1. Title: Factors influencing Coffee Growers’ Perception on Coffee Buyers Opportunism : A Case of Coffee Buyer – Seller Relationships in Tanzania. Thursday, August 27, 20151

2. 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 Thursday, August 27, 20152

3. 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). Thursday, August 27, 20153

4. 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? Thursday, August 27, 20154

5. 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. Thursday, August 27, 20155

6. 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) Thursday, August 27, 20156

7. 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. Thursday, August 27, 20157

8. 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. Thursday, August 27, 20158

9. Research model Thursday, August 27, 20159 OPPOR SALESVOL REDURA SUDEV Hypothesized effect Control Effect

10. 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. Thursday, August 27, 201510

11. 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 Thursday, August 27, 201511

12. 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). Thursday, August 27, 201512

13. 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 Thursday, August 27, 201513 Factor Component 12 OPPOR2.653.130 OPPOR4.810.063 OPPOR5.755.016 OPPOR6.646.015 SUDEV1.044.698 SUDEV2.061.748 SUDEV3.059.720 SUDEV4.036.619

14. Reliability  Reliability: Correctness or exactness>internal consistency >Cronbach alpha (Table 1.2). Thursday, August 27, 201514 ConstructItems No. of Items Reliability (Cronbach alpha) α Buyer opportunismOPPOR 2, 4,5 64.80 Transaction-specific supplier development SUDEV 1,2,3,44.71

15. 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 = b o +b 1 REDURA +b 2 SALESVOL +b 3 SUDEV+ ԑ Thursday, August 27, 201515

16. 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) Thursday, August 27, 201516

17. Thursday, August 27, 201517 Hierarchical Regression Model Independent variables Unstandardized coefficients t-value Tolerance (VIF) Constant b 0 5.02 2.66*** REDURA b 1 -.35 -1.66**.76 (1.32) SALESVOL b 2.13.61.83 (1.21) R 2 =.33SUDEV b 3 -.31 -2.67***.74 (1.35) R 2 adj =.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

18. Hypothesis Testing Hypothesis 1:  supported by coefficient term, b 3 = -0.31, t value = -2.67, p ≤0.01. Thursday, August 27, 201518

19. 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. Thursday, August 27, 201519

20. 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. Thursday, August 27, 201520

21. 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 Thursday, August 27, 201521