Procurement Relationships Research Articles

Psychological Contracts: Framework for Relationships in Construction Procurement

AbstractThe existence of psychological contracts (PC) in construction procurement is examined. Specific objectives are to identify the presence of the PC in construction project teams and catalogue...

Manufacturing complexity and inter-firm coordination: evidence from the textile-exporting firms of Pakistan

This study explores the concept of manufacturing complexity relating to textile fabrics and examines whether the interplay between manufacturing complexity and specific assets enforces inter-firm coordination in international textile procurement relationships. It also accentuates the role of turnkey suppliers in international value chains. The research findings demonstrate that the combined presence of manufacturing complexity and supplier held specific assets leads to higher inter-firm coordination that is crucial for achieving order compliance. Moreover, the results indicate that inter-firm coordination is highly effective in mitigating the prospect of opportunistic behaviour in international procurement relationships. By describing the vital procedural techniques and aesthetic features that are involved in manufacturing a textile fabric order, this study provides valuable insights about manufacturing complexity. Further, the empirical findings demonstrate that international buyers need closer coordination with their key suppliers to mitigate performance ambiguity regarding order compliance for complex customised products.

Manufacturing complexity and inter-firm coordination: evidence from the textile-exporting firms of Pakistan

This study explores the concept of manufacturing complexity relating to textile fabrics and examines whether the interplay between manufacturing complexity and specific assets enforces inter-firm coordination in international textile procurement relationships. It also accentuates the role of turnkey suppliers in international value chains. The research findings demonstrate that the combined presence of manufacturing complexity and supplier held specific assets leads to higher inter-firm coordination that is crucial for achieving order compliance. Moreover, the results indicate that inter-firm coordination is highly effective in mitigating the prospect of opportunistic behaviour in international procurement relationships. By describing the vital procedural techniques and aesthetic features that are involved in manufacturing a textile fabric order, this study provides valuable insights about manufacturing complexity. Further, the empirical findings demonstrate that international buyers need closer coordination with their key suppliers to mitigate performance ambiguity regarding order compliance for complex customised products.

The Influence of Collaboration in Procurement Relationships

Supply Chain Management often requires independent organizations to work together to achieve shared objectives. This collaboration is necessary when coordinated actions benefit the group more than the uncoordinated efforts of individual firms. Despite the commonly reported benefits that can be gained in close relationships, recent research has indicated that collaboration attempts between purchasing firms and their suppliers have not been as widespread as anticipated. Using a survey of procurement professionals, this research investigates how the purchasing function utilizes collaboration in its supply chain relationships. Structural equation modeling is used to identify how information sharing, decision synchronization, incentive alignment, collaborative communication, and trust impact collaboration, as well as how collaboration impacts performance. Results from 86 survey responses indicate that firms are still not fully utilizing collaborative relationships.

Studying ‘cost as information’ to account for construction improvements

Contractors throughout the construction supply chain develop and use cost information. By treating ‘cost as information’, insights are generated into how cost information is created and flows from work carried out to a client cost. A case study of a main contractor’s supply chain involved semi-structured interviews, workshops and document reviews. We considered whether contractors’ current costing practices used for the purpose of pricing and cost control could support decision-making about improvements through the supply chain. The results show that firms recognize that current costing practices do not provide a good representation of work carried out. Cost information that is useful in a narrative that seeks to improve site operations is either not created or hidden in layers of assumptions and lost as it does not cross the boundaries between organizations. This implies that the implementation of current practices of costing in building information modelling will not increase the effectiveness of modelling construction costs for the purpose of improvements. However, cost information that is useful in decision-making about improvements could be created. This could be achieved but requires a systemic change, where new representations of cost are tied to work processes used within more stable procurement relationships.

Performance Effects of Global Account Coordination Mechanisms: An Integrative Study of Boundary Conditions

Although many multinational companies have instituted global account management (GAM) programs to coordinate selling activities to better serve and retain their key global customers, evidence of the effectiveness of their GAM coordination efforts is elusive. Viewing GAM coordination as an organizational design issue in managing vertical procurement relationships, the authors draw on global marketing strategy, organizational design, and relationship marketing theories to study how the performances of GAM coordination mechanisms vary with a host of strategic, relational, and environmental conditions. The conceptual model is tested using data collected from a cross-national sample of more than 200 global account managers. The results show that although GAM relational coordination and GAM operational coordination both have positive effects on GAM performance, they do not perform uniformly well under various boundary conditions. In other words, the performance of a GAM coordination mechanism depends on its fit with the operating context.

