The Impact of Online Ratings on Upstream B2B Relationships

Among the various aspects of a firm’s digital presence, the firm’s online reviews are now a common and increasingly important source of information. Extant online reviews literature has extensively examined the downstream impacts of online review rating, in which a firm’s rating signals the firm’s quality to its downstream end-users and consequently drives the firm’s downstream sales. However, little is known about the implications that a firm’s online rating may have for other channel members, such as the firm’s upstream supplier. Combining signaling theory with power–dependence literature, I investigate the upstream impact of a firm’s online rating on the financial outcomes of the firm’s supplier. Contrary to the common expectation, I find that under certain conditions, an increase in a firm’s online rating leads to a decrease in the supplier’s sales to that firm. I theorize that a supplier’s sales to a firm are determined not only by how much the firm sells downstream, which tends to increase with a higher rating, but also by how the firm handles its purchases upstream from the supplier. The findings suggest important implications for managers of both the firm and supplier companies in utilizing publicly available online information such as a firm’s online rating to manage the upstream firm-supplier relationship.