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Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania. Outlines. Introduction Theoretical Perspective and hypothesis formulation Research Methodology and Operationalization of Variables

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slide1

Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania.

outlines
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
introduction
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).
introduction ctd
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?
introduction ctd1
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.
theoretical perspective
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)
theoretical perspective ctd
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.
theoretical perspective ctd1
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.
research model
Research model

SALESVOL

SUDEV

OPPOR

REDURA

Hypothesized effect

Control Effect

research hypothesis
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.
research methodology
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 validation

  • Sample 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

operationalization of variables
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).
discriminant validity
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 iterations
reliability
Reliability
  • Reliability: Correctness or exactness>internal consistency >Cronbach alpha (Table 1.2).
regression model research model
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

regression assumptions and estimation
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)
slide17

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 Testing

Hypothesis 1:

  • supported by coefficient term, b3 = -0.31, t value = -2.67, p ≤0.01.
discussion managerial implications limitations and areas for further research
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.
managerial implications limitations and areas for further research ctd
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.
managerial implications limitations and areas for further research ctd1
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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