Initiation of buyer–seller relationships: The impact of intangibility, trust and mitigation...

Industrial Marketing Management xxx (2014) xxx–xxx

IMM-07084; No of Pages 12

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Industrial Marketing Management

Initiation of buyer–seller relationships: The impact of intangibility,trust and mitigation strategies

Aku Valtakoski ⁎Aalto University School of Science, Department of Industrial Engineering and Management, Otaniementie 17, FI-00076 Aalto, Finland

⁎ Tel.: +358 40 770 5830; fax: +358 9 470 23665.E-mail address: [email protected].

http://dx.doi.org/10.1016/j.indmarman.2014.10.0150019-8501/© 2014 Elsevier Inc. All rights reserved.

Please cite this article as: Valtakoski, A., Initiatrial Marketing Management (2014), http://d

a b s t r a c t
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Article history:Received 18 January 2012Received in revised form 5 October 2013Accepted 21 May 2014Available online xxxx

Keywords:Buyer–seller relationshipsIndustrial buyingIntangibilityInterorganizational trustIntegrated solutions

The importance of collaborative buyer–seller relationships has increased with the transition from product salesto solution provision. However, the extant literature provides only limited evidence on how this transition affectsthe crucial phase of buyer–seller relationship initiation. This study explores how offer intangibility and thebuyer's trust in the seller interact to affect this initiation. Based on a comparative case study of four softwaresolution providers, the findings indicate that the riskiness of an offer, induced by its intangibility, sets a thresholdlevel of trust that needs to be exceeded to cause the buyer to start a relationship with the seller. The data alsoreveals mitigation strategies that sellers can use to influence the buyer's behavior either by directly reducingthe intangibility of the offer or by indirectly enhancing the buyer's trust in the seller.

© 2014 Elsevier Inc. All rights reserved.

1. Introduction

Many firms in industrial goods markets today offer solutions – inte-grated bundles of products and services – instead of standalone prod-ucts (Davies, 2004; Jacob & Ulaga, 2008; Oliva & Kallenberg, 2003).Due to the solutions' inherent complexity, long life cycles, and econom-ical importance, the transition from product to solution sales has result-ed in a fundamental shift from transactional to collaborative buyer–seller relationships (Penttinen & Palmer, 2007; Sheth & Shah, 2003;Spekman & Carraway, 2006). As indicated by the service-dominantlogic of marketing, successful co-production of value in solutions mar-kets requires a long-term relationship between the buyer and the seller(Vargo & Lusch, 2004a, 2008).

However, this transition presents challenges for both buyers andsellers, who have traditionally engaged in transactional product sales(Spekman & Carraway, 2006), as the complexity of solutions makes exante contracting between the parties difficult (Williamson, 1979). Inparallel, the benefits of solutions, similar to services, are difficult to assessprior to purchase (Jackson, Neidell, & Lunsford, 1995). In particular, thesecharacteristics affect the initiation of new buyer–seller relationships, asinformation on the solution and the seller is limited prior to relationshipinitiation. The buyer is thus often forced to rely on an intuitive assessmentof the offer and trust in the seller to deliver the promised outcomes.

This study seeks to understand how buyer–seller relationships areinitiated in solution markets. As noted by Edvardsson, Holmlund, andStrandvik (2008), only limited research exists on relationship initiation.

tion of buyer–seller relationshx.doi.org/10.1016/j.indmarma

Although buyer–seller relationships have been studied extensively(Cannon & Perreault, 1999; Doney & Cannon, 1997; Dwyer, Schurr, &Oh, 1987; Ganesan, 1994; Heide & Miner, 1992; Morgan & Hunt, 1994;Wilson, 1995), this literature has three key limitations. First, the impactof the offer characteristics has been ignored. However, as argued bySheth and Shah (2003), the buyer's preference between transactionaland collaborative relationships depends on the nature of the purchase.Similarly, Cannon and Perreault (1999) find that the complexity and im-portance of the offer affect the nature of buyer–seller relationships. Totranscend the traditional product-service dichotomy, this study usesthe extended concept of intangibility as proposed by Laroche,Bergeron, and Goutaland (2001) to characterize the solution offer.

Second, the extant research provides no conclusive evidence on howrelationship factors, such as commitment (Morgan & Hunt, 1994), trust(Doney & Cannon, 1997; Ganesan, 1994; Moorman, Zaltman, &Deshpande, 1992), and resource dependence (Anderson & Narus,1990; Dwyer et al., 1987) are causally related. For example, trust, acentral construct in the literature (e.g., Ganesan, 1994; Moormanet al., 1992; Morgan & Hunt, 1994), has been conceptualized as bothan antecedent and a consequence of other relationship factors.

Third, much of the literature has disregarded the potential impact ofthe relationship lifecycle on the above factors (cf. Doney & Cannon,1997; Ganesan, 1994). As suggested by Wilson (1995) and testedempirically by multiple authors (Claycomb & Frankwick, 2010; Jap &Ganesan, 2000), the impact of trust and other factors varies over therelationship's lifecycle.

Due to these limitations, this study adopts an inductive approachand uses case study methodology to study the initiation of buyer–sellerrelationships in solution markets. The study seeks to answer the

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2 A. Valtakoski / Industrial Marketing Management xxx (2014) xxx–xxx

following research questions: 1) how does offer intangibility and inter-organizational trust interact to influence relationship initiation? and2)what strategies can sellers use tomitigate the effects of intangibility?

This study contributes to the literature on buyer–seller relationshipsin four ways. First, the study improves our understanding of buyer–sell-er relationships in solution markets. Second, the use of the intangibilityconstruct expands the analysis beyond goods-based offers. Third, thestudy yields additional insight into how offer characteristics and trustare causally related. Finally, this study provides additional evidence onthe relative importance of these factors during the initiation of thebuyer–seller relationship.

2. Literature review

2.1. Buyer–seller relationship initiation

The development and importance of buyer–seller relationships havebeen studied extensively in the marketing literature. The extant re-search has identified a number of factors that affect the relationship(Wilson, 1995), how these factors affect the choice of relationshiptype (Cannon & Perreault, 1999; Sheth & Shah, 2003) and the long-term orientation of the relationship (Ganesan, 1994), and the typicallifecycle of a relationship (Dwyer et al., 1987; Wilson, 1995). Similarand complementary research on organizational buying has exploredfactors that affect the short-term transactional decision to buy asupplier's offer (Johnston & Lewin, 1996; Kauffman, 1996; Sheth, 1996).

The initiation phase of a buyer–seller relationship, corresponding tothe awareness and exploration phases proposed by Dwyer et al. (1987),and the partner selection and purpose definition phases as defined byWilson (1995), is crucial for the development of a long-term relation-ship. During relationship initiation, the potential buyer and seller en-gage in early interaction and consider the possibility of an exchangeby weighing the potential benefits, costs and obligations entailed inthe relationship. The phase ends when the partners have establishedan initial relationship, including settling on the tentative norms and ex-pectations of the relationship.

Most of the conducted research has explored the organizational andenvironmental factors that affect the development of buyer–seller rela-tionships. As listed by Wilson (1995), these factors include seller repu-tation, trust, power and interdependence, social bonds, mutual goalsand performance satisfaction. Further factors include commitment(Morgan & Hunt, 1994) and communication (Duncan & Moriarty,1998). However, as indicated by Wilson (1995), factors that developover time, such as investments, adaptations or commitment, cannot in-fluence relationship initiation. Instead, factors such as reputation, trust,social bonds, power andmutual goals are important during relationshipinitiation. Therefore, this study concentrates on trust as a potential ex-planatory factor for relationship initiation. However, it is not immedi-ately clear how other factors affect relationship initiation.

