The dissolution of strategic manufacturer-industrial supplier relationships: are insights from the investment model valid and predictive?

Purpose The purpose of this study is to assess the validity and predictability of insights from the investment model (IM) in the context of strategic manufacturer-industrial supplier relationships. IM is a theoretical model in social psychology pertaining to interpersonal relationship discontinuity. This formal empirical test of IM in a different context supports vertical theory borrowing and minimizes the risk of committing atomistic fallacy. Design/methodology/approach Data collected from 256 sourcing professionals participating in a scenario-based role-playing experiment were analyzed via structural equation modeling. The authors also performed bootstrapping to assess indirect effects. Findings The IM is generally applicable to the context of interfirm relationship dissolution. Relative to the original context of interpersonal relationship dissolution, three nuances are detected: investment size as an antecedent has lowered prominence in influencing commitment; satisfaction level, quality of alternatives and investment size have non-orthogonal effects on commitment; and satisfaction level influences relationship continuity through and beyond commitment. Research limitations/implications The empirical findings broaden boundary conditions for IM insights. Beyond interpersonal relationship dissolution, the IM appears to also describe, explain and predict interfirm relationship dissolution. Practical implications Keeping the manufacturer satisfied is critical. Moreover, suppliers should be cautious when entering joint product development agreements. Originality/value This study appears to be among the first to formally validate the applicability of IM insights as they pertain to the dissolution of strategic manufacturer-industrial supplier relationships.