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    Compound Relationships between FirmsAuthor(s): William T. Ross Jr. and Diana C. RobertsonSource: Journal of Marketing, Vol. 71, No. 3 (Jul., 2007), pp. 108-123Published by: American Marketing AssociationStable URL: http://www.jstor.org/stable/30163984 .

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    William .Ross Jr.& Diana C. Robertson

    Compound elationshipsetweenFirmsInthis rticle, he authors ntroducehe dea of a compoundrelationship;hat s,formanypairsoffirms,he overallrelationship etweenthe twofirms s composed ofmultiple imple relationships:upplier o customer, nd viceversa; competitoro competitor;nd partners. his multiplicityfrelationshipsan lead to bothopportunitiesndchallenges for ach ofthe twofirmsnthe dyad.The authors definethe natureofcompound relationshipsnddelineatewhy t s importantor hefirm o treat hem s such ratherhanfocusing nly n thesimplerelationships.They distinguish ompound relationships rom ocial networks nd simple dyadic relationships nd relate theconstruct o exchange theory,coopetition,"nd the interorganizationalelationshipiteraturen marketing.heythen use thepolitical conomyframeworkodevelop a set ofconceptual propositionshat pplyto many spectsofcompoundrelationships. heyendwith ome speculationsregardingheappropriatemanagement fcompoundrelationshipsnd propose opportunitiesor urtheresearch.

    Iist a productiveime or esearchnrelationshiparket-ing.SinceDwyer, churr,nd Oh (1987) underscoredthemportancef onsideringelationshipsnmarketing,marketingcholars avepaid ncreasedttentionorelation-ships, pproachinghe opic rom everal ifferenterspec-tives. Customer elationshipmanagement as become aleading onstructnmarketingcholarshipodayJohnsonand Seines 2004; Reinhartz nd Kumar2000). Otherrelationship-baseddeas, uch s customerocreationPra-halad ndRamaswamy000)andcoproductionBendapudiandLeone2003),arereceivingncreasedttentionn bothmarketingnd strategyesearch.Marketingcholars realsostudyingupplyhain elationshipsWathnendHeide2004).Forexample,Wuytsndcolleagues2004) examinehow a vendor's elationships ith ts suppliers ffecttscustomers'willingnesso engage n a tightlyonnectedrelationshipith hevendor. argo ndLusch 2004) sug-gest hat newdominantogic s emergingn themarketingdiscipline, logicof ervice-centeredxchangehat ccordssignificantmportanceomanagingxternalelationships.As thisresearchllustrates,elationshipsith xternalpartnersreextremelymportanto the wenty-first-century

    WilliamRossJr.s ProfessorfMarketing,meal ollegef usiness,Pennsylvaniatate niversitye-mail:[email protected]).iana .Robert-son sProfessorfOrganizationndManagement,oizuetausinessSchool,moryniversitye-mail:[email protected]).The uthorshankajdeeprewal;unilhomas;nd articipantsn ol-loquiatBrighamoungniversity,he niversityfMiami,he niversityofMissouri,ndhe 005 mericanarketingssociationonferencenMarketingthicseld tNotreame orheirsefulomments.n ddi-tion,he uthorshankhenonymousMeviewersorheirelpfulom-ments.he irstuthorratefullycknowledgesinancialupportromheInstituteorhe tudyf usiness arketsf he meal ollegef usi-ness tPennsylvaniatate niversity.Toread nd contributeo readernd uthorialoguenJM, isithttp://wwwmarketingpower.com/jmblog.om/jmblog.

    (c) 007,American arketingssociationISSN: 022-2429print),547-7185electronic)

    firm. owever, irms re often oncernedolelywith hemanagementf one set ofrelationshipst a time,whereascompanies re ncreasinglyindinghemselvesnmultipleandcomplex elationshipsith ther irmse.g.,Anderson,Hakansson,and Johanson 994). According o Kanter(1994), thebusinessworld f the ate twentiethndearlytwenty-firstenturiess characterizedy more nterfirmcollaborationndbyrelationshipsbetweenwofirms)hatincludemultipleoles.Forexample, firmmight e a cus-tomer,upplier,artner,ndcompetitorfanotherirm llat thesame time. ndeed, omplex elationshipsetweenfirms rean increasinglyrevalentnd mportantrendnbusiness racticendone thatwe believepractitionersndscholarsalike shouldconsider.Examplesof this trendabound:.Dell nc.buys omponentsromenovoex-IBM)nd lsocompetesith enovonthe ersonalomputerarket.orLenovo-IBM,ell s now neof ts argestistributorsndone f ts argestompetitors..SonyCorporationndKonicaMinolta oldingsnc. greedtocooperateodevelop igitalingle-lenseflexameras,thoughhetwocompaniesrecompetitorsn numerousindustries,articularlyn he amera arketplace..MicrosoftndYahoo,ompetitorsn the earch-enginear-ket,have inked heirnstant-messagingystemsomakethemompatible.

    To illustratehis oncept urther,onsiderhefollowingextendedxample: n the 1970sand 1980s, hechemicalsdivision f CelaneseCorporationngagedn several iffer-entkinds ffinishedoods radeswith therhemical om-panies, uch s DuPont ndUnionCarbide. oronekind ftrade, oth ompanieswouldbookorders rom heir us-tomers orproducts heybothproduced, utwhicheverplantwas physicallyearer o thecustomer ould hip othe ustomer,omatter hich ompany's lanttwas,andthecompanyhat ookedtheorder, otthecompanyhatshippedhe rder, ouldbillthe ustomer.hetwo ompa-nies were ustomersfeachother,uppliersoeachother,competitorsgainst achother,ndcollaborateds partners

    JournalofMarketing108 Vol. 1 July007),108-123

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    FIGURE 1The Compound Relationship and Its Component Relationships

    Firm PartnerfirmCompoundRelationship

    PartnerFirm firmSupplier-CustomerFirm Partnerfirm

    Customer-SupplierFirm PartnerfirmSimpleRelationships Competitors PartnerFirm firmPartnerswitheach other. The differentrepositions e use todescribe he elationshipsrethemselvesnteresting.)In this rticle, e introduceheterm compoundela-tionship"o definehese omplex elationshipssee Figure1). Formally, e define compoundelationships beingcomposed ftwoor more imple elationshipsetweenpair ffirms. edefineimple elationshipss separatenddistinctelationshipshat ccur between hese same twofirms,uch s supplierocustomer,ompetitorocompeti-tor, r oint artners.ssentially,compoundelationshipsthe set of individual imple relationshipsetween wofirms.igure is a graphic epresentationf the ompoundrelationshipsetweenhe wo hemical ompanies.Why are compound relationships mportant? heanswersrelativelyimple. s long s the ocus f ttentionwithin givenfirm s on its separatendividual elation-shipswith partnerirmversus eeingthebig picture,which ncompassesll thedifferentimple elationships),thefirmwill facethepotentialf optimizingach of theindividualelationshipsnd, n theprocess, fsuboptimiz-ingor evenharminghe arger verall elationship.This articlemakes everal ontributions.irst,t ntro-ducesthe dea ofcompound elationshipsnd ndicatestsimportance.econd, t elaborates n theconcept f com-pound elationships;istinguishest from ocialnetworks;and relates t to exchange heory,coopetition,"nd theinterorganizationalelationshipiteraturen marketing.Third,tdevelops conceptualmodelfor hinkingboutcompound elationships ased on a political economyframeworkSternndReve1980).Anadditionalheoreticalcontributions thatwe extend hepolitical conomy rame-workby applyingt to moregeneral ituationshan hechannels-of-distributionomainFrazier 999;Grewal nd