Unlike the literature on organizational buying (Johnston & Lewin,1996), research on buyer–seller relationships has largely disregardedthe impact of the offer (Sheth & Shah, 2003). However, as indicated byrecent research on solutions, offer characteristics clearly have an impacton the nature of these relationships (Penttinen & Palmer, 2007;Spekman & Carraway, 2006). As solutions differ significantly in manyways from traditional manufactured products (Sawhney, 2006), thereis a need to understand how offer characteristics affect relationshipinitiation.

Beyond the contributions of the IMP school (Ford & Håkansson,2006), only limited empirical evidence exists on how relationships actu-ally evolve over time (Edvardsson et al., 2008; Narayandas & Rangan,2004).Much of the extant research on the effects of the relationship var-iables has ignored the relationship lifecycle (cf. Doney & Cannon, 1997;Ganesan, 1994). As suggested by Wilson (1995) and demonstrated byJap and Ganesan (2000) and Claycomb and Frankwick (2010), these ef-fects depend on the relationship phase.

Please cite this article as: Valtakoski, A., Initiation of buyer–seller relationstrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarma

Furthermore, there is some confusion about how the relationshipfactors are causally related. For example, trust has been character-ized as both an antecedent (Ganesan, 1994; Moorman et al., 1992)and consequence of other factors (Doney & Cannon, 1997;Moorman, Deshpande, & Zaltman, 1993). More recently, Claycomband Frankwick (2010) explored how seller reputation moderatesthe impact of communication quality and conflict resolution onbuyer uncertainty. In contrast, Whipple, Lynch, and Nyaga (2010)tested the impact of a wide range of factors on relationship perfor-mance and satisfaction without specifying the causal relationshipsbetween these factors. In summary, there is little consensus onhow buyer–seller relationship factors are causally related.

2.2. Offer intangibility

Given the increasing popularity of solutions that consist of bothgoods and services (Jacob & Ulaga, 2008; Oliva & Kallenberg, 2003),the traditional definition of industrial products fails to adequatelycharacterize the entire offer. Furthermore, as proposed by the service-dominant logic of marketing, all offers can be considered to provideservice to the customer (Vargo & Lusch, 2004a, 2008), creating a needfor a holistic definition that applies to a wider range of offers.

Intangibility has been used in the service marketing literature todescribe that services “cannot be seen, felt, tasted, or touched in thesame manner in which goods can be sensed” (Zeithaml, Parasuraman,& Berry, 1985, p. 33). Intangibility implies that it is difficult to obtaininformation about an offer, in particular about its value, prior to pur-chase and use. The notion of intangibility has been most commonlyused in relation to consumer markets (Bebko, 2000; Levitt, 1981); lessis known about how intangibility affects purchasing in industrial mar-kets. However, recent research has suggested that intangibility is notlimited to services, but can be applied to any type of offer (Lovelock &Gummesson, 2004; Vargo & Lusch, 2004b). Hence, the generalizedconcept of intangibility as proposed by Laroche et al. (2001) andLaroche, McDougall, Bergeron, and Yang (2004) that transcends thegood-service dichotomy is used to characterize solution offers. Thisgeneralized concept has three components: physical intangibility,mentalintangibility and generality.

Physical intangibility refers to the impossibility of receiving infor-mation about the offer through human senses and is what servicemarketing has traditionally considered “intangible” (Zeithaml et al.,1985). Mental intangibility refers to how easily the offer can becognitively understood by customers and is a function of thecomplexity and novelty of the offer. This indicates that physicaltangibility does not always ensure a mentally tangible representa-tion of an object (Laroche et al., 2001). For example, a new productbased on a novel technology is likely to have high mental intangibil-ity because a customer has little prior knowledge about the product,its use and potential benefits. The generality dimension refers to howgeneral or specific an offer is perceived by a customer. An offer isconsidered general if customers cannot recall precisely its identifi-able definitions, features and/or outcomes (Laroche et al., 2001). Incontrast, an offer has low generality if customers can specify in detailits features and outcomes. For example, an offer may be consideredgeneral if it has no clear purpose and can be applied in manycontexts.

As indicated by Laroche et al. (2004), offer intangibility increasesthe riskiness of the offer as perceived by the buyer, as the buyercannot be sure that the solution will deliver the promised valueprior to its purchase and use. Because a priori information aboutthe performance of the offer is limited, the decision to purchase theoffer and initiate a relationship with the seller inescapably becomesa risky one. Intangibility thus requires the buyer to trust the solutionseller (Doney & Cannon, 1997; Gao, Sirgy, & Bird, 2005; Johnston &Lewin, 1996).

hips: The impact of intangibility, trust andmitigation strategies, Indus-n.2014.10.015


Table 1Case firm characteristics.

Case Relativesize

Revenueclass

Marketmaturity

Age Maintenanceservice revenueshare

Revenuegrowth

Theta Large N50 M€ Emerging 23 30% 22%Alpha Medium 5–10 M€ Mature 17 39% 2%Epsilon Small b1 M€ Mature 19 30% 5%Gamma Medium N10 M€ Mature 42 51% 9%

3A. Valtakoski / Industrial Marketing Management xxx (2014) xxx–xxx

2.3. Interorganizational trust

The concept of trust is closely related to the concept of risk: withoutuncertainty about the outcomes of an action, i.e., risk, therewould be noneed for trust (Ganesan, 1994; Moorman et al., 1992). Trust is requiredexactly because the buyer cannot foresee the activities of the seller.Trust can be defined as “the ‘willingness to take risk,’ […] the level oftrust is an indication of the amount of risk that one is willing to take.”(Schoorman, Mayer, & Davis, 2007, p. 346). As indicated above, trust isa central construct in understanding the dynamics of buyer–sellerrelationships. Trust has been shown to reduce conflict (Anderson &Narus, 1990), increase commitment (Morgan & Hunt, 1994), and fostera long-term perspective of buyer–seller relationships (Anderson &Weitz, 1989).

Although the research on trust in buyer–seller relationships hasconcentrated on the long-term effects, trust is also important duringrelationship initiation. As indicated by Wilson (1995, p. 340), “trustmay be very active in the early stages of the [relationship development]process.” As the parties have no prior experience of collaboration, trustcan be seen as an antecedent of a successful relationship initiation.

Trust as a construct applies to multiple levels of analysis, includinginterpersonal and interorganizational trust (Fang, Palmatier, Scheer, &Li, 2008; Ganesan & Hess, 1997). This study focuses on interorganiza-tional trust, which can be defined as “the extent of trust placed in thepartner organization by the members of a focal organization” (Zaheer,McEvily, & Perrone, 1998, p. 142), and thus describes the trust anorganization as a whole has another organization (cf. Ganesan & Hess,1997).

As emphasized by Blois (1999), a seller can only indirectly affecttrust by demonstrating its trustworthiness, defined as the characteristicsand actions of the seller that lead it to be more trusted (Mayer, Davis, &Schoorman, 1995). The components of trustworthiness, and conse-quently trust, have been explored in prior research (Blois, 1999;Mayer et al., 1995; Schoorman et al., 2007). Proposed categorizations in-clude ability, benevolence and integrity (Mayer et al., 1995); cognitiveand affective trust (Johnson & Grayson, 2005); and credibility andbenevolence (Ganesan, 1994; Ganesan & Hess, 1997).

