Increased pressure from large online retailers is reducing brick-and-mortar retailers’ sales and profits, causing numerous store closings on both local and national levels. But community engagement may be an answer for local retailers.

brick click streamAccording to a recent study from the University of Alabama at Birmingham’s Collat School of Business, community engagement brings positive outcomes for retailers in two ways: by directly building consumer trust in, and commitment to, the retailer; and by lessening the importance of the retailer’s economic value proposition, or the perceived value of products and services sold.

“The retail landscape has been reshaped with the explosive growth of e-retailing, causing local brick-and-mortar retailers to rethink their marketing strategies in order to survive and thrive,” said Donald Lund, Ph.D., associate professor of marketing in the UAB Department of Marketing, Industrial Distribution, and Economics. “Our findings show that local retailers build stronger customer relationships through community engagement, helping to overcome economic disadvantages compared to larger online retailers.”

The acquisition, assimilation, and exploitation of heterogeneous, valuable knowledge-based resources contribute critically to a firm’s competitive advantage and superior performance. Research in supply chain and strategic management further indicates that abnormal returns derive not only from resources within a firm but also from those outside of the firm’s boundaries. Attaining such external resources often involves acquiring knowledge from external ties.  In supply chain management area, researchers have highlighted the positive role of relational ties in fostering performance and knowledge acquisition. Increased socialization between the buyer and supplier contributes to the creation of relational capital that leads to deeper interfirm communication and knowledge sharing. However, recent supply chain management research cautions about the potential dark side of highly embedded ties, which may become a source of blindness that restrict information flows and even bring in the risk of opportunistic exploitation that hurts knowledge flows. Thus it remains unclear whether relational ties facilitate or inhibit knowledge flows between embedded parties.

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Dr. Simon Sheng and his colleagues address this controversy by studying the following questions:

What is the real relationship between inter-firm relational ties and knowledge sharing between the two firms? Does the shape of the relationship depend on the strength of the ties?

As an informal governance mechanism, how do relational ties interact with formal governance mechanism, i.e., inter-organizational contracts, to influence knowledge acquisition between two firms?

How does the industrial context surrounding the inter-firm exchanges ( i.e., industrial competitive intensity) influence the impact of relational ties on knowledge acquisition?

As the business landscape becomes more global, managers must navigate cross-cultural relationships with an increasingly diverse set of partners. These relationships are built on economic as well as social considerations. Parties to a business relationship may consider qualities such as financial outcomes, convenience, interpersonal relationships, fairness, trust and other aspects of potential partners as they manage their network of business partnerships.

Given a diversity of cultural backgrounds, it seems that some managers may favor more communal interactions within relationships than would be desirable by the typical American firm. With the drastic increase in global business, it is important to understand that our expectations for relationships may not apply to business partners from other cultures.

Lund 200In a nutshell, Dr. Lund and his colleagues found that fairness is most important in cultures that are highly avoidant to uncertainty. Of five different cultural dimensions, uncertainty avoidance accounted for the majority of variation across countries in the importance of fairness. Findings also show that increased exposure to diverse cultures through business relationships enhances the importance of fairness.