Mediated Power And Outsourcing Relationships In Operation Management

Mediated power is frequently used by firms to control the performances or influence the decisions of additional members of the value chain. Amusingly, significant contributions in the educational literature offer consistent proof that the use of mediated power has a negative impact on the excellence of inter-organizational relationships. Up till now, there is a dearth of empirical research examining the conditions under which the use of arbitrated power is more or less prevalent. Using dyadic data collected on 102 outsourcing relationships, this study assesses how the buying firm’s dependence on the service supplier, asserted significance of the outsourced activity, and difficulties with other inter-organizational control mechanism is associated to their reliance on mediated power. Results from our hierarchical weakening analysis support the hypotheses that the use of mediated power is reduced when the buyer is currently more dependent on the service provider because of switching difficulties and the buyer has a higher anticipation of future supply market consolidation. Similar hypotheses concerning the effect of the strategic significance of the outsourced activity and entry barriers to the service supplier’s market were not supported. The consequences also support the hypothesis that the use of mediated power is additional pronounced when the buyer experiences contract management complexities, but the same is not true when the buyer has complexity in monitoring the provider. To our knowledge, these findings stand for the first empirical explanation of conditions which either satisfy or exacerbate the use of mediated power by outsourcing organizations.

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