Cordiality and mutually beneficial arrangements can be more important than hard-negotiated deals when it comes to cementing strong working relationships among supply chain partners, according to the Management Insights feature in the current issue of Management Science, the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMS®).
Management Insights, a regular feature of the journal, is a digest of important research in business, management, operations research, and management science. It appears in every issue of the monthly journal.
"Social Preferences and Supply Chain Performance: An Experimental Study" is by Christoph H. Loch of INSEAD and Yaozhong Wu of the National University of Singapore Business School.
In their study, the authors observe that people's actions in economic transactions are motivated by more than incentives.
Incentives, say the authors, can cause people to be calculating rather than oriented toward a win-win. Behavior is also influenced emotionally by social preferences. In particular, people care about status ("how much do I have relative to you?") and reciprocity ("if you were nice to me, I want to reciprocate; if you were not nice, I want to retaliate").
In their paper, the authors report results from an experiment in which human subjects repeatedly interact in a supply chain situation facing price-sensitive demand. They find that social preferences have a significant impact on the decisions of supply chain partners: When status considerations matter, the partners act more competitively, trying to out-do the other side, even at times damaging their own profits. If reciprocity considerations are important, the partners can start a "virtuous cycle" of establishing a pattern of win-win actions, sustained over time.
From a practice perspective, write the authors, their results imply that managers should not rely solely on financial incentives. Formal incentives for collaboration become more robust when emotionally supported by relationships.
The current issue of Management Insights is available at http://mansci.journal.informs.org/cgi/reprint/54/11/iv. The full papers associated with the Insights are available to Management Science subscribers. Individual papers can be purchased at http://institutions.informs.org. Additional issues of Management Insights can be accessed at http://www.informs.org/site/ManSci/index.php?c=11&kat=Management+Insights.
The other Insights in the current issue are:
- Friction in Related-Party Trade When a Rival Is Also a Customer by Anil Arya, Brian Mittendorf, Dae-Hee Yoon
- Market-Based Supply Chain Coordination by Matching Suppliers' Cost Structures with Buyers' Order Profiles by Yu Xia, Bintong Chen, Panos Kouvelis
- Capacity Investment Under Postponement Strategies, Market Competition, and Demand Uncertainty by Ravi Anupindi, Li Jiang
- Ethical Spillovers in Firms: Evidence from Vehicle Emissions Testing by Lamar Pierce, Jason Snyder
- Competing Through Cooperation: The Organization of Standard Setting in Wireless Telecommunications by Aija Elina Leiponen
- Patents and the Performance of Voluntary Standard-Setting Organizations by Marc Rysman, Timothy Simcoe
- Natural Selection in Financial Markets: Does It Work? By Hongjun Yan
- Learning, Forgetting, and Sales by Sofia Berto Villas-Boas, J. Miguel Villas-Boas
INFORMS journals are strongly cited in Journal Citation Reports, an industry source. In the JCR subject category "operations research and management science," Management Science ranked in the top 10 along with two other INFORMS journals.
The special MBA issue published by Business Week includes Management Science and two other INFORMS journals in its list of 20 top academic journals that are used to evaluate business school programs. Financial Times includes Management Science and four other INFORMS journals in its list of academic journals used to evaluate MBA programs.
About INFORMS
The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. The INFORMS website is www.informs.org. More information about operations research is at www.scienceofbetter.org.
Journal
Management Science