The Role of Formal and Informal Control Mechanisms for Supplier Selection: Experimental Evidence

Abstract

Previous research in operations has emphasized the importance of internal integration for firm performance. This study shifts the focus to determinants of internal integration and experimentally investigates the role of management control mechanisms for the integration of marketing information about customer preferences in supplier selection decisions. To derive our hypotheses, we draw upon relational framing theory and the distinction between formal and informal control mechanisms. Our experiment manipulates two types of formal control mechanisms and the informal control mechanism so that each control mechanism either evokes a group or an individual frame. With respect to the different combinations of formal control mechanisms, we show that only the combination in which both formal control mechanisms evoke a group frame lead to a high degree of customer-oriented supplier selections. More importantly, we show that the informal control mechanism is driving the degree of customeroriented supplier selections when formal control mechanisms evoke conflicting frames, while the informal control mechanism does not lead to any difference when both formal control mechanisms evoke a group frame. Our results contribute to the literature about internal integration and the management control literature.