The Effects of Strategic Supplier Selection on Buyer Competitive Performance in Matched Domains: Does Supplier Integration Mediate the Relationships?

Abstract

This research examines whether the strategic selection of suppliers based on supplier new product development capability, supplier quality capability and supplier cost capability directly and/or indirectly enhances the buyer's competitive performance capabilities in the matched domains of buyer product innovation, buyer quality and buyer competitive pricing, respectively. The resource‐based view of the firm is used to frame the direct effects of strategic supplier selection as the capability of a buyer to select a supplier with resources and expertise in a specified domain should enhance the buyer's performance capability in the “matched” domain (but not necessarily buyer performance in “unmatched” domains). Two supplier integration mechanisms — supplier partnerships and supplier development — are modeled as potential mediators, implying indirect paths. The research hypotheses focus on both direct and indirect effects for each of the matched domains, but do not posit relationships across different domains. For example, supplier selection for new product development capability should impact buyer product innovation (matched domains), but should not necessarily impact buyer quality capability (unmatched domains). The direct effects of strategic supplier selection on buyer performance are supported in each matched domain; however, the indirect effects through supplier integration are not significant for the matched domains. The results identify strategic supplier selection as a promising source of competitive advantage in the resource‐based view sense. In contrast, supplier development and supplier partnership do not provide performance benefits in a given domain above those arising from strategic supplier selection in the same domain; i.e., it is the nature of the resources selected that is key to competitive advantage.