Mending fences in a buyer–supplier relationship: The role of justice in relationship restoration

Abstract

While the extant literature has examined causes for buyer–supplier relationship dissolution, the restoration of severed buyer–supplier relationships has been overlooked. Drawing on organizational justice theory, our research develops and tests a model of relationship restoration. We examine how the supplier's restoration tactics—acknowledgment, compensation, and operational transparency, influence the interactional, distributive, and procedural fairness perception, respectively, of the buyer, resulting in relationship restoration. The results are based on a 2 (Acknowledgment – Yes/No) × 2 (Compensation – Yes/No) × 2 (Operational Transparency – Yes/No) vignette-based study with 390 experienced practitioners. The analysis shows that compensating the buyer and providing transparent procedures for dealing with similar situations in the future, lead to higher distributive fairness and procedural fairness, respectively, resulting in restored relationships. Compensation makes up for past supplier malperformance, whereas operational transparency mitigates future concerns. We also find that restoration tactics based on interactional justice are less effective than those based on procedural and distributive justice. There is only marginal support for the indirect positive effect of acknowledgment on restoration intentions (p < 0.10). These results point to the importance of knowing how to approach a buyer to initiate relationship restoration. Managers must understand and evaluate the specific needs of each buyer when proposing a compensatory design that appeals to the buyer. Additionally, establishing procedures that are appealing to all buyers can be a challenge for a supplier, due to the differing benefits to the supplier provided by each buyer.