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Causes and outcomes of satisfaction in business relationships

Tore Mysen and Goran Svensson
Oslo School of Management, Oslo, Norway, and

Satisfaction in business relationships 123

Received February 2009 Revised June 2009, January 2010 Accepted February 2010

Janice M. Payan
School of Management and Marketing, University of Northern Colorado, Greeley, Colorado, USA
Abstract
Purpose This study includes relationship marketing concepts (i.e. trust, commitment, and satisfaction) as precursors to transaction cost theory outcomes (i.e. specic investments, opportunism, and formalization) which are rarely, if ever, included together. Trust and commitment lead to satisfaction and satisfaction in turn leads transaction cost outcomes. The paper aims to address these issues. Design/methodology/approach The random sample is 600 small- to medium-sized Norwegian manufacturers. Conrmatory factor analysis and structural equation modelling was used to examine the responses from 212 key informants. Findings The strongest positive associations are from the relationship marketing portion of the model including trust satisfaction and commitment satisfaction. The highest negative association in the model is satisfaction opportunism. Contrary to predictions, satisfaction did not have a signicant association with either specic investments or formalization. Research limitations/implications Both relationship marketing and transaction cost theory concepts are examined because it is likely that business success may be motivated by both theories. Limitations of the study are that it only includes small- and medium-sized companies in Norway. Second, it does not cover all business-to-business relationships (i.e. only manufacturer-supplier relationships are included). Finally, additional concepts should be included (i.e. dependence, cooperation, and control). Practical implications The results suggest that managers should work developing high levels of satisfaction in business relationships to dampen the likelihood that business partners will be opportunistic. In this regard, working on a relationship serves as a safeguard against possible future risks (e.g. opportunism). Originality/value This study is a seed for future research about the causes and outcomes of satisfaction in business relationships. Keywords Trust, Investments, Relationship marketing, Marketing opportunities, Transactional costs, Norway Paper type Research paper

Introduction A sizable number of researchers hold the view that trust, commitment and satisfaction are important in developing strong relationships between manufacturers and suppliers (Barry et al., 2008; Caceres and Paparoidamis, 2007; Morgan and Hunt, 1994; Palmatier et al., 2006; Rauyruen and Miller, 2007; Skarmeas et al., 2008). Most research presents trust and commitment as unique concepts (Morgan and Hunt, 1994). In addition, Geyskens et al. (1999) show satisfaction is a distinct concept from trust and commitment.

Marketing Intelligence & Planning Vol. 29 No. 2, 2011 pp. 123-140 q Emerald Group Publishing Limited 0263-4503 DOI 10.1108/02634501111117584

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However, the research is indenite about the how satisfaction is associated with both trust and commitment. For example, some studies position all three constructs (trust, commitment, and satisfaction) as dimensions of a higher order concept of relationship quality (Rayruen and Miller, 2007; Skarmeas and Robson, 2008; Skarmeas et al., 2008). Other studies indicate satisfaction leads to trust and commitment (Geyskens and Steenkamp, 2000; Moliner et al., 2007a, b), is caused by trust and commitment (Farrelly and Quester, 2005), is caused by trust (Anderson and Narus, 1990; Ganesan, 1994; Mohr and Spekman, 1994), or is a mediator between trust and commitment and other outcomes (Garbarino and Johnson, 1999). This paper supports the position of satisfaction as an outcome of trust and commitment for the following reasons. First, [. . .] satisfaction is a focal outcome of buyer-seller relationships that is generally unlikely to develop in the absence of trust and commitment (Skarmeas et al., 2008, p. 25). In support, a sizable number of studies show that trust and/or commitment appear to be antecedents or precursors to satisfaction (Anderson and Narus, 1990; Farrelly and Quester, 2005; Ganesan, 1994; Johnson et al., 2008; Mohr and Spekman, 1994; Payan and Svensson, 2007; Smith and Barclay, 1997; Roath and Sinkovics, 2006; Wong and Zhou, 2006). Next, satisfaction has a stronger association with certain outcomes than trust (Leonidou et al., 2006; Rayruen and Miller, 2007; Ulaga and Eggert, 2006) and a stronger association with certain outcomes than commitment (Bansal et al., 2004; Lang and Colgate, 2003; Rayruen and Miller, 2007). Finally, Moliner et al. (2007a) note satisfaction is the strongest component of relationship quality. Taken together, this suggests satisfaction serves as a more proximal cause of important outcomes than either trust or commitment. As recommended by Terpend et al. (2008, p. 43), this study also uses complementary theoretical lenses to expand the understanding of inter-organizational relationships. In other words, this study includes both relationship marketing concepts (i.e. trust, commitment, and satisfaction) and transaction cost theory concepts (i.e. specic investments, opportunism, and formalization). This study takes the position that in business-to-business relationships, partners should focus on both the building of the relationship via powerful mechanisms, such as trust, but not forget that transactional outcomes (i.e. specic investments, opportunism, and formalization) can impact the success of business partnerships. Rarely, if ever, are the relationship marketing concepts of trust, commitment, and satisfaction examined in the same study along with the transaction cost theory concepts of specic investments, opportunism, and formalization. The objectives of this study are to test if trust and commitment have a positive association with satisfaction and to test if satisfaction, in turn, has a positive association with the outcomes of specic investments, opportunism, and formalization. The rest of the paper is organized as follows. First the paper presents a conceptual model and associated hypotheses. Second it outlines the methodology, data analysis, and results. Finally it discusses conclusions, limitations, and implications. Conceptual model and hypotheses The conceptual model shown in Figure 1 position trust and commitment as precursors to satisfaction. Satisfaction, in turn, is positioned as a precursor to the outcomes of specic investments, opportunism, and formalization.

