more detail (see Figure 2).
. We see three dif-
ferent subgroups of ineffective relationships. First, there
FIGURE 2. Classifying value creation through customer relationships.
can be fairly new relationships which have not developed
a clear pattern of functions. But there might be good po-
tential to develop these relationships. Also, relationship
development and maintenance is an investment process
in the sense that costs and revenues appear in different
time periods . Second, formerly better performing re-
lationships, which have changed in the meantime due to
various reasons, can be in this box. Those relationships
are either near dissolution, or there might be a chance to
renew their potential. Lastly, low-performing relation-
ships may have been and will be ineffective regardless of
time. There was never a high potential in it and nor will
there be one in the future. Maybe such relationships exist
for other reasons (e.g., non-rational functions) or have
simply not been analyzed.
If a relationship fulfills neither direct nor indirect func-
tions then there is a question of why the supplier stays in
this relationship. Regardless of the reason why a particu-
lar relationship is ineffective, a critical analysis needs to
be performed in order to evaluate the future potential of
this relationship. There might be good reasons for keep-
ing a customer relationship, which may be centered
around reasons outside the ones described. But the criti-
cal notion in this case is that the supplier is investing in a
relationship in which none of the value-creating func-
tions are fulfilled. If a customer relationship proves to be
ineffective in the long run, suppliers should not waste
their resources by maintaining those relationships in the
. We name relationships
which only involve direct functions as selling relation-
ships. The benefit for the supplier is the possibility of
selling large quantities, for a profitable price, and/or
over-capacities. Thus, the value will be directly created
through the customer relationship, due to high profits
and/or economies of scale.
Typically it has been assumed that individual salespeo-
ple manage selling relationships with customers. How-
ever, with technological advancement, just-in-time man-
ufacturing, and coordinated buying, the complexity of the
selling task has evolved beyond the capabilities of a sin-
gle salesperson. Therefore, previous conceptual and em-
pirical work in marketing suggests that a group within a
supplier firm should have primary responsibility for man-
aging a selling relationship . Four roles have been
conceptualized in the core selling team . (1) A selling
team leader responsible for all team actions, including
negotiation and internal and external relationship devel-
opment. (2) A seller who serves as primary contact for
customers. (3) A internal coordinator responsible for
compiling and coordinating the extended selling team.
The extended selling team consists of functional experts
possessing the technical knowledge needed by the selling
team to meet specific customer needs and wants. (4) A
customer service representative who provides installa-
tion, maintenance, and other customer services. Individ-
ual members of the core selling team may be responsible
for more than one role.
. These are customer
relationships that have a strong impact on value creation
in connected relationships. Within networking relation-
ships valuable resources are gathered and/or created
(e.g., know how, market information, and new products).
It is the supplier’s task to transform these resources into
value by facilitating them into connected relationships.
As such the success of this relationship depends upon the
supplier’s ability to transform the relationship’s outcome
into results elsewhere in the network.
The responsibility for managing this relationship in-
side the supplier is not easy to allocate. A complex bun-
dle of relationship management activities has to be coor-
dinated and embedded within a broader range of other
relevant (relationship) management activities in the sup-
plier firm .
Salespeople and/or sales managers might not be en-
couraged and/or might be overcharged to transfer re-
sources from networking relationships to connected rela-
tionships, so that value will be created . If, for
example, innovation development plays a major role in a
given customer relationship, then the supplier’s R&D de-
partment might be in a better position to handle this rela-
tionship. This would imply that the marketing depart-
ment offers a service function to the R&D department as
marketing may have more experiences in managing rela-
tionships. But the responsibility for the relationships
needs to be transferred to R&D. Due to the complexity
and diversity of the management, tasks within network-
ing relationships teams should be empowered and en-
couraged to undertake actions that nurture and sustain it
. This group of
relationships fulfills direct as well as indirect value func-
tions. A full range of functions is exploited. This attaches
a very high value for the supplier to relationships in this
If a full variety of value-creating functions are or
should be fulfilled in a relationship, the relationship itself
and its management become more complex. Various in-
puts are needed in order to exploit the relationship and in
order to demonstrate competence in several areas such as
selling existing products and developing new ones. Dif-
ferent departments and functions of the supplier organi-
zation have to interact with the high-potential customer.
Therefore, relationship teams composed of personnel out
of different departments from the supplier firm may be
the best prepared to handle this relationship [40, 41, 43].
