How should process capabilities be combined to leverage supplier relationships competitively?

• Theorizes the balancing and complementing effects of process alignment and partnering flexibility.
• Examines the impacts on both competitive performance and performance risks.
• Survey data from 318 manufacturing firms in the U.S.

Two process capabilities have been identified in the operations management literature to leverage supplier relationships for competitive performance: the ability to continuously improve processes with suppliers (process alignment) and the ability to make changes to these relationships (partnering flexibility). While firms may need both capabilities to be successful, it is unclear what strategy should be used to combine these two seemingly contradictory process capabilities. Using data collected from 318 manufacturing firms on a focal firm’s process capabilities to manage supplier relationships, we examine the performance impacts of two dimensions of a particular strategy: balancing (focusing on achieving a close match between the two process capabilities) and complementing (focusing on creating synergy between the two process capabilities). Our results indicate that the balancing dimension has a much stronger effect on a firm’s competitive performance than the complementing dimension. Also, when a firm pursues a high balance and strong complements strategy (combining high levels of both process capabilities), it is able to reduce its competitive performance risks more than when it pursues a high balance and weak complements strategy (combining low levels of both capabilities) or when it implements unbalanced strategies that emphasize either process alignment or partnering flexibility (combining low levels of one capability with high levels of the other). We conclude by discussing the theoretical contributions and practical guidelines.