Specific investments Trust Satisfaction Commitment Formalization Transaction cost analysis Opportunism

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Figure 1. An inter-organizational relationship marketing and transaction cost model

Relationship marketing

Transaction cost analysis and relationship marketing theories Transaction cost analysis (TCA) has a long history in marketing research due to its focus on the transaction, constituting the economic exchange between buyer and seller, and the reliance of early marketing works on economic theory (Sharma and Pillai, 2003). Williamsons (1975) inuential work on transaction costs led to a signicant research stream on marketing phenomena relevant to this theory. Specic investments are a key concept used in TCA models (Anderson, 1985, 1988; Heide and John, 1988, 1990; John and Weitz, 1989; Klein, 1989; Weiss and Anderson, 1992), and represent investments (or assets) with a high amount of specicity that have little value outside of a particular exchange relationship (Rindeisch and Heide, 1997). Theoretically, TCA suggests that specic investments create a potential threat to the organization that invests in them for two reasons. First, because specic investments are of less value in alternative uses, the beneting organization has the opportunism incentive to expropriate returns from these specic investments by using ex post bargaining or threats of termination (Lui et al., 2009). Second, because investments in specic assets with one organization cannot be used with others, organizations may decide to safeguard their investments ex ante in a number of ways (Heide and John, 1990) including taking steps toward formalization of the partnership (Buvik and Reve, 2001). For example, steps may be taken to develop formal contracts between the exchange partners (Lui et al., 2009). Because of their importance to TCA, this study includes these concepts: specic investments, opportunism, and formalization. In contrast to TCA, focused on arms length transactions, relationship marketing theory focuses on the importance of developing relationships in the long term (Lui et al., 2009). Morgan and Hunts (1994) key mediating variable model is one of the most comprehensive inter-organizational models in the literature on relationship marketing. These authors found that trust and commitment were major factors in developing relationships. In addition, there is a sizable amount of research that shows satisfaction is also key concept in business relationships (Farrelly and Questar, 2005; Johnson et al., 2008; Mohr and Spekman, 1994; Payan and Svensson, 2007; Smith and Barclay, 1997; Roath and Sinkovics, 2006; Skarmeas et al., 2008; Wong and Zhou, 2006). Consequently, this study includes the three most frequently studied relationship marketing concepts of trust, commitment, and satisfaction (Barry et al., 2008; Caceres and Paparoidamis, 2007; Palmatier et al., 2006). Recently, there has been the realization that there is value in examining relationships along with cost considerations (from the TCA perspective) to determine the effectiveness