    FIGURE 2The Chemical Company Example of a CompoundRelationshipCustomer

    Celanese Competitor DuPontPartnerSupplier

    Dharwadkar002; Stern nd Reve 1980)andbyconsider-ingmultipleevels f nternaloliticalconomies.TheImportancefConsideringCompoundRelationshipsTo begin,we considernotherxample.n the ate1970s,PepsiCo,manufacturerfPepsiCola and other oft rinks,began considering aysto increase ountainales for tssoft rinkinebecausefountainrinks ave a muchhighermargin hando either roceryales or vendingmachinesales.A solutionhat epsiCo mplementedas toacquireseveral ast-foodutlets-TacoBell,PizzaHut, ndKFC-as a wayto ensure xclusivityf itsproduct. cquiringthese ewoutletsdded oPepsi'sfountainales,but talsosubtractedrom epsi'sfountainales. How is thispossi-

    Compound elationshipsetween irms 109

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    ble? Several argefast-foodhains,ncluding cDonald's,signed xclusive greements ithCoca-Cola,Pepsi's pri-marynd bitterompetitor.heseagreementsereviewedas responsesoPepsi's moving ownstreamnthe hannelandbecomingheir ompetitor.rom hecompound ela-tionship erspective,epsiCo started ut n a simple up-plier elationshipith ast-foodutlets.When he ompanybought aco Bell,Pizza Hut,andKFC, it then ecame asupplieroand competitorf ll the ast-foodutletstdidnot wn.As a result, long-timeustomer,uch s McDon-ald's,no ongerwanted obuy ola from competitor,o itbought rom oca-Cola.Twenty ears ater, epsi sold itsretail ast-foodusi-nesses obe ina betterositiono sell ts oft rinkst otherrestaurantsReeves1997).Adding newrelationshipiththefast-foodompaniesi.e.,competitorocompetitor)edto the oss ofa previouslymportantelationshipith ev-eral of themi.e., supplierocustomer). iven hat firmmustcarefullymanagesuch strategic elationships,hepoint s thatmanagementf thecompound elationshipinvolvesmanagementfthe ntire elationship,ot ustofeachsimple elationship.epsi'sstrategic iscalculationsoneexample hat rgues irectlyor onsideringompoundrelationships.owever,here re several rgumentss towhythedecisionmakers or he various implerelation-ships hould xplicitlyonsider he ompoundelationship.In onesense, cknowledgingompoundelationshipssnotrequired or firmocontinueotransacttsbusiness.Indeed,many irms ocus olely n the imple elationshipsandnever onsiderhe umofthese imple elationships-thats,the ompoundelationship.heproblems that hesimple elationshipsffect neanother.onceptualizinghenet of simple elationshipsetween wofirms s a com-pound elationshipighlightsertainmportantssues.First,thevarious imple elationshipsarrywith hem ehaviorsandnorms,ndthese ehaviorsndnorms reoftenncon-flictwith ach otherBrandenburgernd Nalebuff 996).Second, he xistencef differentinds fsimple elation-shipsmeans thatthe partner irms re simultaneouslyengagedn several oleswith achother,oles hat arynterms ftheir ower elationsndpotentialor pportunis-tic behavior. otethat ompound elationshipso notplayoutsequentially;hat s, it is notthat, irst,wofirms recompetitors,hen nefirmupplies he ther irm,ndthenonefirmuys rom heother irm.nstead, hese ivergentrelationshipsre occurring t precisely he same time.Third,henature fcompoundelationshipshanges; hus,management ust onstantly onitorhem. hesimultane-ity, omplexity,ndmutabilityreprecisely hy henotionofcompound elationshipsndmanaginghem s such sbeneficial.Thereare at least three easonsthefirm houldpayattentiono its compound elationships ithother irms.First,making mistake rbehaving oorlyn one simplerelationshipayharm ther imple elationships.onsiderthe ase inwhich wofirms ctas both uppliersndcus-tomerso each other. ach firmmustpayattentiono itsbehaviorwith he other irme.g.,meetingts accounts-payableobligationsn a timelymannern its roleas cus-tomer, eetingtsdeliverychedulesn tsrole s supplier)

    to ensure hat t is viewed s sufficientlyesponsiblendcooperativeo act as supplier or ther roductsrtotakepart n a jointventure ith hepartnerirm. econd, ndconversely,erformingell n onesimple elationship ayharm ther imple elationships.orexample,ftwofirmsarecompetitorsndcustomers,utthroatrhighlyompeti-tivebehaviorn theroleofcompetitor ay eopardize hecooperativeehavior eeded o takeon a supplier rcus-tomer olewith hepartnerirm.n an extremease,firmsarenowoptingo fire nprofitabler unattractiveustomers(Winer 001). Third, erformingell in one simple ela-tionshipmay lead to additionalrelationships. wyer,Schurr,ndOh (1987) propose hat uyer-sellerelation-shipsmove hroughtages; erformingell n onestage nsuch relationships grounds ormovingoanother, orecommittedtage.Goodsuppliersrgoodcustomers ay easked tobecomepartners; goodcompetitorhat emon-strateseal apability ay e asked o oinwithts ompeti-tor odevelop ewmarketsr newproducts.hus, ehaviorin eachsimple elationship ust e consideredn terms fits mpact n other imple elationshipsnd,ultimately,nthe ompoundelationship.To summarizehisdiscussion, e contendhat ware-nessof the ompoundelationshiphroughouthemanage-ment fthe imple elationshipss valuable or everal ea-sons.Weoutlined owfailingoconsider he ffectsfanaction ya firm'sepresentativeo a simple elationshipnthe ompoundelationshipanbe harmfulo the ompoundrelationship,espite heaction'susefulnesso the firm'srepresentativer divisionnvolved ith he imple elation-ship.We also suggestedhat eing wareof the mpact factionsnwhatmaybeperceiveds less mportant,ndivid-ualrelationshipsanaidthe argerelationshipnd, hroughit, other, erhapsmore mportant,implerelationships.Thus,considerationf the arger elationshipan be bothprotective nd proactive Brandenburgernd Nalebuff1996). This leads to our first, oundational esearchproposition.

    P1:Firms hatonsiderheir verallompoundelationshipswith therirmsthatre mportanto hem)erformet-terhanirmshat onot.

    UnderstandingompoundRelationshipsRelationshipsWebeginwith hemost eneral fdefinitions,hat f rela-tionship. relationshipsa connectionetweenwo ntities(entities an be organizations,eople,societies, r evennation-states),uchthat he ntities aveexplicit olesforwhich herereexpected ormsf behavior.We narrowurthinkingothe ypes fsimple elationshipshat wofirmsmay have witheach other-for example,a supplier-customerelationshipra competitor-competitorelation-ship.Theobservationhat rives ur hinkingn this rticleis that wofirmsften avemore han neofthese pecificrelationships.n a givenpairoffirms,ne firmmaysellseveral ifferentroductso theother irm,nd n anotherpair, heymay ompetenonemarketnd have supplier-

    110 JournalfMarketing,uly007

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    customerelationshipnanother.hepair nd their iffer-ent elationshipsreourunit fanalysis.To understandhis, onsider given irm nd ts rela-tionships ith notherirm.Wecategorizehe imple ela-tionshipshatt nd he ther irmmightndertakento ourbasictypes: ustomerosupplier,nwhich hefirmuysproductr service romhepartnerirm;uppliero cus-tomer,nwhich hefirmellsa product r service o thepartnerirm; ompetitoro competitor,n which he twofirmsompete ith ach other or omeresourcee.g.,cus-tomers);ndpartners,n which he wofirms ork ogether,formallyr informally,o achieve common oal.Giventhe our ifferentinds frelationships,here an be 11dif-ferentinds fcompound elationships-6hat ontain wosimple elationships,that ontain hree imple elation-ships, nd 1 that ontains ll four inds fsimple elation-ships for representationf the11 types f compoundrelationships,eeFigure ). Note hat herere ikely o benumerousxamples f each of these imple elationshipswithinhe ompound elationship;or xample, supplierfirmmayhavemore han ne division nd more han neproduct roup hat ellsto a particularustomerirm.It s importantodistinguishhe ompoundelationshipconstructromimple yadic elationships.simple yadicrelationshipetween wofirmsnvolves ach of the twofirmsn a specific ole,whereas compound elationshipcomprises ll the simple dyadicrelationshipshatexistbetween he wo irms.or xample,nthe hemicals xam-ple we presented reviously,herewere severalsimpledyadic elationshipsetween elanese andDuPont-sup-plier ocustomer,ustomerosupplier,ompetitorocom-

