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This study explores the link between relationship stability and supplier commitment to quality, and the contingency of the link on characteristics of transactions within the framework of transaction cost analysis. Data collected from 358 suppliers of a globalized firm suggest that supplier firms regard a stable relationship as being positively linked to their commitment to quality for the focal buyer firm. It was also found that the link is stronger when the suppliers’ perceptions of a certainty of supply with the buyer firm are greater, while asset specificity and transaction frequency have no impact on the link. A discussion of the results and of the implications of the findings is provided.

During the last decade, supply chain management (SCM), a management approach that emphasizes the importance of building and managing relationships among partner firms in a supply chain, has received considerable attention in research and practice. SCM is concerned with managing the upstream and downstream relationships between suppliers and customers, to deliver superior customer value at the least cost to the chain as a whole (Christopher, 1998). On the other hand, the importance of quality and its associated benefits such as improvements in customer satisfaction and in the bottom-line have been well acknowledged (e.g., Hendricks and Singhal, 1997). For instance, the quality of logistics services has been recognized as an area in which firms can attain a competitive edge (Mentzer et al., 2001). Given the growing trend towards developing and maintaining mutually beneficial exchanges in buyer–supplier relationships, the aspect of quality management of the supply chain is receiving increased attention in the literature (e.g., Forker, 1997; Stanley and Wisner, 2001). The success of a supply chain depends not only on efficiency from optimizing resources but also on the effectiveness of partner firms in carrying out mutually beneficial activities, i.e., meeting customer requirements at the lowest possible cost (Lai et al., 2002). To achieve business success, it is imperative for firms to excel in quality, on which the efficient and effective flows of goods and information in the supply chain depend. We therefore attempt to fill this gap in the research by developing and testing a framework that looks into how relationship stability is linked to the supplier's commitment to quality for the buyer firm in a two-stage supply chain within the framework of transaction cost analysis (TCA). The impact of various transaction characteristics that take place between the supplier and buyer firms and how they might affect the strength of the link are empirically examined.