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of alternative marketing strategies (Sharma and Pillai, 2003). Consequently, this study includes important concepts from both TCA and relationship marketing theories. From a TCA perspective, TCA variables are independent of relational considerations; as a result, there is limited theoretical discussion concerning a direct relationship between trust, commitment, or satisfaction with important TCA concepts (i.e. specic investments, opportunism, and formalization). However, Young and Wilkinson (1989, p. 111) state, When exchanges take place in an atmosphere of trust and commonality of purpose, transactions are less costly to complete. In regard to commitment, Parkhe (1993) notes that the length of time that one organization expects to do business with another organization (similar to the denition of commitment) may be seen as a cue that there is lower vulnerability in exchanges and therefore lower transaction costs will ensue. Rather than proposing a direct link between trust and commitment with TCA concepts (i.e. specic investments, opportunism, and formalization), this study positions satisfaction as a mediator between trust/commitment and the TCA outcomes. As previously discussed, satisfaction is positioned as an outcome of trust and commitment because the majority of inter-organizational studies show that trust and/or commitment appear to be antecedents to satisfaction and because satisfaction has a stronger association with certain outcomes in comparison to trust and compared to commitment. This study predicts that satisfaction serves as a more proximal cause of important outcomes than trust or commitment. Specic hypotheses follow. Trust and commitment as precursors to satisfaction Geyskens et al. (1999) dene satisfaction as the positive affective state resulting from the appraisal of all aspects of one organizations working relationship with another. Similarly, some dene satisfaction is an effective state resulting from a judgement about performance compared to expectations (Wilson, 1995; Oliver, 1997). The evaluation process encompasses all aspects of the relationship (Geyskens et al., 1999) and is based on tangible and/or intangible ingredients of the relationship experience (Parsons, 2002). A buyers evaluation of performance compared to expectations includes relationship characteristics including trust and commitment. Not surprisingly, Duarte and Davies (2004) note that the predominant positioning of satisfaction in inter-organizational research is as an outcome. This is supported in empirical research (Huntley, 2006; Duarte and Davies, 2004; Skinner et al., 1992). This study agrees with Skarmeas et al.s (2008, p. 25) conclusion that [. . .] satisfaction is a focal outcome of buyer-seller relationships that is generally unlikely to develop in the absence of trust and commitment [. . .]. There is little consensus on the denition of trust. For example, some dene trust as the willingness of a party to be vulnerable or to rely on another (Moorman et al., 1992). Similarly, Rousseau et al. (1998) dene trust as a psychological state about the intention to accept vulnerability to another. Likewise, Mayer et al. (1995, p. 712) state:
The denition of trust proposed in this research is the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party.

They suggest that trustworthiness is an antecedent of trust and consists of integrity, benevolence, and competence of trustees.

Others do not distinguish between trust and trustworthiness. For example, although Morgan and Hunt (1994) drew from the Larzelere and Huston (1980) denition of trust which was based on benevolence (i.e. is the partner interested in the others welfare?) and honesty (i.e. to what extent can I believe my partner?) derived from dating and marriage relationships. They adapted their unidimensional scale to an interorganizational context and claim that their scale captures reliability, integrity, and condence. More recently, it has been suggested that that trust is much more complex and should include multi-dimensional aspects of capability, benevolence, and integrity (Bakker et al., 2006), integrity, honesty, and condence (Coulter and Coutler, 2003), or credibility (Coote et al., 2003). Like Morgan and Hunt (1994), this study downplays the role of benevolence in trust because of its interorganizational context. In support of downplaying benevolence, Schoorman et al. (2007, p. 345) state:
While we may be able to identify situations, such as sole proprietorships, where the owners have strong bonds that display signicant benevolence toward one another, the more traditional mode is probably one wherein each company is motivated primarily by its own nancial interests. If this is indeed the norm, benevolence is not likely to be the most important factor in the development of interorganizational trust.