    petitor,ndpartners-withachfirm aving specific olein each simple elationship.owever,herewas also thecompound elationshiphat ubsumedll theother,impledyadicrelationships.s we notedpreviously,hesimplerelationshipsrecomponentsf the ompound elationship.This means that ach component imple relationshipsaffectedy every ther omponentimple elationshipaswell sbythe ompound elationship),hichn turn ffectsthecompound elationshiptself.Moreover,t means hatsimple elationshipshat recomponentsfcompoundela-tionshipshouldnotbe examinednisolation,whetheryfirmmanagersrbusiness cademics.Similarly,t is importanto distinguishhecompoundrelationshiponstructrom hesocial network onstruct.Conceptually, firm's ocial networkencompass(es)firm's etofrelationships,oth orizontalndvertical, ithotherrganizations-behey uppliers,ustomers,ompeti-tors, r otherntities-includingelationshipscross ndus-tries nd countries"Gulati,Nohria, nd Zaheer2000,p.203). Gulati,Nohria, nd Zaheer 2000,p. 211) also pointout thatnetworks an be "decomposednto a variety fdyadic inks." hus, compound elationships one ink na firm's ocial network.onceptually,ompoundelation-shipsare the nstantiationf whatnetwork heoristsall"multiplexity"Burt 982), rthenumberfdifferentypesof connections etween wo nodes n a network-in urcase,firmsfor nexample fhowcompound elationshipsfitwithin social network odel, ee Figure ). Figurehighlightshemportancefmultiplexitynunderstandingrelationshipetweenwofirms. he inkbetween and Cin the social networkraphs bidirectional;heremaybe

    FIGURE 3Patterns ofCompound Relationships

    Two-RoleRelationships1.Customer-supplier2.Customer-competitor3.Customer-partner4. Supplier-competitor5. Supplier-partner6.Competitor-partner

    TheFirm 1.Customer-RoleThree Three2.Customer-supplier-partner3.Customer-competitor-partner4. Supplier-competitor-competitor

    Four-Role elationship1.Customer-supplier-competitor-partner

    Partner irm

    Compound elationshipsetween irms111

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    FIGURE 4Representingthe Relationship Between Social Networks nd Compound Relationships

    G B CA

    D

    C

    A

    E Feneric ocial Network

    CompoundRelationship

    Notes:ome ormf ompoundelationshipill old or ach f he onnectionsetweenwo odes. rrowizedenoteselationshiptrength.several easonsfor his.The twofirmsmight imply einfluencingach other n one simple elationshipe.g., apartnerelationshipnwhichnfluences bidirectional),rtheymighte influencingachothern twodifferentimplerelationships,n which nfluences unidirectionalut ppo-site i.e., feach s a customernd a seller o the ther).nFigure , thecompound elationshipetween and C isactually omposed f hreeinks: uyer-seller,eller-buyer,andpartner.onsider owdifferenthe ompoundelation-shipbetweenA and C would be if the three inkswerebuyer-seller,eller-buyer,ndcompetitors.he entire ela-tionship ouldhave a differentomplexionoit. n short,analyzinghe verallink etweenwofirmsna socialnet-workwithoutccountingor he various imple elation-ships hat efine he ink an be a form faggregationiasthat lides ndthusmisseshow ach ofthedifferentimplerelationshipsffectshe verall onnection.nour erms,ounderstandhe ntireompoundelationship,t s also nec-essary o understandhe imple elationshipshat onstitutelt. In addition,he oncept f a compoundelationshipsmore han implymultiplexity.ultiplexityends o be acountingepresentation;hats,eachtype frelationshipsoften,hough otalways, reated s simply connection.Conversely,hereas hecompound elationshiponstructaccounts or henumber fsimple elationshipshat on-nect he wofirms,t lso considersmore ullyhenature fthose imple elationshipsnd, s we discuss ubsequently,thenorms hat efine hese elationshipsnd,perhapsmoreimportant,henature f theoverall ompoundelationshipbetween he two firms.n Figure , countinghesimplerelationshipshat constitutehe compound elationshipbetween and C wouldmiss hedirectionalityf the im-ple relationshipsnd, hus, nynorms ssociatedwith achrelationship.Conceptual BasesNow thatwe haveexplained urdefinitionfcompoundrelationships,e turn o its theoreticaloundations.heconceptof compound elationshipsas been developedfromeveral heoreticalases.Exchange heoryasplayed

    a prominentole nresearchn nterorganizationalelation-ships ndhasunderpinnedtudies fbuyer-sellerelation-ships Dwyer, churr,nd Oh 1987)andstrategiclliances(Rindfleischnd Moorman 001). Similarly,heprincipleofexchange Bagozzi 1975)underlies ll therelationshipsthat onstitutehe ompound elationship.ur focus s onrelationalxchange Dwyer, churr,nd Oh 1987) ratherthan transactionalxchange.Followingthe terms hatGulati,Nohria,nd Zaheer 2000) use,we take relationalrather han an atomisticpproach,n thatwe view theexchangen the ompoundelationships being mbeddedin the externalnvironmentf thetwo firmsGrewal ndDharwadkar002). The compound elationshipomprisesall the imple elationshipsndtheirxchange omponents.Thus, t brings broader erspectiveo theconceptofexchangen that xchangen one simplerelationshipslikely o affectxchangen other imple elationships,swell as in the ompound elationship.Another f the foundationsor theconcept f com-poundrelationshipss the ncreasinglymportantdea ofcoopetitionGnyawali ndMadhavan 001; Lado, Boyd,andHanlon 997).Lado,Boyd, ndHanlon1997)proposethat ompetitionndcooperationrenotpolar ndsof onecontinuum;nstead,within ny relationship,ompetitionandcooperationretwo eparate ut nterrelatedspects fthat elationship.he implications thatwithinny givenrelationship,othcompetitionnd cooperationan, andoften o,coexist nd that he ombinationf the wo eadsto enhanced erformanceor hepartnerirmsGnyawaliand Madhavan 001).We use these deas inour examina-tion f norms or he imple elationshipshat recompo-nents f a compound elationship.n addition,he com-poundrelationship oncept exploresthese ideas on abroaderevel.Althoughhere re degrees f competitionandcooperationssociatedwith achsimple elationshipna compound elationship,he combinationf thesimplerelationships ay ndup resultingn a degree fcoopera-tion ndcompetitionhat ivergesromhat fanyoneofthe imple elationships,nd tmaynot venrepresenthesumof thedegrees fcooperationndcompetitionresentin the omponentimple elationships.

    1121JournalfMarketing,uly007

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    Recently, arketingcholars avebegun odevelop it-eraturenthe reaof nterfirmooperation.indfleischndMoorman2001)use socialnetworksheory, ith mphasison the trengthfties, o examinenewproductlliances.Sivadas ndDwyer2000)investigaterganizationalactorsthat ffect uccess in internal ersus lliance-based ewproduct entures.Wuyts,Dutta,and Stremersch2004)examinehow a firm'sportfoliof alliances affects hefirm's uccess in technologicallyntensivemarketplaces.Largely,hese rticles ocus n whatwe callpartnerships-thats,cooperativeimple elationships-andnhowtheyaffecthefirm'serformance.ubsequently,e discuss urpotentialontributionothis iterature,ut here s a basicdifference:hesearticles ocuson thevalueofthe firm'salliances o that irm, hereaswe focus nthenatureftheoverall elationshipetween wofirms. he unit fanalysisinthis iteratures differentromurs-namely, firm'setof cooperative r alliance-based elationshipsersusourfocus ntheoverall elationshipetweenwofirms, hichmight r might ot include ny component,ooperativesimple elationships.DominantRelationshipsAn issue to consider s which fthesimple elationshipsthat onstitutecompoundelationships likely obemoreimportanthan he thers.We abel this imple elationship"thedominantelationship."orexample,n the Lenovo-Dell relationship e described,t might easonably eexpectedhat hedominantimple elationshipetween hetwofirmss the ompetitor-competitorelationshipndthatthe upplier-customerelationships less mportant,houghthismay changewith ime ndchangingmarketircum-stances. lthought s not mpossiblehat herewillbe twoor more qually mportantimple elationships,e do notexpect his o be the ase. We anticipatehat hedominantrelationship illhavegreaterffectsn thenature f thecompoundelationship.

