Modeling Life Cycles of Supply Chain Relationships

Abstract

The paper focuses on the development of buyer – supplier relationships over time. Although there is an ongoing debate about the nature and characteristics of relationship life cycle, the existence of some kind of life cycle is usually assumed when timely development of these relationships is investigated. The objective of our analysis is to investigate this hidden hypothesis using quantitative research methodology. The research focusing on the development of business relationships over time has mainly used qualitative research methods and to the best of our knowledge, no one have yet attempted to measure any relevant variables and the pattern of their development over time using a quantitative methodology. In order to be able to test this hypothesis the level of relation-specific investments generated in the relationship, called the explicit investment measure, was chosen. We have conceptualized and measured it and tested empirically to what extent its development over time fits the pattern of the traditional mathematical model (representation) of the life cycle, which is usually described with a logistics curve. The development of this explicit investment measure over time is a dynamic phenomenon the analysis of which is not without methodological problem. We suggest and apply a procedure developed in the field of population dynamics that makes it possible to use cross sectional data for such dynamic analysis.