Similar to Johnson and Grayson (2005), this study uses a two-component model of trust and trustworthiness, dividing trust into cog-nitive and affective components. Cognitive trust, or credibility, stemsfrom the seller's displayed ability to deliver the offer as promised. Thiscomponent of trust builds on the rational evaluation of the informationavailable about the seller, such as demonstrated product performanceor prior behavior of the product seller. In contrast, affective trust, orbenevolence, is based on the perceived willingness of the seller to en-gage in actions that show special affective consideration toward thebuyer. Affective trust builds on emotional bonds created between busi-ness partners and is further affected by interactions over the relation-ship lifecycle.

3. Methodology

This paper explores how intangibility and trust interact to influencebuyer–seller relationship initiation. Although previous research pro-vides ready constructs and typologies of both intangibility (Larocheet al., 2001) and interorganizational trust (Ganesan & Hess, 1997;Mayer et al., 1995) and evidence on how these constructs affectbuyer–seller relationships (Doney & Cannon, 1997; Gao et al., 2005),many of these studies have been relatively vague with regard to causalrelationships between variables, partly due to their reliance on cross-sectional quantitative data (Narayandas & Rangan, 2004). By contrast,qualitative methods are well suited to study phenomena that are notyet fully understood (Yin, 1994).

Due to these reasons, this study employs the comparative multiplecase study methodology proposed by Eisenhardt (1989). This method-ology focuses on inductive theory development and extension,

Please cite this article as: Valtakoski, A., Initiation of buyer–seller relationshtrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarma

yet allows the use of existing theoretical constructs. A research designwith multiple cases was used because comparisons between cases en-hance the richness of data and allow the emerging theory to be testedusing replication logic (Eisenhardt, 1989). Using more than one casealso enables triangulation between cases, resulting inmore precise con-structs and an understanding of the relationships between constructs(Eisenhardt & Graebner, 2007). These comparisons improve the validityand reliability of the findings.

3.1. Case selection

The software industry was chosen as the context for the empiricalstudy for three reasons. First, solutions are widely offered in thesoftware industry (Brown, 2000), and have also been studied in thiscontext (Neu & Brown, 2005). These solutions consist of softwarecomponents and various services ranging from simple help deskservices to advanced consulting services. They are used for long periodsof time, prompting long-term interactionwith the seller (cf. Narayandas& Rangan, 2004). Second, software solutions are mostly based on noveltechnologies and also include many knowledge-intensive services.Hence, they are highly complex and intangible, making them ideal forthis study. Third, good access to Finnish software firms enabled thecollection of rich data.

The case firms were selected based on their potential to contributeto theory development (Eisenhardt & Graebner, 2007). Three factorswere used to select the case firms: the type of offer, market maturity,and the relative size of the firm. Only firms operating in business-to-business markets were included. The maturity of the seller's market isrelated to the emergence of a dominant design (Anderson & Tushman,1990), which reduces the mental intangibility of an offer in the market.Firm size has a positive impact on seller reputation, which in turn in-creases the buyer's trust in the seller (Doney & Cannon, 1997). Largerfirms are also likely to enjoy better brand recognition, which positivelyaffects the buyer's trust and hence the purchase decision (Walley,Custance, Taylor, Lindgreen, & Hingley, 2007), and have typicallyinvested in offer standardization, which reduces mental intangibilityof the offer (Mittal, 1999).

Data from a Finnish software industry survey (Rönkkö et al., 2009)and the ORBIS database were used to select the case firms. Firm sizewas assessed both in terms of total revenue and number of personnel.Firm age, the revenue share of maintenance services – indicating alarge existing customer base – and revenue growth were used as prox-ies for market maturity since no direct measures were available. Basedon these criteria, the four firms listed in Table 1 were selected for thestudy. For confidentiality reasons all names of the firms and informantshave been withheld.

3.2. Data collection

A total of 24 semi-structured interviews were conducted with thepersonnel of the case firms as part of a larger research project. The inter-viewees, chosen in cooperation with the key informant, represented awide range of organizational levels and functions, including membersof the top management team, sales managers, product development



Table 2Results of the within-case analysis.

Characteristic Case

Alpha Epsilon Gamma Theta

Organizational characteristicsSize Medium Small Medium LargeAge in years 17 19 42 23Scope of business International Domestic Regional International

Mental intangibility: complexityNumber of components Low Medium Medium LowNumber of users Medium Low Low Medium

Mental intangibility: noveltyIndustry standards Yes Yesa No NoMarket maturity Mature Mature Mature Emerging

GeneralityMethodology focus Low High High HighIndustry focus Low Low High Low

Relationship initiation Difficultb Difficult Easy Easy

a Industry standard solution existed but was not implemented by the firm.b The firm had difficulties internationally; in Finland, it experienced less difficulty.


managers and service professionals. The use of multiple informantshelped to avoid single informant bias (Kumar, Stern, & Anderson,1993), and provided a comprehensive view of the case firm, its businessnetwork and customer relationships.

In addition to the four casefirms, two partner firms and one custom-er organization of Case Alpha were included in the study. The partnerfirms were represented by their respective CEOs, and the customerorganization informant was the project manager who had managedthe procurement of the case firm's solution. While limited in theirscope and coverage, these interviews enabled further triangulation byproviding a contrasting account on relationship initiation. The full listof informants is shown in Appendix A.

Because the goal of this studywas to understand how andwhy intan-gibility and trust affect buyer–seller relationship initiation, the inter-views were based on open-ended questions developed from a reviewof the literature. The informants were asked to describe the marketingand sales process of their solution as well as to explain how customerrelationships were initiated and developed. An overview of the inter-view guide is shown in Appendix B. Probing questions were also usedto further pursue interesting topics emerging during the interviewsand to clarify the informant's views. The average length of an interviewwas 64 min. All interviews were recorded and transcribed, amountingto a total of 247 pages of text. Field notes were also kept during andafter the interviews. They were used for developing insights from theinterviews and triangulation during data analysis.

3.3. Data analysis

The data analysis consisted of coding, within-case analysis andcross-case analysis phases (cf. Eisenhardt, 1989; Miles & Huberman,1994). The interview transcripts and field notes were first coded usingthe NVivo software package by analyzing the text paragraph-by-paragraph and linking each mentioned concept to tentative categoriessuggested by the literature review (cf. Miles & Huberman, 1994),creating a direct link from the codes to specific text passages. Additionalconstructs, in particular the identified mitigation strategies, wereallowed to emerge during the coding process, whenever the informantsmentioned constructs or relationships not covered by the tentativecategories. These emergent constructs were also continuously com-pared to previously codedmaterial to ensure their grounding in all data.

Inwithin-case analysis, the caseswas analyzed separately to developa general overview of each case and to infer case characteristics in termsof constructs of interest. In practice, this analysis began by combiningthe accounts of informants from each case for each of the constructs(i.e., codes) using NVivo. These accounts were then exported to aspreadsheet application and compared within each case. Based on acomparison of informant accounts, case notes, general notes, and exter-nally available financial data, a status was inferred for all constructs forthat case. More specifically, each case firm's offer was analyzed in termsof mental intangibility and generality. Due to the nature of software asan intangible good, analysis of physical intangibility was omitted.

Mental intangibility of the case firms' solutions was inferred byassessing their complexity and novelty, both of which have been linkedto difficulties in understanding what an offer actually does (Hobday,1998; Laroche et al., 2001). Offer complexity was inferred from thenumber of independent components and the level of standardization.Offer novelty was inferred by noting the existence of industry standardsin the case firm's market and the general maturity of the market as de-scribed by the informants. While neither of these factors directly mea-sures offer maturity, these factors provide a coarse estimate of theoverall maturity of the market. Offer maturity is subsequently relatedto how well potential customers understand what sellers in the markethave to offer.

