EXPRESS: Horizontal Referrals in B2B Markets

Abstract

Horizontal referrals –when suppliers recommend other suppliers– are a common phenomenon in complex B2B markets. For the referring supplier, giving the best-possible horizontal referral may strengthen the relationship with its customer, yet it may also threaten the referring supplier’s future revenues and cross-selling opportunities. Instead, the supplier could make an obligatory referral, one that fulfills the obligations of recommending another supplier while keeping referring supplier’s own interests paramount. We rely on role theory and its antecedents (mutual trust and referring supplier’s dependence) to determine when a referring supplier adopts the role of a friend (vs. a businessperson) and gives the best-possible referral (vs. an obligatory referral). Study 1, an experiment, supports our theoretical model. Study 2, a conjoint study, links the observable antecedents of the referring supplier-customer relationship to their choice of horizontal referrals. Study 3, another experiment, looks at the consequences of the horizontal referral on the referring supplier-customer relationship and shows that providing an obligatory referral can hurt the customer’s intent to continue their relationship with their supplier. This effect is mediated by the customer’s perceived alignment of interest with their supplier. For B2B marketing research and practice, we report that the supplier’s dependence is critical to predicting the quality of horizontal referrals, even though an exploratory survey showed that customers overlook that dimension and focus on mutual trust when seeking referrals.