Make a deal with the devil? Buyer firms’ competitive advantage and constraints from relationships with dominant suppliers

Purpose This study aims to investigate the competitive implications and performance impacts of buyer firms’ strong relational ties (i.e. relationalism) with dominant suppliers in their industry. Design/methodology/approach This study uses a multi-method approach to triangulate findings. The methodological design comprises: (1) a confirmatory content-analytic case study in the US computer industry during the 1990s, a period when dominant suppliers were clearly established; and (2) a survey of 88 firms across various industries reporting the presence of dominant suppliers in their respective fields. Findings The results from both methods indicate that relationalism with dominant suppliers positively impacts buyer firms’ profitability while negatively affecting their innovation. The survey further suggests that environmental dynamism moderates the profitability-enhancing effect of relationalism but does not influence its innovation-hampering effect. Practical implications This study informs managers about the potential tradeoff between profitability and innovation resulting from leveraging strategic relationships with dominant suppliers. It also offers suggestions to mitigate this tradeoff. Originality/value Although some buyer firms have strategically developed strong relationships with dominant suppliers to leverage critical resources, the full implications of this approach have yet to be explored in the literature. This study addresses this gap by integrating resource dependence theory with the resource-based view. It hypothesizes the performance impacts of relationalism with dominant suppliers and empirically examines these effects using multiple methods.