Satisfaction in business relationships 127

This study adapts the denition of interorganizational trust developed by Zaheer et al. (1998) as the expectation that another business can be relied on to fulll obligations and will act and negotiate fairly. This unidimensional denition is used here because it downplays benevolence and is applicable to different levels of analysis appropriate to an interorganizational context (e.g. both interorganizational and interpersonal boundary spanners) rather than being focused on psychologically based concerns of individuals in their personal relationships. Considering this studys denition of trust, if an organization has the expectation that they can rely on another business to act and negotiate fairly, the organization will be more satised with the relationship. Because satisfaction results from the overall evaluation of a business relationship, including assessing the fairness and honesty in that relationship, high trust will result in a positive affective outcome (i.e. satisfaction with the relationship). In support, some studies show that trust leads to satisfaction in the relationship (Andaleeb, 1996; Farrelly and Questar, 2005; Mohr and Spekman, 1994; Schul et al., 1985): H1. Trust relates positively to satisfaction. In contrast to trust, there is general agreement about the denition of commitment. This study denes commitment as an enduring desire to maintain a valued relationship (Moorman et al., 1992). In support, Morgan and Hunt (1994, p. 23) dene commitment:
[. . .] as an exchange partner believing that an ongoing relationship with another is so important as to warrant maximum efforts at maintaining it; that is, the committed party believes the relationship is worth working on to ensure that it endures indenitely.

They also suggest, in alignment with Cook and Emerson (1978), that commitment has long been a central concept that can distinguish a social exchange from a purely economic exchange. They also state that commitment is among the oldest and most studied concepts in organizational behavior. The above denitions have stood the test of time, based on the recent denition of commitment by Coote et al. (2003) as a long-term exchange between partners that desire to maintain a valued relationship.

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According to Anderson and Weitz (1992), commitment to a relationship will result in a desire to develop a stable relationship and a willingness to make short-term sacrices to maintain the relationship. A buyers satisfaction will be, in part determined by the buyers investment in maintaining the business relationship. For example, if a buyer prioritizes a relationship with a particular seller, the buyer will stress the accuracy in specifying requirements and in involving the seller in key decisions. Clearer specications and more involvement make it easier for the seller to fulll the buyers expectations, which lead to a positive evaluation about the relationship (i.e. satisfaction with the relationship). In support, Mohr and Spekman (1994) and Farelly and Questar (2005) show that commitment leads to satisfaction with the business relationship: H2. Commitment relates positively to satisfaction. Specic investments, formalization, and opportunism as outcomes of satisfaction Adapted into a buyer-seller context, the buyers perception of fullment (Oliver, 1997) or satisfaction is inuenced by the assessment of all aspects of the business relationship between the buyer and the seller (Anderson and Narus, 1990). As previously discussed, satisfaction is an affective state of mind (Anderson and Narus, 1990), and may be inuenced by the buyers evaluation of the previous relational exchange including established trust and commitment. Satisfaction and specic investments Specic investments (also called specic assets or idiosyncratic investments) are interpreted as dedicated activities and resources employed jointly between organizations (Anderson et al., 1994) and represent investments with a high amount of specicity that have little value outside of a particular exchange relationship (Rindeisch and Heide, 1997). Consequently, this represents a risk to the rm that invests in specic assets because the resources deployed cannot be fully used outside the relationship with the beneting rm. However, when Firm A is satised with a relationship with Firm B, Firm A will have more condence that future dealings with Firm B will be positive which will minimize Firm As perception of risk associated with specic investments. This will lead to a higher likelihood that Firm A will set aside resources dedicated to Firm B, or will tailor certain parts of their business to the Firm Bs specications, or will customize marketing activities for the benet of Firm B. In sum, satisfaction will be positively related to specic investments. Satisfaction and opportunism Discussions of opportunism are, to a large extent, based on Williamsons (1975, 1985) TCA theory. Opportunism is dened as self-seeking behaviour with guile (Williamson, 1975, p. 26). Guile involves deceitfulness, a lack of candour or honesty in transactions (Williamson, 1975, p. 9). Opportunistic behaviour may include hidden information or hidden action (Bergen et al., 1992). Therefore, opportunism poses a risk to business relationships. However, this risk may be averted, if there is a large amount of satisfaction derived from the business relationship. When two rms are satised with each other they will have more condence and a heightened expectation that their future dealings with each other will be positive which will minimize the temptation to take advantage of each other (i.e. display opportunistic behaviour). According to Ping (2007, p. 41), as satisfaction

