Common supplier tactics in buyer-supplier-buyer relations

In this article, we develop a game model and examine two types of tactics for a common supplier in buyer-supplier-buyer relations: (a) to remain as a pure supplier and execute private knowledge exploitation by advantage of its structural hole position, or (b) to enter into the product market, so as to increase its revenue. The results of our study reveal that: (1) it will be more beneficial for focal supplier to stay in upstream if the entry barrier is high, which is determined by entry cost (the capital to spend for purchasing equipment) and invisible obstacles, e.g. the proprietary product knowledge privately owned by incumbent players, and the collaborative defense by partner buyers. (2) Focal supplier could create positive economic performance if it enters the product market successfully by overcoming various entry barriers. (3) Consumer's welfare could be improved if the focal supplier enters product market. © 2017 - IOS Press and the authors. All rights reserved.