    P2: nmost ompoundelationships,ne of the impleela-tionshipss thedominantelationship-thats,the ela-tionshiphatnfluenceshenaturef he ompoundela-tionshiporehanny therimpleelationship.However,not all dominant elationshipsre equallydominant.f thedominantelationships extremelyomi-nant,wemay xpectttodefine he elationship.orexam-ple,at eastuntil ecently,ord oldsomeparts ndequip-ment to General Motors. Nevertheless, he dominantrelationshipetween ord nd GeneralMotors s competi-

    tor ocompetitor,ndanyother elationships likely obearm's length nd relatively oncooperative.onversely,somedominantelationshipsre essdominanthan thers.In the hemicalsndustry,or xample, omeofthedomi-nantrelationshipsre competitoro competitor,etthesamefirmsreable to workwelltogethernmore oopera-tive elationships.We proposethat here re at least three actors hatmight eterminehich fthe imple elationshipss domi-nant. he first fthese, ndwe speculate he trongest,spathdependenceArthur 989),expressedn this ase intheprimacy f theoriginal elationship.wo firms hat

    beganwith certainelationshipe.g., upplierocustomerorcompetitoro competitor) ayfindtdifficulto intro-duce norms hat re appropriateo other implerelation-ships nto he ompoundelationship.he other wofactorsareperhapsmore ational;hey onsider he conomic ndstrategicealitiesfthevarious imple elationships.n thesameway hat irmsngagedncustomerelationshipan-agementhould ocus ncustomers ho remostmportantto the firm rom n economicor strategic erspective(Winer 001),firms an be expected ofocusonrelation-ships hat remore conomicallyrstrategicallymportant.Wedistinguishetween conomic ndstrategicmportancetorecognizehat particularelationship ayormaynotbe profitableurrentlyutmaystillbe importanto thelong-termealth ndwell-beingf thefirm.f one simplerelationships more conomicallymportantoone orbothofthe two firms han he other implerelationships,hatrelationshipas an increasedikelihood fbeing hedomi-nant elationship.imilarly,fanyone simple elationshipis ofparticulartrategicmportanceo the firm omparedwith he therimple elationships,thasan ncreasedike-lihood ofbeingthe dominantelationship.heremaybeother actorshatnfluence hich imple elationships thedominantelationship,utwe believe hat hese hree reespeciallymportantnes.P3:Whichimpleelationshipsthe ominantelationships afunctionf three actors:istory,conomicmportance,and trategicalue.

    ThePolitical conomy rameworkandCompoundRelationshipsIn definingompound elationshipsndtheir omponents,we haveraised ssuesrelatedohow the elationshiporksboth ocially ndeconomically. e now urn o the oliticaleconomy rameworkBenson1975;Stern nd Reve1980;WamsleyndZald 1973)because tenablesus tostructureour examinationf these ssuesbothsystematicallyndcomprehensively.he political conomyframeworkasbeen used extensivelyn the marketing omain (e.g.,Achrol, eve, nd Stern 983;Frazier 999;Gassenheimer,Houston, nd Davis 1998;Grewal ndDharwadkar002;Hutt,Mokwa, ndShapiro1986) andexplicitlyelineatesthe nternalociopoliticalnd economic tructuresndpro-cesses of an institutionnd theexternalnvironmenthatinfluenceshem.Conceptually,olitical conomiesSternandReve 1980) include n internalolitical conomyhatexistswithinnexternalnvironment.he nternaloliticaleconomy as twocomponents,ninternalconomy, hichincludes conomic tructuresndprocesses,ndaninternalpolity,which ncludes ociopolitical tructuresnd pro-cesses.Accordingo Stern ndReve (1980), theenviron-ment tself ompriseswoparts,he xternalconomyndexternalolity.WeadoptAchrol, eve, ndStern's1983)representationfthepolitical conomy rameworkor heremainderfourdiscussionsee Figure ).Eachsimple yadic elationshiphatwe havediscussedcan be envisioned s containing political conomy ndexisting ithinn environmentnwhich ach of theother

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    ownpolitical conomyhat s surroundedy tsownexter-nalenvironment,ithin hich achof the imple elation-shipsexists s a part f itspolitical conomy.Moreover,eachsimple elationshipn the ompound elationships animportantart f the external nvironmentf each of theother omponentimple elationshipsnd thusmay nflu-ence the therimple elationshipsnd the ompoundela-tionshiphey onstitute. erecognizehat his omplicatesthepicturewithin hecompound elationship's oliticaleconomy,ut urbasicassumptions that hewhole f thecompoundelationships greaternd more mportanthanthe umof tsconstituentartsi.e., tssimple yadic ela-tionships).he viewthat igure , PanelB, presentsetterreflectshis ssumption.Figure ,PanelB, has an additionalmplicationor hesimple elationshipshat recomponentsf a given om-pound elationship.hat s, all the imple elationshipsrepartof each other's xternalnvironment,s is the com-pound elationshiptself. his means hat ach of the om-ponent imple elationshipsffects he other implerela-tionships nd that all relationshipsre affected y thecompound elationship.or example, f threefirms recompetitors,uch s GeneralMotors, enault,ndNissan,and theymove into a cooperativerelationship,heircompetitiveelationship illbe affectedecausethey realso cooperating ith ne another.hey reunlikelyobeas fiercelyompetitives theymayhavebeenpreviously.

    P4:Each omponentimpleelationshipn a givenompoundrelationshipnd he ompoundelationshiptselfrepartof he oliticalconomyf nd hereforenfluenceach fthe omponentimpleelationships.A disadvantagefdefininghecompound elationshipin terms f tspolitical conomys that tcomplicatesheunderstandingf the internal conomy nd the internalpolity.Wecan nolonger escribe ither fthese onstructswith simplistic epresentationhatrefers o thewholepoliticaleconomy. nstead,by introducinghepoliticaleconomyof the compoundrelationship, e create theequivalentf a two-level olitical conomy. t thehigherlevel s the oliticalconomyf he ompoundelationship,and at the owerevel rethepolitical conomiesssociatedwith ach of the variousdyadic implerelationshipshatconstitutehecompound elationship.his s both prob-lem and an opportunity.n theproblematicide,we losesimplicityndelegance.On the pportunityide,wegaincloserreflection f reality nd an understandingf theimportancefmanaginghese imple elationshipss bothseparatend nterdependent.e viewthis omplicationsitself aving hepotential or n importantonceptualiza-tion, ut his s beyond he copeof this rticle.In thefollowingubsections, e examine he nternalpolitical conomyf the ompoundelationship. e exam-inethe ociopoliticalrocesses s being epresentedytherelationshiporms,he ociopoliticaltructures being ep-resentedythepowerbalancebetween hetwofirms,heeconomic rocesses s being epresentedythepropensityfor pportunism,ndthe conomic tructures being epre-sented ythenature f the xchange elationship. erec-ognize hat hese renottheonly xamples ftheirypes;however, econtend hat or he urposes f tudyingom-