with a relationship declines and becomes less rewarding, organizations are more likely to emit negative behaviours such as opportunism or surreptitious self-interest seeking. There is support beyond Ping (2007) that satisfaction is negatively associated with opportunism (Anderson, 1988; Pfeffer and Salancik, 1978; Ping, 1993). Formalization and satisfaction Formalization refers to: [. . .] the degree to which rules prescribing behaviour are formulated, as well as the extent to which role responsibilities are prescribed (Scott, 1987, p. 33). Formalization may include the extent to which the relationship between the buyer and seller is regulated by explicit contracts and/or specied rules and procedures. More formal arrangements guide the behaviour of the participants in the supply chain and reect a coordinating strategy between buyers and sellers (Xu and Beamon, 2006). In alignment with Palmatier et al. (2006), formalization is an outcome of relationship satisfaction. A rm that is satised with another rm will be more willing to engage in the level of communication and adaptation that is required to formulate contracts and exchange procedures (i.e. formalization). In partial support, Atkin and Rinehart (2006) show that satisfaction is positively associated with formalization (e.g. formalized contracts): H3. Satisfaction relates positively to specic investments. H4. Satisfaction relates negatively to opportunism. H5. Satisfaction relates positively to formalization. Method Research context and sample The study was performed in 2007/2008. The random sample consisted of 600 small- to medium-sized Norwegian companies (25-250 employees) across multiple industries after excluding 19 government entities. The chief executive ofcer (CEO) of the remaining companies was contacted by phone in order to clarify whether he/she was qualied to answer the questionnaire and, if not, the CEO was asked to identify another member of the corporate management team that was qualied to respond. A total of 581 surveys were mailed (via postal mail) to key informants; and a total of 212 surveys were returned for a 36.5 percent. Sample characteristics The companies average time working with the suppliers is approximately 13 years. Theownership of the companies is as follows: 48 percent are privately owned, 5 percent are publically owned, 1 percent are owned by the supplier, 33 percent are owned by the company, and 13 percent have another form of ownership. With respect to the companies sales volume relative to the suppliers: 50 percent are smaller or much smaller, 10 percent are roughly equal, and 40 percent are larger or much larger. The percentage of the companies sales that suppliers account for is: about 50 percent account for up to 10 percent, 40 percent account for 11-90 percent, and 10 percent accounts for more than 90 percent. The percentage of the companies prot that suppliers account for is: about 70 percent account for about 10 percent, 25 percent account for up to 11-50 percent and 5 percent account for more than 95 percent. As suggested by Campbell (1955), two items were included in the survey as respondent competency checks. The two items asked:

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(1) How much the respondent knew about his/her rms perspective about the topics of this study? (2) How much the respondent knew about specic experiences with its suppliers? About 99.0 percent of the respondents indicated that they had a good knowledge of their rms perspective of their suppliers and 99.5 percent indicated that they had similar knowledge of experiences with their suppliers. As a result, all returned studies were used in the data analysis presented below. Measures and scale items The measures used this study that support the inter-organizational relationship marketing and transaction cost model (Figure 1) are based upon the following sources: (1) Causes: . Trust. Items were borrowed and modied from Zaheer et al. (1998). . Commitment. Items were borrowed and modied from Morgan and Hunt (1994) and Anderson and Weitz (1992). (2) Mediator: . Satisfaction. Items were borrowed and modied from Andaleeb (1996). (3) Outcomes: . Specic investments. Items were borrowed and modied from Heide and John (1990). . Opportunism. Items were borrowed and modied from Dahlstrom and Nygaard (1999), John (1984) and Provan and Skinner (1989). . Formalization. Items were borrowed and modied from Dahlstrom and Nygaard (1999). Informants responded to ve-point Likert-type scales for all variables. These measures were anchored at (5) strongly agree and (1) strongly disagree (Table I). Goodness-of-t measures measurement model To examine and test the measurement properties between the constructs of the conceptual model, conrmatory factor analysis were used ( Joreskog and Sorbom, 1976). Conrmatory factor analysis was run with a six-construct measurement model (i.e. 18 indicator variables as shown in Figure 2) using the SPSS/AMOS 16.0 software. When the measurement model was tested the goodness-of-t measures were all well within recommended guidelines (Hair et al., 2006, pp. 745-9). For example, the x 2 was 185.847 with 120 degrees of freedom. This x 2 was statistically signicant ( p 0.000) and may be due to the sample size (n 212). As a result, other t statistics were examined. The normed x 2/df was 1.549 while the normed t index (NFI) was 0.936, the Incremental Fit Index (IFI) was 0.976, the tucker-lewis index (TLI) was 0.965, the comparative t index (CFI) was 0.976, and root mean square error of approximation (RMSEA) was 0.051 (condence interval 90 percent: 0.036-0.065). All of these t statistics are within recommended guidelines. Based upon the satisfactory ndings in testing the measurement model, all of the items for all six scales were retained for testing this