Generality of the solutions was inferred from two factors: whetherthe solution supported some specific management methodology andwhether the solution was industry-specific. Management methodology


refers to a specific technique or function, such as total quality manage-ment or customer relationship management. A solution was industry-specific if it was targeted at a very narrow industry segment, while a ge-neric solution could be used across a number of industries.

Finally, during the cross-case analysis, the cases were compared toidentify emerging patterns in the empirical evidence and to developtentative explanations for these patterns. This analysis was facilitatedby cross-tabulated displays of within-case analysis results (Miles &Huberman, 1994). The emergent part of this study – the mitigationstrategies –was also inferred during this phase from the informants' ac-counts on how the firm was able or unable to convince new customersto buy their offer. Tentatively identified strategies were also comparedacross the cases and combined into coherent categories based on theircharacteristics and the relationship factor they affect.

4. Findings

4.1. Within-case analysis

The results of the within-case analysis are shown in Table 2. Thereported characteristics of the cases are relative to the other firms inthis study.

To summarize, the solutions offered by all case firms were highlycomplex software systems that improved the performance of thecustomer organization, requiring changes to the structure and processesof this organization. As such, the solutions were typically composed ofrelatively independent software components that could be recomposedin various ways. In addition, the functionality of the solutions was alsobroad, being used by a small to a moderate number of customeremployees in various user roles. These factors and the relative techno-logical novelty of the software and the supportedmanagementmethod-ologies contributed to the high mental intangibility of the solutions.However, the differences between the cases were relatively small.

The case firms' solutions were more varied in terms of generality.Enabled by flexible software technologies, some solutions were verygeneric and could be applied in many different customer contexts andsupportedmultiplemethodological approaches. The industry specificityof the case firms' solutions also varied; while some solutions weredeveloped for a specific type of firm within one industry, others weremarketed to a broad range of customer organizations across multipleindustries. For example, Case Gamma's solution supported a specificmanagement methodology and was marketed in only one industry. Bycontrast, Case Alpha's solution was very generic and unfocused interms of both methodology and industry.




In conclusion, the solutions of the case firms were, on the average,considerately intangible. The case firms, as illustrated by the followingquotations, also understood this:

“Sometimes […] what we sell is hard to define precisely, includingwhat benefit the customer gets.” (Account manager, Case Alpha)

“Our software is in away too open to be sold as-is […] by itself is sortof empty andwithout content; much of the functionality is based on[a] model we develop and how it serves the customer's needs.”(Development manager, Case Epsilon)

4.2. The impact of offer intangibility and trust on relationship initiation

Given the high intangibility of the case firms' solutions, it was notsurprising to find that they had experienced difficulties in initiating re-lationships with their customers. The case firms were aware that thecharacteristics of their solutions influenced the buyers' decision toenter into a relationship:

“In the end, [customers] are making abstract decisions, with very ab-stract results— they're hard tomeasure except by trusting in a positiveoutcome” (Vice President, Products, Case Alpha; emphasis added)

In other words, the informants thought that many of their solutions'outcomes were uncertain, and thus initiating a relationship with thecase firm constituted a risky decision. Given the intangibility of thecase firms' solutions, this suggests that intangibility increases the riski-ness of the offer, and negatively affects the propensity of the potentialbuyers to engage in a relationship. Thus, to generalize, the more intan-gible the offer is, the more risky it is and the less likely the potentialbuyer is to initiate a relationship with the seller by purchasing theoffer, other factors remaining constant.

The above quote also indicates that, faced with such risky decision,the buyer needs to trust the seller. Because a solution offer is typicallyboth mentally intangible and general, and hence risky, the buyer musttrust the seller to deliver the benefits of the offer as promised. Further-more, because solutions require longer-term relationships to createvalue, the buyer needs to trust the seller as an organization to keep itspromises and that it will not exploit the exposed position of thepotential buyer in the long run (Heide & Miner, 1992).

The evidence supports a threshold model of interaction between in-tangibility and trust. In other words, there appears to be a thresholdlevel of trust that is just enough to offset the perceived risk of the offerinduced by its intangibility. Disregarding the potential effects of benefitsand costs on the relationship initiation decision, the buyer thuscompares the riskiness of the offer with the trust he has in the seller.If the buyer does not trust the seller enough in comparison to theriskiness of the offer, he will not take the risk and will choose not tostart a relationship with the seller. If, in contrast, the buyer's level oftrust in the seller exceeds the threshold level of trust in comparison tothe perceived risk, the buyer is willing to take risk and engage in therelationship. Put differently, offer intangibility negatively moderatesthe impact of the buyer's trust in the seller on the propensity to initiatea relationship. This implies that a highly intangible offer is likely torequire great trust in the seller.

Conversely, an offer with low intangibility requires less trust fromthe buyer. However, even a nearly riskless offer requires some levelof trust in the seller. Low intangibility is thus not a sufficient condi-tion for initiating a relationship; a level of trust above the thresholdlevel determined by the offer intangibility is necessary for the deci-sion. This implies that even sellers with offer of low intangibilityneed to gain the buyer's trust.


The following evidence illustrates this threshold mechanism. Thecase firms Epsilon and Theta are similar in terms of solution intangibil-ity, as evaluated by product complexity, novelty, industry focus andmethodology focus. However, the two firms had experienced verydifferent reactions from potential buyers with regard to customerreferences:

“I have this impression that the value of our references is surprising-ly small; our potential customers often ask for contacts […] but nev-er make the call. It's a mystery to us.” (CEO, Case Epsilon)

“We're able to leverage our references. Obviously, our best refer-ences are global corporations […] we have a lot of public sector ref-erences in the public sector, and we've been able to use them withEuropean public sector customers.” (SVP, Strategy, Case Theta)

In other words, even though the case firm Epsilon had prior custom-er references, its potential buyers were uninterested in or unconvincedby these references. By contrast, case firm Thetawas able to successfullyuse its references in developing its relationship with new buyers. Thissuggests that there is a great difference between the two firms interms of the trust placed in them by potential buyers. It appears thatfor some reason buyers trust case firm Theta more than case firmEpsilon, resulting in different decisions about relationship initiation.Given the similarity of their offers, additional factors must thus influ-ence the buyers' behavior through their impact on the buyer's trust.

These factors were themitigation strategies that were identified fromthe informants' accounts during data analysis. The name mitigationstrategy was chosen because sellers can use these factors deliberatelyto influence the buyer's propensity to enter a relationship. Since thesestrategies affect intangibility and trust, they help us explainwhy certainfirms have little trouble convincing potential buyers while others strug-gle severely with initiating a relationship with them.

4.3. Mitigation strategies

A seller can affect the buyer's behavior in twoways. First, it can try toreduce the intangibility of its offer. These direct mitigation strategiesaffect buyer behavior by lowering the threshold of trust required for re-lationship initiation. Second, the seller can alternatively try to affect thebuyer's trust. However, the seller cannot directly influence the buyer'strust but instead must try to affect trust by improving its trustworthi-ness. These compensating mitigation strategies seek to raise buyer'strust above the threshold level of trust required by offer intangibility.

4.3.1. Direct mitigation strategiesDirect mitigation strategies seek to reduce the intangibility and,

consequently, the perceived riskiness of the offer by modifying it.These strategies, shown in Table 3, were identified during the casestudy, and are divided into two types: 1) strategies affecting mental in-tangibility and 2) strategies affecting the generality of the offer.

