The influence of purchase-related risk perceptions on relationship commitment

Abstract

Purpose – Perceived risk is an intrinsic element of all organizational decision making and business relationships. It is closely interconnected with relationship commitment and strongly affects the buying decisions. Therefore, the organizations that best understand the risks perceived by their customers and hold the means that allow the customers to accommodate these risks, possess a significant competitive edge. The paper aims to discuss these issues.

Design/methodology/approach – This research surveys 165 companies on purchase-related risk perceptions and tests the effects of three risk dimensions on relations commitment, and the effectiveness of procedural control on managing these risks. Moderation effect of buying situation is also tested. Structural equation modelling is used to test the conceptual model on data from Finnish companies.

Findings – The participants in organizational buying experience three types of risks, product performance, personal psychological, and personal financial risks. Higher product performance and personal financial risks are found to decrease the customer’s commitment to the supplier, whilst higher psychological risks have a positive effect on relationship commitment. Procedural control is confirmed as an effective application in managing risks in organizational buying process. Buying situation significantly affects the model.

Originality/value – The present study shows that purchase-related risk perception is a multidimensional construct which consist of both organizational and individual-level aspects. The authors also provide new insights into the effectiveness of procedural control on mitigating organizational risk perceptions in different buying situations.