130

Trust Commitment Satisfaction Specic investments

Opportunism

Formalization

(a) This supplier has always been fair in its negotiations with us (b) We can rely on this supplier to keep promises made to us (c) This supplier is trustworthy (a) We would like to continue our work with this supplier (b) We intend to do business with this supplier well into the future (c) We are resolute about future intent to do business with this supplier (a) Our relationship with this supplier reects a happy situation (b) Our rm is content about its relationship with this supplier (c) The relationship between our rms is trouble free (a) My rm has made signicant investments in resources that are useful only to this supplier (b) We have customized a consequential portion of our business in dealing with this supplier (c) We have tailored major parts of our business to accommodate the needs of this supplier (a) This supplier has not kept what it promised when we entered into the relationship (b) Sometimes, this supplier has altered the facts slightly in order to get what they need (c) This supplier is not always truthful with me (a) Our contracts with this supplier and his representatives are on a formal, pre-planned basis (b) In general, the information routines from this supplier are very clear (c) Generally, there are well-established information routines between us and this supplier

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Table I. Scale items

studys hypotheses. Both the structural model and hypotheses tested are shown in Figure 2. Assessment of construct validity and reliability Several measures were used to assess the validity and reliability of constructs used in this study (Table II). Convergent validity is the extent to which the individual items in a construct share variance between them (Hair et al., 2006) and is measured based on the variance extracted from each construct. The variance extracted for all constructs exceeded the recommended 50 percent. Reliability is also considered when evaluating constructs. All constructs exhibited composite trait reliability levels that exceeded 0.7 (Hair et al., 2006, p. 777). Discriminant validity examines whether the constructs are measuring distinct concepts (Hair et al., 2006) and is assessed by comparing the variance extracted to the squared inter-construct correlations. The variance extracted should be larger than the corresponding squared inter-construct correlations and this condition was met in all cases (Table II). Consequently, the model exhibited discriminant validity. Nomological validity means the direction of the causal relationships between the constructs is consistent with theory (Figure 2). The construct relationships were signicant and consistent with theory conrming nomological validity. In summary, the recommended guidelines for convergent, discriminant and nomological validity, as well as construct reliability, were all met. Therefore, it is concluded that the measurement properties and some structural relationships of the CEO-model applied in Norwegian business relationships indicate acceptable validity and reliability.

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a)

b)

c)

a)

b)

c)

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Trust

Commitment

H1 (+)
a)

H2 (+)

b)

Satisfaction

c) a) Specific investments a)

H3 (+)

H5 (+)
Formalization b)

b)

c)

H4 ()

c)

Opportunism

Figure 2. Six construct structural model

a)

b)

c)

Variable Satisfaction Trust Commitment Specic investments Opportunism Formalization Variance extracted (%) Composite trait reliability

Satisfaction Trust Commitment 1.00 0.65 0.59 0.00 0.49 0.00 77 0.85 1.00 0.49 0.00 0.52 0.01 71 0.84