To generalize, direct mitigation strategies seek to “make intangiblesmore tangible” (cf. Levitt, 1981). In other words, these direct mitigationstrategies reduce intangibility by providing additional tangible evidenceof the offer to the potential buyer. Five distinct direct mitigation strate-gies were identified.

The first strategy, market standards, refers to the existence of non-technological standards in the market. These standards are comparableto dominant designs in product technology (Anderson & Tushman,1990) but instead standardize non-technological aspects of the solu-tions. For example, all customers in the market may use a specific stan-dard management methodology to solve certain specific problems. Thesellers then need to ensure their solution supports this methodology. Amarket standard is likely to reduce the mental intangibility of an offerbecause a standard specifies explicitly the characteristics and probable



Table 3Direct mitigation strategies.

Affected type of intangibility Strategy Description Quotations

Mental intangibility Market standards A market-wide standard for the solution,adopted by other sellers as well

“I'd like to think that [market standards]is an advantage to us.Customers are likely to think seriousabout using a small vendor […] andthere's a great risk whether this vendorcan deliver on its promise […] If thesmall vendor can show that it supportsstandards, customer is more likely toaccept the vendor's offering”(VP, Products, Case Alpha)

Solution definition The solution and its benefits aredocumented clearly and concisely

“[Customers] want solutions, but wedon't have them […] if a customer wants a[specific solution] they won't work withus since we don't have anything ready”(Consultant, Case Alpha)

Service standardization The seller's services and their benefits aredocumented clearly and concisely

“When consulting services are notstandardized; you could call them abstract[…] then a basic salesman is not necessarilyable to sell them […] We also want toimprove consulting quality, so that customers'expectations are closer to what we actually do”(VP, Regional sales, Case Theta; Emphasis added)“Packaging implementation services has madesales more certain […] we're able to show thecustomer that we have these [implementation]phases and this is the schedule we will follow”

(Development manager, Case Epsilon)Product demonstration A practical live demonstration of what

the fully implemented solution lookslike and what it can do

“We have a live demo [of the system]; we usereal data that we import and export, and showwhat the system looks like”(SVP, Regional sales, Case Theta)

Generality Focused solution The solution is explicitly targeted at a selectedmarket, providing more easily understandablebenefits for customers in that market

“Outside consultants have told us that weshould focus on a specific customerindustry […] but the problem is that ourproducts are so generic […] Of course it wouldbe a good thing to have a clearly defined targetmarket […] it would definitely help our business”(VP, Marketing, Case Alpha)“We try to find replicable solutions[from specific industries] For example, we havereferences in pharmaceutical firms, so we knowa lot about their processes, and then we canreplicate that [solution]”(SVP, Regional sales, Case Theta)


outcomes of the solution in a way that does not depend on the seller.Obviously, the sellers can try to affect the emergence of market stan-dards, but may do this only indirectly, as these standards need to be-come widespread in the market to be effective.

The second strategy, solution definition, is similar to market stan-dards, but is limited to the solution of a single seller. By standardizingand documenting its solution, the seller can reduce the mental intangi-bility of its offer, as standardization makes it easier for potential buyersto understand the functions and benefits of the solution. However, thisstrategy is likely to be less effective than the market standard strategybecause a market-wide standard is more likely to be adopted by poten-tial buyers.

On the offer component level, sellers can also use the service stan-dardization strategy. This strategy seeks to affect themental intangibilityof the offer by defining and documenting the characteristics and out-comes of its service components. Because services themselves are al-ways highly intangible, this strategy provides a more straightforwardmethod to affect offer intangibility. However, because it only affects ser-vice components, the impact on the overall offer intangibility is likely tobe limited, given the complexity of solutions (Hobday, 1998).

The fourth strategy, product demonstration, aims to convince poten-tial buyers by providing a realistic demonstration of what the solutionlooks like and can do in practical terms. While such demonstration can-not provide conclusive evidence of the value of the solution, it can


clarify itsmore tangible characteristics. In this sense, a pre-sales demon-stration of the solution is likely to reduce some of the vagueness regard-ing the solution, thus reducing the mental intangibility of the offer.

The fifth direct mitigation strategy, focused solution, essentially usesthe same standardization and documentation methods of reducing in-tangibility as the solution and service standardization strategies, butchanges the offer by focusing it on a certain customer segment. Thus,this strategy seeks to make the offer more specific in the minds of po-tential customers and reduce its generality by, for example, modifyingit to meet the needs of a certain industry or function within customerorganizations.

4.3.2. Compensating mitigation strategiesUnlike the direct mitigation strategies, compensating strategies

leave the offer unchanged and instead affect the relationship betweenthe seller and the potential buyer. These strategies seek to influencethe potential buyer's trust in the seller and, consequently, the buyer'spropensity to initiate a relationship with the seller. However, becausethe seller cannot directly influence the buyer's trust, the compensatingstrategies enhance the seller's trustworthiness (Blois, 1999), whichthen has a positive impact on the buyer's trust (Mayer et al., 1995). Intotal, nine compensating mitigation strategies were identified.

Five of these strategies, shown in Table 4, influence the cognitivetrust of the potential buyer. Because cognitive trust is based on rational



Table 4Compensating mitigation strategies influencing cognitive trust.

Strategy Description Quotations

References Customer references demonstrate crediblysuccessful past implementations of the solution.References may be specific to a geographical market,a vertical industry or a technology/methodology.

“It's a reference sales business. If you have two (banks)as references […] you have to be a really weird characterif you don't sell to other banks”(Channel sales manager, Case Alpha)“This is mostly a reference business. We have goodreferences both domestically andinternationally […]But obviously it's still meager in comparison to bigconsulting firms with world class references”(VP, Products, Case Alpha)

Expert recognition The offering of the firm is recognized or endorsed by athird party expert, such as market research firm or consultant.These experts provide the customer with a third partyopinion about the solution and the firm.

“As long as we are not in the big analysts'report, how can we get interest [from customers]?”(Channel sales manager, Case Alpha)

Expertise The seller demonstrates its expertise in the offering domainthrough, for example, formal education, publications andresearch community positions.

“Our competitors have gone further in that they havedeveloped their consultants' skills […] so that theyknow more about the details of implementing[a market standard] than we do”(Development manager, Case Epsilon)“With a strategy focused on certaincustomer industries […]we need to have top experts in those industries.And we have a lot of personnel with formaleducation in customer industries”(SVP, Case Gamma)

Market position If the focal firm can establish a dominant market position(market share), customers will consider the firm as acredible seller. This position may be limited to ageographical market.

“There's a strong player in [Finland] called [our firm]so it's not very tempting for our international competitors”(VP, Direct Sales, Case Alpha)“You could say that in Finland the market isquite saturatedand that we have a leading position”(SVP, Case Gamma)

Continuity The focal firm must demonstrate continuity in itsbusiness in terms of financial viability, availableresources and competence development.

“The [next] challenge is how to continuously convince thecustomer of our credibility as a vendor they can trust in”(Service manager, Case Alpha)


thinking and known facts about the seller (Johnson & Grayson, 2005),these strategies are more straightforward to employ than strategiesthat influence affective trust.

The first strategy, references, uses previous successful customer casesas evidence of the value of the offer. Customer references are a concreteway of demonstrating the value of the offer (Salminen & Möller, 2006)

Table 5Compensating mitigation strategies influencing affective trust.