    pound elationships,hey reparticularlyalientStern ndReve 1980). Indeed,several of these have received hebenefitf heir wn iterature-forxample, ole heoryndnormsGoffman 959),powerStern ndEl-Ansary977),andopportunismWilliamson975,1981).Sociopolitical Processes: Relationship NormsAs part f the eparate nd distinct ature f simple ela-tionships, e suggest hat achtype fsimple elationshiphas whatwemighterm generic orm fbehavior ssoci-atedwitht BrandenbergerndNalebuff996;Heide andJohn1992). This is not to say that here re no mixedmotivesGulati,Nohria,nd Zaheer 000).However,om-petitors ompete; heymayormaynotcooperate s well(Lado,Boyd, nd Hanlon1997).Similarly,ustomersuy,and sellers ell; theymayalso competeLado,Boyd,andHanlon1997).It maybe habitual or ny representativef thefirmwho s involvedn a simple elationshiphat s competitivetoconceptualizehe elationshiptrictlyn terms fthe wofirmsompeting ith achother. onversely,uppliersup-plyand service heir ustomersn return or ales. Theymaybe engaged n singletransactionsr in long-term,relationship-basedransactions,ut hemain urpose f therelationships to sellproductsnd/orervices hat he us-tomer alues ufficientlyo continueobuy t anacceptablepriceto thesupplier irm. imilarly,ustomersuy; theymayrecommend ewproductsVonHippel1982) for hesupplieropurchase,ut hemainpurpose ftherelation-ship s toobtain oodsorservices hat hey eed orwant,either oproduceheir wnproductrtosupportheir usi-ness activities n someway. Finally, artners ooperate.They maycreatenewproducts,heymay opennew mar-kets, rtheymay stablishointventures,ut hey ooper-ate, lbeitnonedegree ranotherfclosenessnthe oop-eration.hesegeneric ormsctto nfluencehenormshatdefine specific implerelationshipnd thecompoundrelationship.There s an additional ssumptionboutnorms hatunderlies hestatementhatgenericnorms nfluencehenormshat efinehe ompoundelationship.hisassump-tions thathe ompoundelationshipasnorms f tsown,normshat re eparate romut nfluencedythenorms fthesimple elationships. e cannot rove hat his s thecase,butwe cannote xamples hat uggest hat t s. Forexample, ompare hechemicals ndustrynd theairlineindustry.n general, egardlessfthenature fthe impleroles, upplierobuyer rcompetitors,hemical irms endto interactn a relativelyollegialmanner. onversely,nthe irlinendustry,espite heprevalencefcode sharing,playersnthe ndustryend oact ndependentlyt the eastandmore ften n a cutthroatay, erhaps ecause of theregular inancialistresshat ermeateshatndustry.However, efurtheruggesthat elyingolely nthesegeneric ormss toosimplistic.s wenoted reviously,heliteratureas shown hat n mostfirm-firmelationships,thefirmsnquestion avemixedmotivesGulati,Nohria,andZaheer2000) andmixedbehaviorsLado, Boyd, ndHanlon1997).Thus,based onseveral actors,ncludingutnot imited o firm istory,elationshipistory,nd ndustry

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    conditions,he egree o which hese eneric orms recar-ried out-that s, theactualbehaviors f the two firms-willvary.Integratedocial contractsheoryDonaldson ndDun-fee 1994,1995;Dunfee, mith, nd Ross 1999)proposesthat elf-definedommunitiesevelop heir wn authenticnormshat re egitimatenless hey iolate ypernorms,thin etof overarchingorms o which lmost ll actorswould gree. uildingn this onceptualization,esuggestthat irmsrecommunities,ndustriesrecommunities,nddyadic relationshipsre communitiesnd thereforerelikelyohave heir wn diosyncraticorms hat ivergeit-tle or muchfrom hegeneric orms. orexample, s wenoted reviously,ompetitionn both he utomobilendus-try ndthe irlinendustrys fierce ndoften ricebased,whereas ompetitionn the hemicalndustrys much en-tler nd often ttributer servicebased.Thus,there rebasicrelationshiporms hat ct neachtype f imple ela-tionship,ut hesenorms re often pecifiedather iffer-ently. or example, onsider gain the differencen thenaturefcompetitionetween hemical ompaniesndair-lines.Bothcompete,hegeneric orm, ut hemical om-panieshave ther, ore ooperativeelationships,hich ctas environmentalnfluencesnthe ompetitiveelationshipand thusmitigateheferocityf theirompetition;irlines'other elationshipso notmitigateheir ehavior s much,and thus hey ompetemore iercely.

    P5:Therelationshiporms or nyrelationship,imple rcompound,etweenwo firmsre derived rom wosources:a) the asicnaturefthat elationshipnd hegenericormsssociated itht and b) the xternalndinternal nvironmentsn which hatrelationshipssituated.A finalssue that asanimportantffect n thesenormconflictss that hefirm nd tspartner ust onsider hefuture.s Kanter1994) indicates,elationshipsf alltypesaredynamicndreciprocal. s such, hey hange. n the1980s, BM andApplecompetedodefine hevery atureof thepersonal omputer arket,ut nthe1990sandthe2000s, BM andApplecooperatedn severalointventuresand tandards-settingfforts.he firmimplyannotffordto assume hat ll will be preciselys it s now.As Heideand Miner1992) indicate,the hadow f the uture" ustinfluencehedecisions nd behaviorsftodaynanyrela-tionship. ver ime, ompoundelationshipshange rasti-cally. he closepartner aydevelopnto vicious ompeti-tor, s may hevalued upplier. owever,hehandoftimecutsbothways;the erious ompetitor ay lso becomevaluedpartnerr supplier.n partnership,hefirmannotaffordo be too collaborativer cooperative;n competi-tion, hefirmmaynotwish o be toocompetitive.hishasimplicationsor oth he imple elationshipsnd the om-pound elationshiphey onstitute.However,hisnecessityo consider he futures eventrueror ompoundelationshipsfonly ecause heirhapeis affectedy changenany f the imple elationshipshatconstitutehem. hanges nrelationshipsremore biqui-tous n today's urbulentusiness nvironment.ncreasedglobalizationnd theprevalence fmergersnd acquisi-tionsmean hat firm'sompetitoret s subject o constant

    change.Bothbuyersndsellers re morewilling o "fire"sellers ndbuyers, espectively,hat renotmeetingheirneeds,whichmay change henature fthese imple ela-tionships. imilarly,artnershipsreoften ime imited ycontractrcircumstance,eading oregularhangesnthisdomain s well.Thus, hat here s change ssociatedwitheach of thecomponentimple relationshipsAnderson,Hakansson, nd Johanson 994) thatmakeup the com-pound elationshipnsures hat hecompound elationshipis subject o greater hangethan nyone of thesimplerelationships.Anotheractorhat ncreases he ikelihood fchangena compound elationshipompared ith ts omponentim-plerelationshipss the nvironmentnwhich hange othecompoundelationshipccurs.Consider relativelyimpleexample f supplierhat s asked o become partner itha customern a new venture.fthe wofirms re active ntheUnited tates, henewrelationship aystir ntitrustissues,which n turnmay tir hangesn norms n both henew and the old relationships.onversely,fone firm sEnglish nd he thersJapanese,ot nly s therehe ddi-tion fpartnershiporms obuyer-sellerorms, ut herearealso cross-culturalifferencesnpartnershipormsnd,perhaps,ngroup uyer-sellerorms. nyet notherote,the wofirms ill face echnologicalssues ssociatedwithsystemsntegration,alessecurity,nd nformationharing.For example, haringales datamaybe beneficial o thepartnershiputdetrimentalothebuyer-sellerelationship.Theseareexamples fhowdifferentspects f the xternalenvironmentight ffect he same structuralhange n acompound elationship.t is importanto recognize hatsimilarssues anandwilloccur or ny therhangenthecompositionf a given ompound elationship.This discussion as obvious mplicationsormanagersattemptingomanage ompound elationships,ut t alsohas implicationsorresearcherstudyingompound ela-tionshipsn thecontextfpolitical conomies. nystaticanalysiss usta snapshotnd s subject ochange, ut hisis particularlyrue or compound elationshipomparedwithts omponentimple elationships.

