title: factors influencing coffee growers’ perception on coffee buyers opportunism : a case of...
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Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania.
Wednesday, April 19, 2023 1
Outlines
• Introduction
• Theoretical Perspective and hypothesis formulation
• Research Methodology and Operationalization of Variables
• Data Assessment (Preliminary screening, Discriminant validity and Reliability).
• Research Model (Regression Model)
• Regression Assumptions
• Regression Estimation and Hypotheses Testing
• Managerial Implications, Limitations and Areas for further Research
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Introduction
Background information
Main coffee buyers in Tanzania-Primary societies/Associations (KNCU,
MBOCU).
Complaints from farmers> buyers no longer offering incentives (fertilizers,
insecticides, equipment(CPU) and credits).
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Introduction…Ctd.
Research Problem
Buyers characterized: lying>insincerity>undervaluation of products.
These behaviors>reflection of buyers’ opportunistic behavior (John
1984; Williamson 1985).
Research Question
What is the key factor affecting suppliers’ perception on buyers
opportunism?
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Introduction…Ctd.
Objective of the study
Enhance relationship to reduce perception on buyers opportunism.
Specifically how supplier specific development (investment) affect
suppliers’ perception on buyers opportunism.
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Theoretical Perspective
A good theory is the best tool in understanding/solving practical business
issues (problems).
Transaction Cost Theory (Douma & Schreuder Ch. 8, 2011) >The founder:
Ronald Coase>1937: ‘‘Why do firms exist?’’
What are Transaction Cost?
Control and monitoring costs (e.g. cost documentation)
Bargaining costs (e.g. haggling about terms of trade)
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Theoretical Perspective…Ctd.
Transaction Cost is induced when SPI is deployed> It is not possible to
avoid this cost>Challenge: Minimize them.
Basic assumptions> Bounded Rationality, Uncertainty/Complexity,
Information Asymmetry and Opportunism.
Opportunism: ‘Self seeking with-guile’’ (Williamson 1975; p.6)>Take
advantage upon a situation, charge unfair prices, reduce the original
product quality.
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Theoretical Perspective…Ctd.
• Three Basic Elements> Specific Assets, Uncertainty/Complexity of Trade, Frequency or Volume of Trade.
• Specific Assets: Investment of Buyer and /or seller in> specific knowledge>routines >machines >tools to serve a specific trade partner (Risky Investment)
• SPI are sunk cost (irreversible).
• Previous Studies on Opportunism>Focused on Suppliers Opportunism; no studies on Buyers Opportunism.
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Research model
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OPPOR
SALESVOL
REDURA
SUDEV
Hypothesized effect
Control Effect
Research hypothesis
Hints: Transaction-Specific Supplier Development (SUDEV)> ‘‘a long
term cooperative effort between a buying firm and its suppliers to
upgrade the suppliers’’ (Bucklin and Sengupta 1993; Parkhe, 1993).
SUDEV (SPI)-reduce opportunism (Joshi, 1998).
making visit;> discuss issues for performance improvement with respect to
grading of my coffee beans; >recognizing farmers’ business for
achievements/performance in the form of awards;> providing farm businesses
with training/education; >providing farm businesses with equipment or tools
for improvement, >providing farmers with credit/capital (Krause and Ellram,
1997; Wagner, 2006).
H1: There is a negative association between transaction-specific
supplier development and buyer opportunism.Wednesday, April 19, 2023 10
Research methodology
Empirical research setting : Coffee industry in Tanzania
Cross sectional research design
Cross sectional research design (Malhotra and Birks, 2006).Questionnaire Instrument
Developing and reviews of questionnaire (adapting items)=>Translation- 2 ways and validationSample Size, Data collection procedures and technique
More than 400, 000 smallholders.=>Sample=123 each=>Key informants=>Finding the farmer for more than five years=>Personal interview
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Operationalization of variables
Constructs are operationalized as latent variables and all variables are measured as reflective scales> Variables were operationalized by question items with 7 points likert scale.The question items for opportunism were adapted from Gundlach et al., (1995); Skarmeas et al., (2002) and Provan and Skinner, (1989).While question items for Specific Supplier Development (SUDEV) were adapted from Krause (1999) and Ghijsen et al., (2009).
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Discriminant Validity
• Discriminant Validity: Exploratory Factor Analysis (Table 1.1) Rotated Component Matrix Extracted Principal Component Analysis. Rotated Method: Varimax with Kaiser Normalization. Rotation converged in 3 iterationsWednesday, April 19, 2023 13
Factor
Component
1 2
OPPOR2 .653 .130
OPPOR4 .810 .063
OPPOR5 .755 .016
OPPOR6 .646 .015
SUDEV1 .044 .698
SUDEV2 .061 .748
SUDEV3 .059 .720
SUDEV4 .036 .619
Reliability
Reliability: Correctness or exactness>internal consistency >Cronbach alpha
(Table 1.2).
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Construct Items No. of Items
Reliability
(Cronbach alpha) α
Buyer opportunism OPPOR 2, 4,5 6 4 .80 Transaction-specific supplier development
SUDEV 1,2,3,4 4 .71
Regression Model (Research Model)
Regression analysis
Statistical tool used to describe relationship between dependent and
independent variables> bivariate (simple)>multivariate (multiple).
Regression Model (Research Model)
OPPOR = bo +b1REDURA +b2SALESVOL +b3SUDEV+ ԑ
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Regression assumptions and Estimation
Regression assumptions:
Multicollinearity (Correlation Matrix: OPPOR & SUDEV, REDURA)
Collinearity (Tolerance>0.10, Variance Inflation Factor (VIF)<10)
Normality (Histogram & Normal P-P Plot of Standardized Residual)
Homoscedasticity (Scatter Plot)
Regression estimation:
OLS > to estimate parameters of our regression model (Table 1.3)
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Hierarchical
Regression
Model
Independent variables Unstandardized coefficients
t-value Tolerance (VIF)
Constant b0 5.02 2.66***
REDURA b1 -.35 -1.66** .76 (1.32)
SALESVOL b2 .13 .61 .83 (1.21)
R2 =.33 SUDEV b3 -.31 -2.67*** .74 (1.35)
R2adj=.26 F (7, 65) = 4.54 p<.001 Values for REDURA and SATIS are
mean centered scores
**p<.05 t- values greater than 1.64 are significant at 0.05 one tail
***p<.01 t-values greater than 2.33 are significant at 0.01 one tail
Hypothesis Testing
Hypothesis 1:
supported by coefficient term, b3 = -0.31, t value = -2.67, p ≤0.01.
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Discussion, Managerial Implications, Limitations and Areas for Further Research
Discussion
Training on :picking>pulping>washing,>fermentation>washing>drying.
Investment on: Machines (CPU)/Tools> Provision of Capital/Credit
Personnel visits to help improve on suppliers performance.
Invite farmers>discuss>performance improvement>grading of coffee beans.
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Managerial Implications, Limitations and Areas for Further Research…Ctd.
Managerial Implications
Lays out foundation on>stakeholders (buyers) >reduce opportunism.
Frequent communication and well established reporting system>SMS
& telephone calls.
Establishment of training centers: seminars, establishing farms for
training
increasing follow-up
Frequently>inviting farmers to discuss issues>on performance
improvement with respect to grading system of coffee.
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Managerial Implications, Limitations and Areas for Further Research…Ctd.
Providing farmers with equipment or tools for improvement.
Providing farmers with credit/capital.
Buyer Organizations should cooperate with supplier when deployment of
SUDEV is appropriate/profitable.
Limitations and areas for further research
Analyses only coffee industry
Cross sectional design
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