Strategy Description

Personal relationships Personal relationships between the emof potential buyers and sellers

Brand The seller's brand creates affective trucapability and willingness to create beresults for the potential buyer

Sacrifice Sacrifices made by the seller (e.g., in tmeetings abroad and resources alloca

Local presence If the seller has local presence in a geomarket and knowledge about local coand cultural idiosyncrasies, it will be tmore than a non-local competitor.


and build trust in the seller through a transference process (Doney &Cannon, 1997). This strategy uses the referent power of previouscustomers, a type of peer recognition, to indicate offer benefits. Anotherexpression of this strategy is word of mouth (Buttle, 1998) – informalreferrals by satisfied (or dissatisfied) prior customers – that providespotential buyers with information about the capabilities of the seller.

Quotations

ployees “Usually the successful [partners]have contacts from […] their past jobs”(Channel sales manager, Case Alpha)“In Russia [customers] don't need asolution [or] consultancy […]they need a person whom they can trust.”(Partner CEO, Case Alpha)

st in itsneficial

“[Our firm's] brand is not strong enoughto create quick breakthroughs in new[international] markets” (SVP, Case Gamma)

erms ofted).

“[Middle East customers] look for trust inthe main vendor […]if our competitors send 40 people there andwe don't do anything,it's quite clear what the customers think ofthat” (Service manager, Case Alpha)

graphicalmpetitionrusted

“Our partners have the best knowledge onhow to [sell] in their own local environment”(VP, Marketing, Case Alpha)“Sometimes it takes us a long time to open a[new] market since we have to prove[potential customers] that we're there tostay and not just to try it out”(SVP, Regional sales, Case Theta)




However, not all references are alike: they may be specific to a geo-graphical market, an industry or a technology/methodology; referencecases similar to the potential buyer are the most important.

The second cognitive trust strategy, expert recognition, seeks to affectthe buyer's trust by demonstrating third parties' trust in the seller.Typically, these third parties are industry experts or analysts who areperceived to have a good knowledge of the firms and solutions in themarket. These experts can provide the buyers with an informed, inde-pendent opinion of the seller and its solution. As the buyer typicallytrusts these experts, this trust is again partly transferred to the seller.

The third strategy, expertise, seeks to affect the buyer's trust throughpublicly demonstrated capabilities of the seller. Unlike expert recogni-tion, where seller credibility is established on the firm level, expertiseinforms the potential buyer of the competencies of the individualemployees of the seller. These competencies can be seen as a proxy forthe overall capabilities of the seller. Thus, if the seller's employees candemonstrate their expertise in the domain of the offer, for example,through publications and research community positions, potentialbuyers are likely to perceive the seller as more trustworthy (Doney &Cannon, 1997; Johnson & Grayson, 2005).

The fourth strategy, market position, differs from the first three inthat it is based on the position of the seller in relation to competitionrather than its demonstrated capabilities. If the seller can establish adominant or visible position in the market (e.g., a large market share,known for innovativeness), potential buyers are likely to consider it ascredible, irrespective of its actual demonstrated capabilities. However,market positionsmay be limited to a certainmarket niche or geographicmarket.

The fifth cognitive trust strategy, continuity, seeks to establish theviability of the seller in terms of financial position, available resourcesand competence development. Industrial goods typically have long lifecycles (Thorelli & Burnett, 1981) and operating these solutions typicallyrequires continuous provision of maintenance services provided by theseller. Therefore, buyers seek to form long-term relationshipswith solu-tion sellers, and the potential cessation of these services in the case ofbankruptcy or acquisition is a risk for the buyer. The sellers thus needto demonstrate to potential buyers that it has the means and the inten-tion to remain in the market.

The second type of compensatingmitigation strategies aims to influ-ence the affective trust of the potential buyer. These strategies are im-portant because the use of strategies that affect the buyer's cognitivetrust is not always feasible, particularly in the early stages of the offerlife cycle. For example, if a new solution is based on a novel technology,no past references or third-party information is yet available to indicateits value. However, given the importance of interpersonal factors onpurchase decisions (cf. Jones, Busch, & Dacin, 2003), the impact ofthese strategies should not be underestimated even in the case of ma-ture offers. The four identifiedmitigation strategies influencing affectivetrust are shown in Table 5.

The first affective trust strategy, personal relationships, leveragesexisting interpersonal relationships between employees of the seller

PerceivedRisk

Intangibility

Trust

CognitiveTrust

AffectiveTrust

RelationshipInitiation

CompensatingMitigation

MentalIntangibility

Generality

DirectMitigation

Fig. 1. Framework of the impact of intangibility and trust on relationship initiation.


and potential buyer organizations. These interpersonal relationshipsare an antecedent forwider interorganizational trust, since they providea personal basis for building interorganizational trust (Fang et al., 2008).A common approach for sellers is to exploit existing social networks inmarketing their solution because the trust developed in previous per-sonal interactions is likely to positively influence the trust in the seller(Nicholson, Compeau, & Sethi, 2001; Weitz & Bradford, 1999).

An obvious way to improve the buyer's affective trust is the creationand maintenance of a brand. The seller's brand promotes affective trustfor the firm's capability and willingness to create beneficial results forthe customer (Walley et al., 2007). This trust is particularly importantfor the buyer's relationship with the entire seller organization(Michell, King, & Reast, 2001;Mittal, 1999). Branding is particularly im-portant in international markets, where direct personal contact withbuyers is not always possible.

The third strategy, sacrifice, can be used to demonstrate the seller'swillingness and capability to commit to the development of a relation-ship with the potential buyer. Developing this relationship often re-quires sacrifices from the seller (Gassenheimer, Houston, & Davis,1998; Ulaga, 2003), which may also be seen as making relationship-specific investments (Cannon & Perreault, 1999; Heide & Miner,1992). These sacrifices may take the form of having firm executives at-tend sales meetings, making the effort of traveling abroad for personalmeetings, and fostering social interactions between the seller's andthe buyer's employees.

The fourth and final strategy for influencing the buyer's affectivetrust is local presence. If a seller has a local presence in a particular geo-graphic market, including knowledge about local competition and cul-tural idiosyncrasies, it is likely to be trusted more than a generic globalplayer by potential buyers in that market (Zabkar & Brencic, 2004). Inpractical terms, having employees recruited from the specific countrywho speak the language of potential buyers is likely to foster greater af-fective trust than operating arms-length with a language not spoken bythe buyers. Local presence can also foster affective trust through culturalcloseness with buyers (Anderson & Weitz, 1989).

5. Discussion

This study has explored how offer intangibility and trust interact toaffect buyer–seller relationship initiation, and how the seller can affectthe initiation by using mitigation strategies. Based on a comparativecase study of four software firms, the findings of this study supportthe development of a conceptual framework (Fig. 1).

The firstmain finding of this study is that offer intangibility and trustinteract and affect relationship initiation through a threshold mecha-nism. In other words, intangibility was found to moderate the relation-ship between trust and relationship initiation. Intangibility increasesthe perceived riskiness of the offer, which has a negative impact onthe propensity of the buyer to initiate a long-term relationship withthe seller. In other words, the more intangible the seller's offer is, theless likely it is for the buyer to purchase this offer and initiate a relation-ship with the seller. To trigger the buyer to initiate a relationship withthe seller, the buyer's trust in the seller needs to exceed a thresholdlevel of trust to be determined by the perceived riskiness caused bythe intangibility. This model thus suggests that an increase in the levelof trust between the buyer and the seller can offset a higher risk causedby an increase in the intangibility.