    P6:Compoundelationshipshangemore ver ime han otheiromponentimple elationshipsnd, n so doing,affecthe indsfnormshatre ppropriateor hem.Thisdiscussioneadsto some mportantuestions.Whydo these imple elationshipsavethepotentialoconflictwith ach other?Whydo they ring roblemsothe om-pound elationship?e suggest hat hereasons re duetoconflictsn sociopoliticalrocesses r polities crosstherelationships.Consider he kindsof simplerelationships e havedefined: ompetitors,uppliers,ustomers,nd partners.Eachof these elationshipsas certainehaviors ndnormsassociatedwith t thatwe label"generic." ecallthat hesegeneric orms rethat ompetitorsompete, uppliersup-plyandservice,ustomersuy nduse,andpartners orktogethero achieve omegoal.Whatdoes the xistencefthesegeneric ormsmeanfor hecompound elationship?In a particularompound elationship,nyor all of thesesimple elationshipsay xist. et here re ignificanton-flictsmong henorms or hese elationships.heobvious

    116 JournalfMarketing,uly007

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    conflicts betweenompetitionndthe ther hreeelation-ships.t s as if hereretwogeneric ypes f imple yadicrelationships: orecompetitivend morecooperative.ngeneral, ompetitorsompete,whereas artners,uppliers,and customersto a considerableegree) ooperate. hus,whenever competitiveelationships one of thesimplerelationshipshat onstitutecompound elationship,heremust e conflictmong hevarious xpectationshat xistinthe imple elationshipshatmake ptheparticularom-pound elationship.However,here s another orm fconflicthat houldbe acknowledged.ven incooperativeelationships,hereis conflictLado, Boyd,and Hanlon 1997). Cooperativerelationships,hether uyer-sellerelationshipsr someform f an actualpartnership,xist ocreate alue for hetwopartners,alue that he twopartners ouldnotgetwithoutherelationship.therwise,herewould be littlepointto therelationshipsee, e.g., Johnson nd Seines2004).However,he reation fvaluemust ecessarilyaisethe ssueof how todivide hat aluebetween he wopart-ners.All else being equal, the supplierwouldpreferhigher rice, nd the ustomer ouldprefer lowerprice.In addition,ll elsebeing qual, ach of the wopartnersna simplerelationship ouldprefero getmorefrom herelationshipatherhaness.Thus, heres thepotentialorconflict n cooperative implerelationships,onflicthatcanspillover nto he therimple elationshipshat efinethe ompoundelationship.

    P7:Conflictmonghe ormsf he impleelationshipshatconstitutecompoundelationshipa) isgreaterhenneof he impleelationshipsscompetitoro ompetitorut(b)willmost ftenxistmonghe ormsf hoseompo-nentimpleelationshipsimplyecause he impleela-tionships'ormsre lmostnvariablyn certainmountof onflictith ne nother.Sociopoiitical Structure: Power DifferencesAllrelationshipsavepowerevels; hats,the wofirmsntherelationshipach have somepower.The relationshipwouldnothaveformedftherewas notvalue n t for achof the wofirms,nd thevaluethat achpartneras for heother efinestspowern the elationship.s Ross,Ander-son, ndWeitz1997)find,he wofirms'erceptionsf herelationshipnd their utcomes romherelationshiparydramaticallyith hefirms'elative ower. imply ut, heweaker irmelieves hattgains ess fromhe elationship,even houghtprobably eeds he elationshipore.The politicaleconomyor powerrelations iterature(Stern ndReve 1980)suggestshat owernonerelation-ship s a function f importancen another elationshipbetweenhe wofirms.onceptually,e suggesthathis sanother esult f both hecomponentimple elationshipsand the ompoundelationshiphey onstituteeing art fthepolitical conomy ftheother omponentimple ela-tionships.hus,being n mportantustomerrsupplierfa partnerirm fteneads to a powerfulositionn othercomponentimple elationshipsith hat artnerirm.heimplications thatn compound elationships,ower ela-tionshipsnall the imple elationshipsffect ne another,whereas n simple elationshipshat renotpart f a com-

    poundrelationship,heonly power evels thatmatter rethose fthe wofirmsn the imple elationship.P8:Power elationsn he imple elationshipshatonstitutecompoundelationshipre ffectedy he owerelationsin the other imple elationshipsn that ompoundrelationship.

    In thenext ection, e examine n areaofpossible dvan-tage hat ompoundelationshipsanprovideo a firm,hatofpreemptingpportunisticehaviornrelationships.Economic rocesses:OpportunismAnexample f aneconomic rocesss opportunism,hichis typicallyefined s self-seekingith uileand s foundinrelationshipstboth he rganizationalnd he ndividuallevel. Williamson1985,p. 47) describes uileas "lying,stealing,heating,ndcalculatedffortsomislead, istort,disguise, bfuscate,rotherwiseonfuse." pportunismnrelationships,articularlyhemanagementfopportunism,hasreceived great ealof ttentionnthemarketingitera-tureRindfleischndHeide 1997). In an era ofcorporatescandals, irmsre ncreasinglynterestednpreventingndmanaging pportunism.owever,espite oth esearch ndcorporatenterests,heres limitednderstandingf howtomanage pportunisticehaviornrelationshipsWathnendHeide2000).Safeguardsrethoughtomitigatepportunismycre-ating ncentives or hepartiesn a relationshipo act insuch a wayas to supporthe xchange Jap ndAnderson2003)-to preventthe premature ermination f theexchange nd to aligntheself-interestedotives f eachpartyn a waythat an bring boutmutual enefit. om-poundrelationshipsan act as a safeguardgainst ppor-tunismn at leasttwoways: 1) throughhe mpositionrthreatfsanctions romnecomponentimple elationshiptoanothernd 2) byreliance ntrust ndreputationuiltinoneor more fthe omponentimple elationships.In a long-termelationship,heopportunityo imposesocial sanctionse.g.,notreciprocatingocial invitations),which s availablebecause of considerable rior nvest-mentsn therelationship,an act as a safeguardgainstopportunismDyer 1997). In a business elationship,otonly an socialsanctions e imposed, ut o cansanctionsthatnvolve he ossofrepeat ndpotentialusiness. foneparty ithdrawsromhe elationship,his an have onsid-erable usiness epercussions.heexpectations thatfonepartyngagesnopportunisticehavior,he ther arty astheopportunityoretaliate nd do the ame. Evena com-pound elationshipfa relativelyhort urationncurs hepossibilityhatopportunisticehavior n one componentsimple elationshipill ncur etributionnanotherimplerelationship.heassumptions that artieso a relationshipwouldnotwant otake hat isk nd huswould ehave on-servativelyi.e.,nonopportunistically).ohn1984) arguesthat pportunisms notcharacteristicfhuman ehavior,particularlyn ong-termelationships.hissuggestshat fany nesimple elationships shorterm ut he ther im-plerelationshipsndthe ompoundelationshipre ongerterm,nthe nterestsfpreservinghe onger-termelation-ship, artiesnvolvednthe horter-termelationships ayact less opportunistically.e expect hat he onger-term