Specic investments

Opportunism Formalization

1.00 0.01 0.20 0.00 81 0.92 1.00 0.04 0.07 72 0.89 1.00 0.01 74 0.88

1.00 69 0.87

Table II. Squared inter-construct correlations and summary statistics

Results The structural models x 2 was 246.299 with 129 degrees of freedom. This x 2 was statistically signicant ( p 0.000). As is common practice, the other t statistics were re-examined. The normed x 2/df was 1.909 while the NFI was 0.915, the IFI was 0.957, the TLI was 0.943, the CFI was 0.957, and RMSEA was 0.066 (condence interval 90 percent: 0.053-0.078). All of the t statistics are well within recommended guidelines. Furthermore, three out of ve hypothesized relationships in the structural model were signicant ( p 0.000) having standardized regression weights ranging between 0.367 and 0.712 (Table III). Subsequently, three hypotheses were supported in this studys conceptual model. Discussion As hypothesized, trust and commitment has a positive association with satisfaction in support of H1 and H2. In specic, this study shows that the strongest positive associations from the relationship marketing portion of the model, including the association between trust and satisfaction (regression weight 0.56), and the association between commitment and satisfaction (regression weight 0.37) Some research does not suggest any sequential logic among these three concepts, such as the research that simply includes all three concepts (i.e. trust, commitment, and satisfaction) as elements of relationship quality (Rayruen and Miller, 2007; Skarmeas and Robson, 2008; Skarmeas et al., 2008). However, the denition of satisfaction as the positive affective state resulting from the appraisal of all aspects of one organizations working relationship with another (Geyskens et al., 1999) presumes that there is an evaluation or judgment that takes place about previous experiences with another organization (Wilson, 1995; Oliver, 1997). It is highly likely that previous experiences include feelings of trust and commitment that one organization acquires about another organization (Geyskens et al., 1999; Parsons, 2002). In other words, satisfaction may be more logically positioned as the outcome of trust and commitment based on the conceptual denition of satisfaction as a subsequent judgment. Also as hypothesized (i.e. H4), this study shows the highest negative association in the model between satisfaction and opportunism (regression weight 2 0.71). These results support ndings in previous studies (Anderson, 1988; Pfeffer and Salancik, 1978; Ping, 1993, 2007). As mentioned previously, as satisfaction with a relationship declines and becomes less rewarding, organizations are more likely to emit negative behaviours such as opportunism or surreptitious self-interest seeking Ping (2007, p. 41). The opposite is most likely true, that high levels of satisfaction in a relationship dampen the likelihood that business partners will be opportunistic. Contrary to predictions (i.e. H3), satisfaction does not have a signicant positive association with specic investments. In hindsight, there are conicting results in the
Exogenous Hypothesis construct H1 H2 H3 H4 H5 Trust Commitment Satisfaction Satisfaction Satisfaction Endogenous construct Satisfaction Satisfaction Specic investments Opportunism Formalization Regression weight 0.563 0.367 0.040 20.712 0.020

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Signicance Finding 0.000 0.000 0.593 0.000 0.798 Supported Supported Not supported Supported Not supported

Table III. Tests of hypotheses

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literature regarding the relationship of specic investments with satisfaction. For example, and contrary to this studys prediction, Payan and Svensson (2007) predict and nd a negative relationship between specic assets and satisfaction. They suggest this because of the potential threat of specic assets (i.e. the investment in dedicated activities with one organization cannot be used with other organizations). Heide and John (1992, p. 35) suggest that:
[. . .] specic investments will reduce an organizations control because of the dependence that is created. Dependence arises from investments in specic assets because they make the focal exchange partner irreplaceable, or replaceable only at a cost.

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This lack of control may be associated with an organizations negative judgment (i.e. satisfaction) about its relationship with the organization requiring the specic asset. Unexpectedly, results also indicate that there is not a signicant positive association between satisfaction and formalization. Therefore, H5 is not supported. It may be possible that one organization may view attempts at formalization in the form of rules, procedures, contracts, etc. by another organization as control tactic. If this is the case, organizations may interpret the attempt to formalize the relationship by another organization as a power play and the attempt may have come about due to the dissatisfaction or concerns with the relationship. Implications and limitations This study has made several contributions to the literature. First, this study includes both relationship marketing concepts (i.e. trust, commitment, and satisfaction) and transaction cost theory concepts (i.e. specic investments, opportunism, and formalization) because it is likely that business success may be motivated by both theories (i.e. relationship characteristics, such as trust, and/or transactional outcomes). Rarely are the relationship marketing concepts examined in the same inter-organizational study along with the transaction cost theory concepts. Second, this study shows that the strongest positive associations are between trust and satisfaction and between commitment and satisfaction. These results support previous studies that nd that trust serves as an antecedent to satisfaction (Schul et al., 1985; Razzaque and Boon, 2003; Grewal et al., 1999). As pointed out by Geyskens et al. (1998, p. 240):
[W]hen a channel member trusts its partner, it will feel secure by way of an implicit belief that the actions of the partner will result in positive outcomes or not result in negative outcomes [i.e. trust]. This evaluation should lead to high satisfaction.

