The effects of a manufacturer's actions on supplier performance: Insights from a contingent expectancy theory-based model

Manufacturing firms deploy two actions to enhance supplier performance: (i) they provide rewards, i.e., incentives, and (ii) they provide resources, i.e., investment. In this study, we ask why each of these actions is effective and when it is more (or less) effective. Drawing from expectancy theory, we argue that incentives are effective in enhancing supplier performance because they increase supplier instrumentality, while investment is effective in enhancing supplier performance because it increases supplier expectancy. Having identified two types of technological change—dynamism and diversity—we draw from contingency theory to argue that incentives are less effective when technological dynamism is high, and that they are more effective when technological diversity is high. Conversely, we argue that investment is more effective when technological dynamism is high, and that it is less effective when technological diversity is high. We develop a moderated mediation model in which supplier instrumentality and supplier expectancy mediate the impacts of incentives and investment, respectively, on supplier performance, with technological dynamism and technological diversity serving as moderators of these mediated pathways. The results from a matched dyadic survey of 202 supplier–manufacturer relationships provide support for our moderated mediation model.