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    perspective ill holdsway.Furthermore,fthe dominantrelationships dominant ecause tgenerateshegreatestfinancialeturn,artiesn otheromponentimple elation-ships will be careful not to endangerthe dominantrelationship.Interpersonalrusts one of themost revalentorms fgoverningelationshipsSmith, arroll,ndAshford995).Repeated iesbetween irms vertimebuildcommitment(Gundlach, avi, ndMentzer 995)andtrustLewicki ndBunker 996),which lso canserve s a safeguardgainstopportunismGulati1995;JapandAnderson 003). In acompound elationship,hebuildingftrustased onexpe-riencesworkingwithone component implerelationshipandhaving xpectations et n a predictable aymaybeexpectedo extend o otheromponentimple elationships.Similarly,vertime,parties o therelationshipegintovalue he elationshipndwill notbehave pportunisticallybecausetheydo notwant o eopardize hat elationship;"relational xchange" s believed to limitopportunismthroughharedvalues and norms Brown,Dev, and Lee2000). Closelyrelated o the formationf trust nd theeffects f relationalxchange s that irms re also con-cernedwith possible pilloverfreputation-relatedffectsfrom nesimple elationshipoanotherBrass,Butterfield,andSkaggs1998).For xample,fLenovo reats ell badlybecauseDell is a competitorut henwants o sellcomputercomponentsoDell, Dell maybecomewary boutbuyingfrom enovo.Reputations critical o a firm's bility oenter ntorelationships ithanother irmStuart1998).Thisprovidesupportor he dea that ow firmerformsin its simplerelationshipsith firm,n a broadsense,defines hetherhe ompoundelationship,hichncludesthesesimplerelationships, ill growor shrink.t alsoimplies hatfirmswill notdevelopsuccessful ompoundrelationshipsfthey avea poorreputations a relationalpartnerndmaybe forcedo focus n ndividual-levelela-tionships.We suspect hat ucha reputation ay ead tosuch firm aving norganizationalife hat,nHobbes's([1651]1968)terms,snasty, oor, rutish,nd hort. hus,for hecooperativespects fa compound elationshiposucceed, heres a greatereed oalign ehavior nd xpec-tationsn ts omponentimple elationshipshan heres ina single, imple,wo-partyelationship.ratherathologi-cal possibilitys that hepartieswouldcoordinateheirbehavioryacting pportunisticallyn all theirimple ela-tionships. owever,he otentialor estroyinghevalueofthe other implerelationshipss too great; nstead,weexpect hat hepartieswillaligntheir ehavioro thatnoonebehaves pportunistically.P9:Compoundelationshipsan actas safeguardsgainstopportunismn he artf llpartiesnvolved.

    Furthermore,e speculate hat henature f thedomi-nant elationship illhave a decided mpact n thecom-poundrelationships a safeguardgainst pportunism.fthedominantelationships that fcompetitor,e expectgreaterpportunismhanf hedominantelationships thatofcustomer.hismaybe thecase becauseof the ackofgoalcongruencendpotentialonflictf nterest.ossandRobertson2000) demonstratehatsalespeopleare less

    likely o ie to a customerhan o a competitor,uggestingthat here s less opportunisticehaviorn the customerrelationshiphannthe ompetitorelationship.t sreason-abletoposit hatwhen hedominantimple elationshipna compound elationships competitive,hepartnerirmsmight e reluctantomake diosyncraticnvestmentsn thelarger elationship,nd thus hepartnerirm ill be at essriskof opportunism.owever,we contend hat, ll elsebeing equal,for nygiven evelof investment,henthedominantimple elationships competitiven nature,herisk fopportunismillbehigher.Economic tructures:heStructurefExchangeAll business elationshipsanbeconceptualizedshavingstructurehat efines hem. onsider hegeneric elation-shipswe have examined husfar. n competitiveelation-ships, ompetitionends obeprice rnonpriceriented.npartnerelationships,herelationshipends o be definedeitherycontractrbyagreement.nbuyer-sellerelation-ships, he elationshipends o be market asedor relation-shipbased.Moreover,most ypes fgeneric elationshipshave omekind fexchangessociatedwith hem. artner-ship relationshipsmayexchange xperience or marketshare rowth.uyersnd ellers xchangemoney or oodsor services.We usethe oncept fexchangeBagozzi 1975)and tsdevelopmentn terms f transactional ersusrelationalexchangee.g.,Dwyer, churr,ndOh 1987)as a metaphorto reflecthese deas. Transactionalxchange s the deathat n exchange ransactions a one-timevent uchthatthe wo transactorsillnever ransactgainor, fthey o,will notrecognize ach other.Under suchan exchange,transactorseednever oconsidereputationalffects. on-versely,elationalxchange ssumes hat hepartieswillencounterachothergain, ven othepoint fcarryingna longer-termransactionelationship.he idea appliesnicelyto compound elationships. y theirverynature,compound elationshipsarrywith hem heneed toviewtheir omponentimplerelationshipss more relationalratherhan ransactionalriented.hus:

    P10:ngeneral,omparedithndependentimpleelation-ships, impleelationshipshat re part fcompoundrelationshipsre more elationalhan ransactionalnnature.However,here s an exceptiono this ase whenthedominantelationships competitoro competitor.ecallthatby definition,he dominantelationships themostimportantmong he imple elationshipshat onstitutehecompoundelationship.f the ominantelationshipscom-petitorocompetitor,e propose hat his elationshipillresultna compound elationshiphats more ompetitiveand less cooperativehanother ompound elationships.However,heres an additionalesult.f thedominantela-tionships competitoro competitor,hecompound ela-tionshipwill be less oriented oward he ong-term ell-being fthe wofirmsndmore rientedowardhe uccessofone ofthe wofirms.hismeans hathe ompoundela-tionship illbemore ransactionaln naturehan elational.Thus:

    1181JournalfMarketing,uly007

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    p1 :Compared ith ompoundelationshipsnwhich hedominantelationships moreooperativennature,om-poundelationshipsnwhichhe ominantelationshipscompetitiveremore ransactionalhan elationalnnature.Interactionsand Basic PremisesInP11,wespecificallyuggest moderatingelationshipora main-effectropositionP10). n P10,we propose hat,ngeneral, ompound elationshipsead to more relationaltransactions;owever,n P11,we propose hat hiseffectdecreaseswhen hedominantimple elationshipna par-ticular ompound elationships competitive.n a moregeneral ense,however,mostof ourpropositionsre theresult f theapplication f one or moreof a few basicpremiseso an ssueof nterestnrelationships.hesebasicpremisesre that1) compoundelationshipsomposed fmore han nesimple elationshipan exist nd matterP1),(2) relationshiporms xist or nd aredifferentcross hevarious omponentimple elationshipsPS), 3) thecom-ponent simple relationships re part of the politicaleconomies or nd thus re nfluencesn eachof the thercomponentimple elationshipsP4), nd 4) theres oftendominantimple elationshiphat nfluencesrdefineshenature f the ompoundelationshipP2).Thus,Pll has tsbasis in all four f thebasicpremisesPi, P5,P4,andP2)and their pplication o exchange heory. imilarly, 7,which ddresses he effects fcompound elationshipsnpower elationshipithin hedyad,has its basis nP1, P5,andP4 and their pplicationopower nrelationships. especulate hat heremayalso be a moderatingroposition(17a)such hat ower elationsre nfluencedythenatureof thedominantimple elationship,napplicationfP2toP7.For reasons fspaceandclarity, e cannot iscuss llthese ubordinateropositions,ut hisdoes notmean hatthey renot mplicitlyresentnd mportant.

    DiscussionTo summarize,we suggestthat firms re increasinglycaught p in complex,multiroleelationshipsith artnerfirms hat equire hem o consider ll their elationshipswith given artnerirms one.We define his s the om-pound elationship.urexplicationf thecompound ela-tionshiponstruct akes he mportantoint hat he om-pound relationship nd the simple relationships hatconstitutet are nextricablyound ogethernd nfluenceone another.n theprevious ections,we listed he basicpremisesn which he ompound elationshipsbased.Webelieve that hesepremiseshave notable nd significantimplications ortheory. or example, cholars tudyingsimple dyadic relationshipsnd social network heoristscreating etworksomposed f simpledyadscan benefitfromecognizinghe mportantnfluencesfthe ompoundrelationshipnd tscomponentimple elationshipsn thesimple yadrelationship.onversely,cademics nd man-agers annotttendolely othe ompoundelationshipndignore tscomponent imple elationships.nstead, ocialnetworkcholars tudying eneral inks-whatwe wouldcallcompound elationships-canenefit romonsidering

