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Whilst there is much research material on buyer and supplier performance assessment and management, a relationship perspective can bring an added dimension, especially to the performance of close, mutual relationships. This article aims to bring a relationship performance understanding to the study of buyer–supplier exchange. Unfortunately, business-to-business relationships are assumed to enhance performance but what little research has been conducted is limited to a few dimensions reflecting a narrow theory or practice assumption. To remedy this we investigate a relationship performance definition that incorporates both non-financial and financial dimensions. The results are developed from seven qualitative interviews followed by a postal survey incorporating the views of 200 industrial buyer respondents in the UK. To examine the relationship among the performance variables, factor analysis was conducted on 21 dimensions of performance included in the research. On this basis, key dimensions of relationship performance are grouped and implications drawn for defining relationship performance and its measurement. The authors conclude that it is meaningful to take a relationship performance position when managing buyer–supplier interactions. However, not all the dimensions identified may be available to all types of relationships.

The study of relationships is now a well-developed stream of thought in the literature from both a buyer and supplier perspective. Relationships are seen as having positive links to performance but little is known about the nature of this performance. Relationships themselves can be seen as generic; applying to all buyer–seller exchanges. In this article, relationships are viewed as mutual, two-way, involved exchanges between buyers and suppliers. While it is accepted that most purchasing and supply relationships might not achieve this ideal, or it may not be relevant to their needs, it does provide insights into potential performance areas we believe are neglected in prior research. The importance of relationships to the conduct of business is widely supported in the literature (Jackson, 1985; Kanter, 1994; Gummesson, 1999), a development that began in the 1970s in a European context within the Industrial Marketing and Purchasing (IMP) group (Hakansson, 1982; Ford, 1997). Relationships between buyer and suppliers have also been underlined with themes such as partnership management (Johnson and Lawrence, 1988; Ellram, 1995), outsourcing (Mullin, 1996) strategic alliances, and supply chain co-operation and collaboration receiving emphasis (Christopher and Juttner, 2000). Indeed the supply chain management literature has linked the management of demand and supply empirically to firm performance (see, Tan et al., 1998; Vonderembse and Tracey, 1999, for recent examples). Authors such as Macbeth and Ferguson (1994) and Watts et al. (1995) have argued for the strategic role and potential of buyer–supplier relationships inherent in the development of co-operative relationships when compared to the traditional role that is directed by the benefits that accrue to one party only. It is apposite, therefore, to bring a relationship performance viewpoint to this key nexus of a firm's operation. Our objectives in this paper are: 1. To advance a more comprehensive definition of buyer–supplier relationship performance. To date, in our opinion, the conceptualisation of relationship performance has often been limited to a narrow set of output measures or normative rules for suppliers or buyers. 2. To identify and test a set of relational performance measures and to assess their relevance to managing buyer–supplier relationships. This paper concentrates on measures of the output of relationships rather than on relational processes which may, in turn, determine these outputs. For the longer term, we would also like to be able to link performance to individual relationship structural types. Academics and practitioners alike can gain much from knowing that different forms of relationships can yield different performance outcomes for both parties in a relationship.

This research demonstrates the potential, a relationship viewpoint can have in the assessment of buyer–supplier partnership performance. An expanded conceptualisation of performance to include financial and non-financial may prove fruitful in evaluating the range of outcomes possible in close relationships. However, this range may not be suitable for all buyer–supplier relationship types. This paper supports a move to assessing buyer–supplier exchanges as relationships rather than from a single actor perspective only. The dimensions of performance provided in this paper are a composite relationship set. Taking a relationship performance position has been under-studied in previous research. It is hoped that this contribution will add to existing methods of evaluating performance of buyer and supplier exchanges. For relationship performance assessment to develop and grow, a broader conceptualisation of buyer–supplier relationship performance is needed, and is supported in this paper. Combining theoretical perspectives that study buyer–supplier relationship performance would seem a worthwhile research endeavour. Multiparadigm approaches to relationship performance research as advocated by Eccles (1991) and Ketchen et al. (1996) for business strategy performance research are strongly supported here. This is not to suggest that the performance dimensions found in prior research are not important just that they are too narrow to capture the multidimensional nature of the construct. Indeed measures utilised in prior studies which defined performance from a single theoretical perspective, were incorporated in the current research and were found to be important (see Kalwani and Narayandas, 1995; Dyer, 1996). The importance of a broadened conceptualisation for relationship performance was underscored when the respondents were asked about the relative importance of the financial and non-financial items used to measure performance. The top three measures, which received a ranking were flexibility (total ranking 134), lower costs (125) and stability (118). Two of these items are from the more strategic non-financial factors and one from the more financial. This may reflect the nature of the sample but gives support to the broadened conceptualisation of buyer–supplier performance by including a relationship theory position. The non-financial and financial dimensions of the relationship performance construct proved useful as a means for classifying measures and to conduct the research. Within these dimensions key factors were identified. 14/20 dimensions were explained in three factors—one financial and two non-financial. These factors have intuitive internal consistency and operational and strategic relevance. While it is noted that they were only tested within main supply relationships from a buyer's perspective, they do offer potential for further development. Such dimensions provide a starting point in an expanded conceptualisation of relationship performance. Further work on these dimensions would permit an assessment of their significance and of their importance to individual buyer–supplier relationship types such as those provided by Sinclair et al. (1996). An explanation of the number of factors found in the financial and non-financial categories may be in the motivation of the party conducting the performance assessment. That is, the relationship type may influence the performance measures considered important and therefore, the pattern of significance of the relevant performance items. This is a possible explanation as to why items such as design involvement factored separately. Design involvement, as a value-added performance outcome, may be important only to certain relationships and may be negative in the performance assessment of others. This may be a reason for the difficulty in interpretation. Relationship motivation appears to affect performance expectations. In the current research all the firms were considering main supply relationships but even these can exhibit significantly different patterns. For example, an arm's length versus bilateral relationship may have different performance expectations. Further research work will have to be of a type linking relationship-specific dimensions of performance to individual relationship types. In our research we still felt it necessary to include all measures, even if sets of items within financial and non-financial dimensions are more relevant to a particular relationship type than to others. One of the main problems with the current research may have been the reductivist nature of scale development. Twenty-one dimensions may not be enough to capture the underlying relationship between all the divergent items included. However, there are practical limits in data collection which favour the method used. It has revealed sufficient information on which to build further research and had internal consistency supporting the use of composite scales in measuring performance. It may be easier for managers to evaluate performance in a composite way rather than on the basis of an individual facet. The information required for the latter may be too detailed, a fact borne out in our qualitative research stage. The evaluation of a set of relationship performance dimensions as presented here demonstrates the potential of buyer–supplier exchanges at a strategic level. Consideration of buyer–supplier exchanges from a relationship performance perspective provides many avenues for further enhancing relationship outcomes depending on the buyer or supplier management system deemed appropriate. A relationship understanding of buyer–supplier exchange performance provides an additional rationale for closely aligning purchasing and supply management to the strategy of the firm.