The impact of effectuation on small firm buyer−seller relationships

  • Phillip McGowan

    Student thesis: Doctoral Thesis


    The success of a small firm depends on the decisions it makes relating to buying and selling. This study therefore investigates the logic used by a small firm owner-manager when determining such important decisions, through the scope provided by four interlinked papers.
    A review of sales related literature resulted in the development of a new construct of overall sales failure and instrument that measures elements that simultaneously and explicitly impact sales failure, thus enabling distance from failure to be established. Furthermore, it identified the significant impact of firm size in respect of sales. With the dyadic nature of buyer-seller relationships, and small firms reported as using different processes to their larger counterparts, attention is therefore directed at the decision-making logic used by small firm owner-managers. Consideration is given to the impact of effectuation logic on buying intentions. A conceptual model that seeks to explain the predilection of a small firm owner-manager to select trusted suppliers from within personal and business networks, and to engage on flexible terms is presented. It suggests that supplier relationship decisions made using effectuation logic may enable wider choice of suppliers than the formal processes of large firms. Empirical qualitative work to test the propositions made within the model, is reported herein.
    A qualitative study into such use of effectual logic by micro firm owner managers that operate in the UK Telecommunication market, finds that they do indeed utilise effectual means to develop personal relationships with trusted suppliers. This use of effectual buying also appears to positively promote the use of effectual selling, which enables the micro firm to match, in real time, what they have or can access from suppliers with what is required by customers. This appears to be an iterative process, the output of effectual selling leading to a further need for effectual buying, which while initially reducing uncertainty, can in the longer term increase it.
    Effectual logic would also, in additional to firm size, have additional intersectional, relational context aspects. Findings from a longitudinal study into a Key Account Management relationship between a small firm within the food industry and a major UK grocer suggest effectual logic may positively moderate the ability of a small supplier to enter into such a relationship. However, once within it, applying effectual logic may negatively impact success by increasing the potential for failure to co-create value, leading to suboptimal products and impacting buyer confidence and trust. Consequent attempts to recoup resources expended through the sale of rejected products to other customers appears to then fail and further damage the firm’s customer relationships, creating a cascading cycle of failure, depleted resources and the need for more effectual logic to acquire more.
    This study therefore makes a contribution to knowledge, specifically, whilst extant literature has hitherto identified use of effectual decision-making logic as an antecedent to positive outcomes, this study has identified negative consequences from such use by owner-managers of small firms, when determining buying and selling decisions. It does this as follows. First it identifies that owner-managers of small firms do indeed use effectual logic when determining buying and selling decisions, such use of effectual buying enabling the firm to overcome resource restriction and offer a wider range of products/services than it could otherwise provide. Second, such use of effectual buying facilitates, or even necessitates, effectual selling, which enables a small firm to offer a wider range of products/services to more customers, than it would otherwise be able to service, potentially also enabling a small firm to overcome resource restrictions and enter into Key Account Management relationships with larger customers. Third, such use of effectual selling, however, also holds the potential to negatively impact trust, an underpinning requirement for buyer−seller relationships. Fourth, because lack of trust is an antecedent to sales failure, each sales failure negatively impacts resources, creating a requirement for more effectual selling. Fifth, this leads to a cycle of cascading sales failure, such sales failure creating, rather than reducing, uncertainty.
    It also makes a contribution to practice. Specifically, the final topology has been translated into a qualitative self-assessment tool, which has been adopted by some members of the Sales Performance Association (SPA), used by SPA members’ clients, as it provides a comprehensive framework that can be used to help the client identify areas of real or potential sales failure and therefore determine a scope of remedial work.
    Date of AwardMay 2020
    Original languageEnglish
    Awarding Institution
    • University of Portsmouth
    SupervisorShuangfa Huang (Supervisor), Martina Battisti (Supervisor) & David Grant Pickernell (Supervisor)

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