Understanding Supplier Switching Behavior: The Role of Psychological Contracts in a Competitive Setting

Today's globally competitive environment presents ample opportunity for buyers to dissolve relationships by switching suppliers. While previous studies have described supplier switching behavior based on supplier attributes and switching costs, our study leverages attribution theory to evaluate the impact of psychological contracts on supplier switching behavior. We report the results of a controlled experiment involving 265 subjects in which we manipulate three characteristics of a psychological contract breach: attribution (whether the breach was due to reneging by the supplier or a disruption), severity (whether the breach was major or minor), and timing (whether the breach was early or late in the life cycle of the exchange history). Our analysis indicates that in the context of supplier switching, buyers are affected by the attribution and severity of a breach but not by the timing. In contrast to previous experimental research in noncompetitive settings, we find that psychological contract violation mediates the relationship between breach and behavior. We further complement our primary findings with a vignette-based experiment and interview data collected from experienced managers. Our research makes an important contribution to the relationship dissolution and industrial buyer behavior literatures by providing a behavioral explanation for supplier switching and reveals the complex role of psychological contracts in supply chain exchanges.