Employing information technology in purchasing: Buyer-supplier relationships and size of the supplier base

Abstract

Despite the fact that U.S. companies have made substantial investments in information technology (IT), relatively little empirical research has focused on the impact of IT investments used to support purchasing functions. Such a phenomenon deserves greater attention by industrial marketers in light of two widely recognized trends, the shift away from arms-length exchange relationships and the shift toward supplier base reductions. In this article we present a series of propositions related to how the extent of IT investments and their degree of use in purchasing may alter the nature of buyer-supplier relationships, that is, foster the development of closer relationships overall, and also contribute to the reduction of the number of vendors being used. The results of an empirical test of our propositions suggest that IT investments enhance buyer-supplier relationships indirectly, mediated by the degree of IT use in transaction processing, while also directly contributing to the reduction of supplier bases. Implications and directions for future research are also discussed.