Similarly, results here support the positioning of commitment as an antecedent to satisfaction (Mohr and Spekman, 1994; Farelly and Questar, 2005). For example, if a buyer prioritizes a relationship with a particular seller, the buyer will stress the accuracy in specifying requirements and in involving the seller in key decisions. In brief, the buyer will be committed. Clearer specications and more involvement make it easier for the seller to fulll the buyers expectations, which lead to a positive evaluation about the relationship (i.e. satisfaction with the relationship). Third, this study shows the highest negative association in the model between satisfaction and opportunism (regression weight 20.71). These results support ndings in previous studies (Anderson, 1988; Pfeffer and Salancik, 1978; Ping, 1993, 2007).

As mentioned previously, as satisfaction with a relationship declines and becomes less rewarding, organizations are more likely to emit negative behaviours such as opportunism or surreptitious self-interest seeking (Ping, 2007, p. 41). The opposite is most likely true, that high levels of satisfaction in a relationship dampen the likelihood that business partners will be opportunistic. In this regard, working on a relationship serves as a safeguard against possible future risks (e.g. opportunism). Fourth, although satisfaction is not positively associated to specic investments this provides some insight about conicting results evidenced in the literature. Because this study predicted a positive relationship between satisfaction and specic investments and others have predicted and shown a negative relationship between satisfaction and specic investments (Payan and Svensson, 2007), this may indicate that there may be other important moderators and/or mediators between satisfaction and specic investments. Payan and Svensson (2007, p. 807) suggest that:
Unless specic assets are matched equally between both partners, specic assets will not be viewed as a fair negotiation point between organisations (Anderson and Weitz, 1992). This could account for the 2negative trust-specic assets link. In regard to the negative specic assets-satisfaction link, the investment in specic assets reduces an organisations control and increases dependence because these assets cannot be used with other organisations (Heide and John, 1992). The invested organisations lack of control and increased dependence is likely to result in a lowered level of satisfaction with the relationship.

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Testing a model with dependence as a moderator or mediator between satisfaction and specic investments may explain these conicting predictions and results. Finally, although the proposed relationship between satisfaction and formalization of the exchange was not supported this nding provides some insight. The weak inuence of satisfaction on formalization may indicate that satisfaction may play only a minor role in the establishment of explicit rules and procedures in the relationships. Another possibility is that asymmetrical dependence between organizations may be a factor that inuences the satisfaction-formalization link. To manage dependence, an organization may purposely structure the relationship with another by means of establishing formal links (Heide, 1994). For example, Lusch and Brown (1996) proposed but found no support for the argument that a dependent distributor would introduce explicit contracts in the relationship with the supplier. On the other hand, their results conrm that the more a supplier is dependent on a distributor, the more formal are the procedures introduced in the relationship with the distributor. Although the results of this study conrm three hypotheses out of ve, there are some research limitations that need to be acknowledged. For example, the sample used in this study only included small- and medium-sized companies in Norway. This may limit the ability to generalize ndings to larger companies and companies in other countries or contextual settings (e.g. culture). Another limitation is the sample does not cover all business-to-business relationships (i.e. it only tests the relationship between manufacturers and suppliers). These limitations surface the opportunity conduct future research in other business to business relationships among different countries or cultures. Another suggestion for future research is to test competing models that vary in terms of the positioning of relationship quality facets of satisfaction, trust, and commitment with important relationship outcomes across a broad spectrum of contexts. This research would be informative and may advance the eld in a signicant fashion.

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Other constructs might be included in the future testing of the importance of satisfaction as a mediating variable between trust and commitment on the one hand, important outcomes. For example, the above discussion suggests that dependence may be an important moderator or mediator of the relationship between satisfaction and both specic assets and formalization. In a related development, the relationship between trust and control needs to be more thoroughly examined. For example, Huemer et al. (2009) recently suggested that trust may substitute for or complement control and vice versa under certain conditions. In addition, other constructs that may be added include cooperation because it has been shown to have a signicant association with the quality of relationships (Payan and Svensson, 2007; Mohr and Spekman, 1994; Morgan and Hunt, 1994) based on the type of industry (Felzensztein and Gimmon, 2008) or based on the culture/subculture (Felzensztein and Gimmon, 2007).
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