The Impact of Transaction‐specific Investments on Buyer‐Seller Relationships

Abstract

Many business‐to‐business buyers are building closer relationships with fewer sellers. When faced with the choice of which sellers to partner with, buyers often develop such close relationships with sellers who have made transaction‐specific investments (TSIs). TSIs are assets (both tangible and intangible) that have very little value outside a particular relationship. Sellers thinking of making these TSIs need to be able to assess the buyer′s probable response to such investments to help determine whether such investments would be advisable for the seller. Develops and tests a model of buyer‐seller relationships to assess the impact of a TSI on buyer′s perceptions of the benefits to the seller′s TSI. Using previous literature and managerial evidence, the model hypothesizes two paths within the TSI Benefits Model which represent the benefits that the buyer perceives to be outcomes of the TSI. Identifying the one benefit path that the buyer values more will allow the seller to stress those corresponding benefits that lead to the development of a closer relationship with the buyer.

Citation

Lohtia, R. and Krapfel, R.E. (1994), "The Impact of Transaction‐specific Investments on Buyer‐Seller Relationships", Journal of Business & Industrial Marketing, Vol. 9 No. 1, pp. 6-16. https://doi.org/10.1108/08858629410053434