The allocation of responsibility for this relationship is not
easy and should involve a cross-functional team as op-
posed to a single department.
We have derived some managerial implications by dis-
tinguishing relationships along two axes, direct and indi-
rect functions. Hereby, we have seen that relationship
management is influenced by what functions are fulfilled
in a given relationship. Companies need to analyze their
relationships in order to allocate resources accordingly.
The aim of our study has been the empirical identifica-
tion of relationship functions and an analysis of the rela-
tion between the functions and value creation. But the
present study not only provides answers to important
questions concerning value creation through relation-
ships, it also raises questions for further research.
To understand the value concept, the opposite side of
benefits (i.e., the sacrifices) must be discussed. Several
costs of relationships have been discussed, such as han-
dling costs (e.g., personnel, travel, communication), rela-
tionship-specific investments (e.g., product modifica-
tions, organizational adaptations), and opportunity costs.
Although, so far a model of relationship costs and
functions of relationships
is missing. Here, we suggest a
similar approach to the one presented in this study in or-
der to develop a measurement tool.
Furthermore, the relationship between the identified
value-creating functions and other relationship-specific
constructs needs to be analyzed. After we have developed
a model of value-creating functions (i.e., the dimensions of
potential outcomes of relationships) we need to understand
the preconditions for the development of those functions
as well as the development process itself. Based on other
studies, it could be expected that variables such as trust,
commitment, and partner-specific adaptations are key de-
terminants for the successful development and mainte-
nance of value-creating relationships [7, 43].
Are there different preconditions and antecedents for
the different functions? Can we see a relation between
the development stage of a relationship and value-cre-
ation in a relationship? The development process of value
creation in relationships should be especially looked at in
longitudinal studies. We assume that relationships can
“travel” between the boxes in the matrix over time.
In addition, there is the important question of
[1, 7]. When value is created within a relation-
ship both partners would like to benefit from this situa-
tion. Value is provided from one partner to the other, but
what, in turn, is received (e.g., customer’s innovation
function balanced by supplier’s volume function)? To se-
cure the long-term survival of the relationship both part-
ners must understand the value-creating functions within
the relationship. It is important to note that these func-
tions can vary between the partners: The customer may
value indirect functions, where as the supplier sees direct
functions fulfilled from his position. So what does the
provider of a certain function receive? Are there typical
combinations of value-creating functions in relation-
ships? This process of sharing requires an effective man-
agement; we have pointed out some issues in the previ-
ous sections. But for a deeper understanding of value
creation, more research efforts are needed.
Direct and indirect value-creating functions also sug-
gest implications for
reward systems may work for a direct function, because
results can be seen in a short period of time. Neverthe-
less, a short-term orientation fails in motivating person-
nel to exploit indirect value functions of relationships be-
cause of a time gap between input and outcome. New
reward systems need to be developed and implemented in
order to promote indirect functions of relationships
which are vital for the survival of a company. More re-
search needs to be done in terms of reward systems in or-
der to motivate personnel in fulfilling indirect relation-
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Measures and Items of the Study.
Please rate the benefit/utility that your company gains through
the customer relationship! (1 ⫽ very low, ..., 7 ⫽ very high)
Profit function (mean ⫽ 3.79, SD ⫽ 1.41)
margin per product
Volume function (mean ⫽ 4.19, SD ⫽ 1.54)
amount of deliveries
long-term supply agreements
Safeguard function (mean ⫽ 3.04, SD ⫽ 1.37)
possibility of short notice deliveries
possibility to sell over-capacities
reduction of dependency on other customers
Innovation function (mean ⫽ 2.87, SD ⫽ 1.50)
joint development of production processes
joint concept development of new products
adoption of new technologies
Market function (mean ⫽ 2.90, SD ⫽ 1.55)
initiation of contacts with new customers
information about potential new customers
references to potential new customers
Scout function (mean ⫽ 2.94, SD ⫽ 1.43)
information about the market
information about competitors
information about relevant third organizations (e.g.,
further suppliers and customers)
Access function (mean ⫽ 2.30, SD ⫽ 1.38)
support by handling contacts with governmental agencies
initiation of contacts to important persons (“movers
promotion in influential institutions and committees
Considering all costs and revenues associated with this
relationship, how would you assess its profitability? (1 ⫽
very bad, 7 ⫽ very good) (Mean ⫽ 4.45, SD ⫽ 1.73)