This research examines effects of supplying firms’ transaction specific investments on their firm performance through buyers’ trust and commitment. In this process, the research investigates moderating effects that buying firms’ purchasing strategies, which consist of relational strategy (competitive or cooperative purchasing strategy) and cost-reduction strategy (purchase price-based or total cost-based purchasing strategy), have on buyers’ commitment and suppliers’ performance. The study proposes a conceptual model integrating relationship marketing and purchasing strategy researches regarding business-to-business supplier-buyer relationships and test hypotheses derived from the conceptual model. Data were collected through a survey, and 248 purchasing managers participated in the survey.

In an increasingly dynamic business environment, innovation output occupies a central position among all organizational outputs, not only because it is a primary way in which firms compete and grow, but also because it profoundly influences social and economic evolution (Eisenhardt & Tabrizi, 1995; Sorensen & Stuart, 2000). Understanding the factors that determine an organization’s ability to produce new ideas and continually innovate thus is a fundamental issue in strategic management and marketing fields. Among all sort of determinants, collaboration with buyers to create value through innovation has attracted particular attention from scholars (von Hippel, 1988; Thomke & von Hippel, 2002; Sawhney, Verona, & Prandelli, 2005). This study examined the role of Internet-based collaboration in the buyer-supplier relationship in promoting product innovation of supplying firms. Drawing on the juxtaposition of the governance literature and social exchange theory, we proposed that Internet-based collaboration positively affects product innovation performance of supplying firms, but too much dependence on it impedes product innovation. That is, Internet-based collaboration has an inverted U-shaped relationship with product innovation performance of supplying firms. It further posited that in-person interaction between buying and supplying firms strengthens the positive effect of Internet-based collaboration on product innovation, such that when the degree of in-person interaction is high, Internet-based collaboration is associated with better innovation performance. These propositions were tested using data from a large survey conducted by a survey data on buyer-supplier relationships in China. The results show that Internet-based collaboration has a stronger positive relationship with innovation performance and this positive effect declines after the degree of Internet-based collaboration goes beyond a threshold. Moreover, the first-order effect of Internet-based collaboration is stronger when the degree of in-person interaction is high than when it is low. The optimal level of Internet-based collaboration in low degree of in-person interaction is moderate, whereas when in-person interaction is more frequently used in connecting with buying firms the optimal level rises. These results provide strong supports for the predictions of hypotheses.