Why Firms Establish Adversarial Relationships

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Factors Contributing to Adversarial Relationships

In every business community there are unscrupulous actors who prioritize quick profits over long-term returns. However, a number of factors influence the attractiveness of adversarial relationships, as discussed below.

The Moral Economy

The moral economy is defined as the way people conduct themselves in market relationships to benefit the actors involved and the market economy as a whole. The moral economy is comprised of commercial culture and organizational norms and systems, and the way these play out through relationships. Some business cultures are more permissive than others, with adversarial relationships being viewed as an acceptable way of doing business.

Conflict

Conflict exists in any market system—and can produce a competitive force to drive innovation. But conflict along ethnic, religious, class or political lines can cause a proliferation of adversarial relationships, reducing industry competitiveness. Violent conflict can transform industries as infrastructure is destroyed, assets lost, actors displaced or killed, and market linkages severed. Instability and desperation can lead to short-term thinking, and mistrust may be pervasive and/or focused around conflict fault lines. Consequently, conflict-affected environments are often characterized by opportunistic behavior and the prioritization of immediate benefits over long-term relationships.

Disenabling or Shifting Business Environment

When the business environment lacks transparency or otherwise fosters corruption, or when systems are not in place to monitor and enforce agreements, firms offer lower returns to suppliers to off-set risk and are less likely to invest in supportive relationships. Similarly, economic, social or political shifts—especially those that undermine traditional structures—can create inequities of knowledge and power, leading to increased mistrust, risk and the incidence of adversarial relationships. These upheavals need not be unhealthy; they can include increased democratization, trade liberalization, economic development programs and the like.