The secondmain finding is that the seller can affect the buyer's pro-pensity to initiate a relationship by employing mitigation strategies.These strategies are organizational and market factors that affect eitheroffer intangibility or the buyer's trust in the seller, and thus also indi-rectly the buyer's behavior. The first class of strategies, directmitigationstrategies, seeks to lower the perceived riskiness of the offer by reducingits intangibility. The five identified direct mitigation strategies reduceintangibility mainly through standardization and explication of the so-lution, and influencing the emergence of market-wide standards for




solutions. The second class of strategies, compensatingmitigation strat-egies, seeks to influence the buyer's behavior by fostering greater trustin the seller that exceeds the threshold level. Five of the nine identifiedcompensating strategies affect the buyer's cognitive trust by usingextant references, third-party evaluations of the seller, and recognizedexpertise of the focal firm. The latter four strategies influence thebuyer's affective trust by appealing to personal relationships, brandand cultural similarity.

5.1. Relation to prior research

The findings reconfirm the prior result that intangibility increasesthe perceived riskiness of an offer to the potential buyer (Larocheet al., 2004). Concurrent with the seminal studies of Moorman et al.(1992) and Ganesan (1994), trust affects the buyer's propensity to en-gage in a relationship with the seller and is thus an antecedent of along-term relationship orientation and collaboration. The findings ofthis paper therefore provide further evidence highlighting the centralrole of trust in buyer–seller relationships.

The framework, shown in Fig. 1, is also in agreement with priortheoretical models that explain risk-taking behavior as a function ofperceived risk and trust in the seller (Mayer et al., 1995). The currentstudy adds to thesemodels by analyzing the impact of offer characteris-tics, in the form of intangibility, on the perceived riskiness of the offer,which affects the buyer's propensity to initiate a relationship with theseller.

However, Narayandas and Rangan (2004) argue that trust is alwaysdirected toward individuals. In contrast, the evidence here indicatesthat organizational-level trust matters for buyer–seller relationship ini-tiations. This discrepancy may be partly explained by differences in theempirical context: Narayandas and Rangan studied relationship initia-tion in mature commoditized industrial markets, while this study wasconducted in the software industry that is marked by emergingmarketsand technological uncertainty. In such a turbulent context, trust in theseller organization is required, as argued here, because the buying orga-nization is unlikely to have alternatives for sourcing the desired solutionand therefore has to trust the seller to deliver what has been promised.Trust in this context is not simply a “hygiene factor” (cf. Narayandas &Rangan, 2004, p. 72).

Furthermore, because offers in mature industrial markets are likelyto be less intangible due to standardization and the increase in customerknowledge, the results of this study suggest that the required level oftrust in the seller organization as a whole is lower. In this sense, thisstudy again contradicts the findings of Narayandas and Rangan(2004), who associate thematurity of themarketwith an increased em-phasis on interpersonal trust. Similarly, Heide and Weiss (1995) foundthat slower technological development and higher homogeneity tendto be associated with a closed seller consideration set and closer rela-tionships with extant sellers. The findings of this study thus indicatethat high levels of trust are also needed in at least some emergenthigh-tech markets.

This study contributes to the literature on buyer–seller relationshipsin four ways. First, the study improves our understanding of the devel-opment of these relationships in solution markets. In contrast to priorresearch on the topic (Lindberg & Nordin, 2008; Sheth & Sharma,2008; Stremersch, Wuyts, & Frambach, 2001; Töllner, Blut, &Holzmüller, 2011), this study has explored the impact of offer character-istics, emphasized the importance of trust, and focused on relationshipinitiation. Instead of studying the procurement of service components(Van der Valk, 2008), the buying process (Lindberg & Nordin, 2008;Töllner et al., 2011) and the impact on sales organizations (Sheth &Sharma, 2008), this study concentrated on the impact of the overalloffer characteristics on relationship initiations using the concept of in-tangibility. In particular, the current study highlights the importanceof trust in solution markets, as solutions are inherently risky. Withoutsufficient trust, no relationship is formed, and the value creation


potential of the solution is left unrealized. The findings suggest thatsome level of trust is always needed, even when the risk of the offer islow. Moreover, this study has also provided evidence about customers'perspective on solutions, underrepresented in the extant literature(Tuli, Kohli, & Bharadwaj, 2007).

Second, this study has increased our understanding of the effects ofoffer characteristics on buyer–seller relationships. Despite their obviousimportance, only few studies have directly addressed their impact onbuyer–seller relationships (Cannon & Perreault, 1999; De Ruyter,Moorman, & Lemmink, 2001). Offer characteristics have often beenobserved only indirectly, for instance, in terms of relationship-specificinvestments (Ganesan, 1994). Many authors have simply omitted thisfactor from studies of buyer–seller relationships (Doney & Cannon,1997; Ganesan, 1994;Wilson, 1995). The findings of this study indicatethat offer characteristics do affect relationship initiation and should notbe ignored when studying buyer–seller relationships.

Relatedly, this study further improves our understanding on howoffer characteristics affect buyer–seller relationship by characterizingoffers in terms of overall intangibility instead of only technologicaluncertainty (cf. Heide &Weiss, 1995). The extended concept of intangi-bility transcends the product-service dichotomy and hence allows theframework to be applied in different empirical contexts with differentcombinations of goods and services.

Third, this study contributes to our knowledge on the relationshipsbetween the factors associated with buyer–seller relationships. Despitenumerous studies that test a specific causal relationship between thesefactors (Claycomb & Frankwick, 2010; Ganesan, 1994; Jap & Ganesan,2000; Spekman & Carraway, 2006), there appears to be no consensuson exactly how these factors affect each other. In addition, manyauthors, such as Whipple et al. (2010), largely ignore the causal rela-tionships between these factors. Similar to Narayandas and Rangan(2004), this study has sought to unravel the relationships betweenthese factors through qualitative research. It was found that offer intan-gibility and interorganizational trust affected relationship initiationthrough a threshold mechanism. The findings also suggest thatadditional factors such as buyer expertise and brand affect buyer–sellerrelationship initiation indirectly through their influence on intangibilityand trust.

Fourth, this study has improved our understanding of how the im-pact of the relationship factors varies over the buyer–seller relationshiplifecycle. As suggested by Dwyer et al. (1987), Wilson (1995) andClaycomband Frankwick (2010), the impact of relationship antecedentsis likely to vary over this lifecycle. However, much of the extant researchdoes not distinguish between the relationship before and after initia-tion. This current study has provided additional evidence on the impactof antecedents during the initiation phase of the relationship. In partic-ular, the findings indicate the importance of trust for initial relationshipdevelopment.

The findings also challenge existing evidence about relationship ini-tiation. For example, Monczka, Petersen, Handfield, and Ragatz (1998)argue that affective trust is more important in the initial relationship,while cognitive trust becomesmore important in later phases. The find-ings of this study suggest that this is not always the case: because rela-tionship initiation precludes any extensive interaction with the seller,cognitive trust may be more important in the early phases of the rela-tionship. This discrepancy indicates that we do not fully understandthe function and priority of the two types of trust over the buyer–sellerrelationship life cycle.

5.2. Managerial implications

This study has significant implications for managers in both sellerand buyer organizations in industrial goods markets and, in particular,markets for solutions that consist of both products and services.Furthermore, given that most offers can be characterized using the




notion of intangibility, the results can also be applied in other markets,including high-tech products and professional services.