    more eeply henaturef the imple elationshipshat on-stitutehose inks.A basicpremisehatwe have returnedorepeatedlysthepotentialmportancef thedominantelationshipP2).A second s thebasic assumptionhat ccording o ourunderstandingfcompound elationships,achcomponentsimple elationshipnd he ompoundelationshiptconsti-tutes re importantxternal nvironmentalactors ortheother imple elationshipsP4).As we suggested rieflynourdiscussion fP11,wespeculatehat heformeri.e.,thedominantelationship)ctsas a moderatorormany f theeffects eexpect rom he ompoundelationship,uch hatitwillstrengthenrweakenmany f these ffects.he at-ter lreadynfluenceseveral f ourpropositions,ut wespeculate hat tmaybe used toexamine ther onstructswehavenot onsiderede.g.,relationshipatisfaction).Another otable spect fcompound elationshipss theproposed igher ate fchange ncompound elationshipsthan n thesimple elationshipshat onstitutehemP6).Organizational volution heoristsAmburgeynd Rao1996;Dickson2003; Dickson,Farris, nd Verbeke 001)explicitlyconsider change and the rate of change.AmburgeyndRao (1996)point o the mportancef "vitalrates"-therates t which irms nter nddepartn indus-try-andto ntraorganizationalnfluencesn the urvivalffirms. o thedegree hat ompound elationshipsmprovefirm erformance,hey hould nfluence italrates, itherbymakingteasier or irms o enter nindustryrby pro-tecting he firm gainstprematureeparture. imilarly,thereeems o be anopportunityo consider he nfluencesofcompound elationshipsn ntraorganizationalvolution-aryprocesses nd their ssociated ffectsn thenature fthefirm;managinghe firm's elationships ith xternalstakeholderss compound elationshipshould esultndif-ferent ntraorganizationalrocesses and evolutionarypatterns.We imited ur onceptualizationocompoundelation-ships etweenwofirmsn a dyad.However,n the ncreas-ingly omplicatedusiness nvironmentf the wenty-firstcentury,t is not uncommon o find elationshipsmongthree irms; or xample, onsider hework fWuyts ndcolleagues 2004), whostudy alue chainsfrom triadicperspective.o the extent hat ach of the three irms sengaged n dyadic relationships ith each of the otherfirms,heremightlso be a compound elationshipmongthe hree irms.We suspect hat urconceptualizationillgeneralizeo this verall elationship,t east nspirit. hatis, we expect hat ur basic propositionsthat ompoundrelationshipsxist ndmatter,hat elationshiporms xistfor hevarious imple elationships,hat omponentimplerelationshipsre partof thepolitical conomiesof oneanother,nd that here s often dominantimple elation-ship)will hold and thusbe useful n understandingndmanaginghe arger elationship.tthe ametime,we sus-pectthat heanalysiswill be considerably orecompli-cated.As more artiesre addedtothe ompoundelation-ship,conceptually,t seems that hey nter he realmofsocial networksatherhan ompoundelationships.A final onceptual oint s associatedwith he notionthat t east omeof the ompoundelationshipsnwhich

    Compound elationshipsetween irms119

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    agency elationships a potentiallyich area of studynwhich the idea of compoundrelationshipsmay proveuseful.There re also opportunitiesor mpirical esearch oexamine ome fourpropositions.or xample,t simpor-tantto understand hether nd under what conditionsexplicitonsiderationfcompound elationshipsids firmperformance.imilarly,nother ruitfulrea forresearchwouldbe to examine mpiricallyhevalidityf,andper-hapstheboundaryonditionsssociatedwith, urproposi-tions.Anotherotentialesearchpportunityouldbe anexplicitxaminationftheroles and behaviors ssociatedwith hevarious implerelationshipsnd thedegreetowhich ommunityactors-firm,ndustry,nddyad-influ-ence these oles nd behaviors.inally,tmight e fruitfulto examine owsimple elationshipsnd their onflictingnorms nd behaviors ffecteoplewho act as firm epre-sentativesn these elationships.ManagingheCompound elationshipIn several onversationse had withmanagers uringhecourse fdevelopingur deas, hemanagers' eneral eac-tions uggestedhat heywere ntriguedythe deas andthat he ssueofcompoundelationshipsas an importantarea forresearcherso explore nddevelop.As we sug-gestednour theoreticaliscussion, irmmanagersannotaffordo focus nonly nekind fsimple elationship-ingeneral,he one inwhich hey re n charge.We contendthatt s importantor hefirm omanage ntentionallyhecompoundelationshipndthe imple elationshipsccord-ing o the one he irm ants osetfor he ompoundela-tionship. or example,we might ecommend greaterdegreeof distance n a customer-supplierr partnershipsimplerelationshipf thefirms concerned bout futurecompetitionith he ther irmr f he irm ants o main-tain strongompetitiveelationshipith he ther irmnothermarkets.Withrespect o theprocessof managing ompoundrelationships,e suggest hat he firsttep s theexplicitdesignationf a relationship anager or ach importantcompoundrelationship. he role of the relationshipmanagerwould be to oversee nd be responsibleor heentireelationship.e suspect hat his hould e a formalratherhan n nformalole ndthat epresentativesf eachof the imple elationshipshould eporto the elationshipmanager,t east nmatrix orm. he second tep s a defin-itionalprocess.The relationship anager nd thesimplerelationshipepresentativeshoulddentifyll simple ela-tionships,dentifyominantnd other elationships,eter-mine n organizationaltructureor ach simple elation-

    ship,and determine nd communicateppropriateolenorms or achsimple elationship.heserolenorms ouldbe based on both henature f the imple elationshipndtheplanned ature fthe ompound elationship.he rela-tionshipmanager nd thesimplerelationshipepresenta-tives hould hen orecast s much s possible he futuredirection f the compoundrelationshipnd begin theprocess fdevelopingherelationshipnowledgease forongoingmanagementf thecompound elationship.hen,the elationship anagerhould egin o workwith he ep-resentativesf the imple elationshipso ensure hat eci-sions ndbehaviorsnthe imple elationshipsre ppropri-ate to theneeds f the ompound elationship.Anotherssue is thequestion f how to structurenysimple elationshipshat re nconflict ith hedominantsimplerelationshipe.g., a jointventure etween eriouscompetitors).he structure ill ie along continuumhatvaries nterms fformalityrom nly nformaleparationwith nformalirewalls etweenhe woorganizationso aformal,ontractualrganizationr ointventure ith or-malcontractualirewalls.nbetweenmightie a hybridrcompromise,uch s a separate unctionalnitwith ormalpolicy-based irewalls etween he simple relationships.Which structures appropriate ill differ epending nseveral actors. he argerhe ize and/ormportanceftheother elationshipnrelation o the dominantelationship,themoremportantormaleparation illbe.Similarly,hegreaterhe conflict etween he nature nd needs of theother elationshipnd thedominantelationship,hemoreimportantormaleparation illbe.Finally,hegreaterhedegree owhich hedominantelationship ight tultifyheother elationship,he more mportantormal eparationwillbe.

    ConclusionIn this rticle, e developed he dea that ompound ela-tionships etween irms xist and thatmanaginghem simportanto thehealth f thefirm.We argued hat ehav-iors n thesimple elationships ayaffect hecompoundrelationshipor oth oodand ll,dependingnthe onflictbetween hebehavioral ormsntheparticularimple ela-tionshipnd those n the therimple elationshipsnd thecompound elationshiphey onstitute.urthermore,edeveloped frameworkordescribingompound elation-ships nd uggestedhat t s importantor hefirm o man-age compound elationshipsxplicitly.We end with hebeginningsf a research gendaforstudying ompoundrelationshipsndsome uggestionsormanaginghem.

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    The Olin School of Business is seeking faculty n marketing, t all levels beginning n August 2008.Candidates forassociate or full professor hould have an establishedrecord of quality researchwailcandidates for assistantprofessor hould be promising esearch scholars. Successful candidateswill beexpected to publish highquality research and teach effectively n the school's Bachelor's, Master's,and/or h.D. programs.Candidates shouldhold a doctoratedegreeorbe close tocompletion.ion.Salary,teaching oad and fatuity upport rehighly ompetitive. Applicants houldsend a cover letter,curriculum itae,any a copy of the dissertation roposal orcompleteddissertation,r inthe case of moreestablished cholars severalsamplesof theapplicant'sscholarship.Applicationsshould be sent to Dean M R. Gupta,Olin School cifBusiness, Campus Box 33,Washington University, Brookings Drive, St. Louis, MO 63130-4899. Early applications receivefullest onsideration.Washington University is an equal opportunity/affirmative ction employer andwelcomesapplications from women and minorities.

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