Strategic capabilities and internet resources in procurement

Abstract

PurposeThis paper seeks to adopt a resource‐based approach to investigate the link between procurement capabilities, internet resources, and performance. It aims to cover two gaps in the operations management literature: the missing links between procurement capabilities and the performance of a firm, and the role of internet resources in shaping such links.Design/methodology/approachAfter the identification of two key capabilities in procurement and the introduction of internet resources, the relationships with performance are empirically tested in a sample of 93 firms in the textile and clothing industry in Italy. Data were analysed using a partial least‐squares technique and main and interaction effects were investigated.FindingsFirst, process efficiency and process integration capabilities provide a significant (and equally important) contribution to firm performance, but there are no complementary effects between them. Second, and contrary to expectations, the internet has been found to enhance the effect of process integration capability, but not that of process efficiency capability. Third, a new finding reveals that the internet not only interacts with each of these capabilities in procurement separately, but it also enhances the synergistic effect between them.Research limitations/implicationsThe investigation is based on a self‐reported cross‐sectional analysis, and it is specific to a single industry and the procurement of one type of material. Nonetheless, it suggests a number of different implications. Achieving excellence in procurement requires the development of distinct capabilities, because the management of core purchasing activities and the integration of procurement in the supply chain are not complementary. Contrary to common expectations, employing the internet in procurement has little power to reduce transaction costs, although it can be fruitful for improving inter‐functional coordination. The internet can also help in “putting the pieces together” by exploiting the otherwise latent complementary effects between procurement capabilities.Originality/valueThis paper is unique in that it employs a strategic management theory – the resource‐based view – to unpack the mechanisms through which procurement activities contribute to performance. It represents a first response to the call for research into the use of such theoretical frameworks which has recently been made in the operations management literature. The paper also offers the first empirical test of how the internet interacts with existing capabilities in the procurement domain, providing clear guidance on how to exploit its often undervalued potential.