From the seller's perspective, the framework provides an explana-tion of how offer intangibility and trust interact to affect the buyer's be-havior. Themain finding is that buyers need to trust the seller regardlessof the characteristics of the offer. Thus, optimization of the offer is not asufficient condition for success in industrial markets. Some level of trustin the seller is also needed. Furthermore, the framework also impliesthat the more intangible, i.e., complex the offer is, the more trust isneeded. Hence, solution sellers need to think about how to encouragethe buyer's trust to initiate a collaborative relationship.

The second implication for sellers is that they can influence thebuyer's behavior using the identifiedmitigation strategies. These strate-gies provide concrete methods for improving the seller's trustworthi-ness in the eyes of the buyer. The strategies can also be used as achecklist to ensure that important aspects influencing buyer behaviorare not overlooked. In addition to influencing the initiation of relation-ships with individual buyers, the mitigation strategies can be used forimproving the firm's position in the market through the long-termdevelopment of, for example, expert resources or more focusedsolutions for specific market segments. Of course, these strategiesneed to be prioritized depending on the competitive, technical andindustry contingencies.

From the buyer's perspective, this study provides amodel for under-standing relationship initiation with sellers. By introducing theextended concept of intangibility, the study provides a novel perspec-tive on solution offers andwhy buyersfind themdifficult to procure. So-lutions are difficult to purchase because they are both mentallyintangible (new to the market, built on novel technology, complex)and generic (not made for a specific purpose, adaptable to futureneeds). Both these factors imply that solutions are likely to be consid-ered risky; hence, developing some level of trust in the seller is neces-sary before the initial purchase, as their benefits are uncertain.

The identified mitigation strategies provide a concrete checklist offactors that buyers should expect – and demand – from solution sellers.For example, is the offer clearly defined and does it fit our firm and in-dustry? Does the seller have employees who are considered experts inthe industry? By asking these questions, solution buyers can improvethe chances that the seller is reliable and trustworthy and hence likelyto be able to deliver an offer that is valuable in the long run.

5.3. Limitations

This study has both theoretical andmethodological limitations. The-oretically, the study was purposefully limited to the initiation phase ofbuyer–seller relationships. While the results provide a detailed view ofthe factors affecting this early phase, the applicability of the emergingframework in later phases of the relationship is unclear. In addition,the only outcome observed in this study was the customer's propensityto initiate a relationship with the seller. Many prior studies have ex-plored further outcomes, such as relationship quality and relationshipperformance. Future research could study later phases of the relation-ship and the impact on other outcome variables.

Another limitationwas that only intangibilitywas used to character-ize a solution offer. However, as suggested by earlier research, the rela-tive costs and benefits of an offer also affect buyer–seller relationshipinitiations (Whipple et al., 2010). Obviously, these additional factorspartly determine the importance of the offer to the buyer and hence in-fluence the buyer's behavior— a more valuable offer is likely to promptmore intense collaboration with the seller (Cannon & Perreault, 1999;Sheth & Shah, 2003). However, these factors were controlled to someextent by choosing case firms whose offers were relatively similar.These additional factors could, of course, be integrated with frameworkproposed here.

The study was also simplified by the narrow focus on interorganiza-tional trust. As indicated by prior studies (Doney & Cannon, 1997;


Ganesan & Hess, 1997), buyers differentiate between trust in the sellerorganization and in the individual employees within that organization.Future research is needed to studywhether interorganizational and per-sonal trust have a different impact on buyer behavior, and how they areindividually affected by the identified mitigation strategies.

For purposes of clarity, this study omitted many organizational andenvironmental factors that might have influenced relationship initia-tion. For example, the proposed framework ignores the buyer's propen-sity to trust, a factor known to directly affect trust (Mayer et al., 1995).Organizations also vary in their propensity to take risks (Sheth & Shah,2003). Future studies could incorporate these additional contingenciesas part of the framework.

Methodologically, the use of qualitative methods implies that thefindings are not statistically generalizable. Yet, given that the goal wasto elaborate and expand our theoretical understanding of relationshipinitiation, generalizability was not the immediate concern of thispaper. Establishing more generalizable results would require the useof quantitative methods and is left for future studies.

The othermethodological limitation of this studywas the reliance onthe sellers' perspective of the relationship, which somewhat limits thevalidity of the findings. However, the accounts of two service partnersand one customer organization did concur with the findings. Moreover,emphasis on the seller's perspective was prompted by the focus on thebuyer's ultimate purchase decision and how the seller can affect this de-cision instead of the buyer's internal buying processes.

6. Conclusions

This paper has explored the initiation of buyer–seller relationshipsin solution markets. The findings from a case study of four softwaresolution firms have increased our understanding of how relationshipfactors are related to each other at the start of the relationship initiationphase. More specifically, the evidence suggests that offer intangibilityincreases risk for the buyer, and consequently decreases the propensityto initiate a relationshipwith the seller. Intangibility can be counteractedby the buyer's trust in the seller, which ultimately dictates whether thecustomer initiates the relationship or not— higher intangibility requireshigher trust in the seller. The identifiedmitigation strategies affect intan-gibility and trust, andmay be employed by the seller to influence buyers'behavior.

Acknowledgments

The author would like to thank Kirsimarja Blomqvist for commentson an earlier version of this paper, and the Editor and three anonymousreviewers for their suggestions and helpful comments during the revi-sion process. The author also acknowledges the personal grant providedby the Jenny and Antti Wihuri Foundation for this research.

Appendix A. List of informants

hin

Case

ps: The impac.2014.10.015

Interviewee

t of intangibility

Organizationallevel

, trust andmitigatio

Title

Alpha
1 TMT VP, channel sales 2 TMT VP, product mgmt 3 TMT CEO 4 TMT VP, direct sales 5 Consultant Consultant, channel 6 Sales KAM, direct sales 7 TMT VP, marketing 8 Sales KAM, channel sales 9 Consultant Consultant, direct 10 Consultant Consultant, channel 11 Sales KAM, channel sales P1 Partner Partner CEO, UK
n strategies, Indus-


(


continued)

Case

Please cite thtrial Marketin

Interviewee

is article as: Valtg Management (

Organizationallevel

akoski, A., Initiation2014), http://dx.do

Title

P2
Partner Partner CEO, Russia C1 Customer Customer, Finland
Gamma
1 TMT SVP, unit executive 2 TMT VP 3 TMT VP
Epsilon
1 TMT CEO 2 TMT Development manager 3 Consultant Project manager 4 Sales Sales manager
Theta
1 TMT SVP, strategy 2 TMT SVP, regional sales 3 TMT SVP, regional sales
TMT = top management team; VP = vice president; KAM = key account manager.

Appendix B. Interview guide

B.1. Personal background

What is your current position and what kind of responsibilities doyou have?

How long have you worked at the current employer and what posi-tions have you held previously?

What is your educational background?

B.2. Customers

Who are your customers?What is the typical firm/organization size of your customers?Do you sell your solution to specific industries?How many existing customers do you have?

B.3. Offer

What is your offer to customers?What is the value proposition/benefit from your solution to

customers?What is the importance of your solution to customers?Who is the buyer for your offer?What kind of sales process do you use?

B.4. Product and technology

What products are included in your offer?What is the maturity of product technology in your markets?

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Dr. Aku Valtakoski is a post-doc researcher at the Department of Industrial Engineeringand Management at Aalto University School of Science. His research interests include un-derstanding the impact of industrial services on organizational learning, firmperformanceand industry evolution. His research has appeared in the Journal of Service Management,and has been presented at Academy of Management and European Academy of Manage-ment conferences. He gained his Ph.D. degree from Aalto University, Finland.










































































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