Governance of procurement relationships in the wine industry

Purpose – The purpose of this study is to examine three governance structures (market, contract and vertical integration) that are commonly used to coordinate procurement relationships between grape growers and winemakers in the wine industry. This paper aims to adopt a multi-theoretical approach combining transaction cost and relational exchange theories to explore the influence that trust and a state’s legal system have on the choice of governance mechanism. The authors propose arguing that, in the absence of an efficient legal system, trust must exist between parties to facilitate the pervasive use of contracts. Design/methodology/approach – The empirical results are derived from mail survey responses of 111 South African and 116 New Zealand wineries. These two countries were selected because of the variances in the efficiencies of their legal systems. Multiple regression models were used to investigate the importance that parties place on trust and the legal system when considering the use of incomplete contracts to govern supply chain relationships that are characterised by high asset specificity and high uncertainty. Findings – It was found that contracts are frequently used to govern transactions in both countries, and that trust between parties is an effective substitute for an efficient legal system in governing contractual relations. Specifically, it was found that trust between parties is the major motivating factor for the use of contracts in South Africa, overcoming the weakness of the legal system, while reliance on the legal system to enforce contracts underpins the New Zealand industry. Originality/value – This study offers a direct cross-country comparison drawn from a population study of two major wine-producing countries that has not been attempted before. In the three models, measures were included to capture the effectiveness of a state’s legal system to extend the governance literature.

Direct farm, production base, traceability and food safety in China

With the rapid growth of China's economy, rising demand for safety food has been accompanied by frequent food safety scandals. Given that China's farming is dominated by millions of small-scale farms, ensuring food safety is a major challenge facing the public and private sectors. The direct farm (DF) program, initiated in 2008, represents one of the government's major initiatives to modernize the distribution of fresh fruit and vegetables (FFV) and improve food safety. Under the DF program, participating national and international retailers are expected to establish more direct procurement relationships with farm communities. While it is often claimed that greater participation by retailers in the production and post-harvest processing implied the DF program will lead to improved quality, safety and traceability, systematic evidence remains elusive as existing studies are largely narrative, based on case studies, or theoretical inference. Little empirical evidence is available for a broader evaluation of the DF program. This paper aims to fill this gap by assessing the overall performance of a single retailer's DF experience with respect to the procurement and food safety of FFV. We use data from a survey of production managers of 35 DF production bases (PBs) spread across 11 provinces, 3 cities and 1 autonomous region in China. The results show a mixture of opportunities and challenges. On one hand, the DF program improves production practices and distribution channels of FFV produced on its PBs, thus facilitating the move of China's food system towards improved food safety compliance. On the other hand, significant heterogeneity in the traceability of food and the ability of DF to meet higher safety standards is evident both across major product categories and across household-operated vs. firm-operated PBs. The paper concludes with policy implications.

The role of effective relationship management in successful large oil and gas projects

Project success has been a central topic in the project management literature. The high volatility attended with oil and gas upstream projects has enhanced the need for relational contracting approaches. Successful Large International Engineering and Construction Projects can deliver value to project parties (clients, sponsors, contractors, subcontractors, etc.) and other stakeholders (users, investors, communities affected by the project, etc.) in the project supply chain. Supply chain and procurement strategies play a significant role in project success, due to their impact on project value and on the way project risks are managed. In this study, we review insights gleaned from 13 oil and gas senior procurement executives, from which we derive a set of propositions and some preliminary results related to the success of these elements. In general, we find that relationship management plays a critical role in the outcomes associated with oil and gas project success. Procurement relationship management practices affect the way the needs of project stakeholders outside the contract (users, suppliers, communities affected by the project, etc.) are attended as well as the way project relationships are managed inside and outside project teams. As a result, those strategies are also related to important drivers of project success, such as relationship and stakeholder management.

Relationship risk perception and determinants of the collaboration fluency of buyer–supplier relationships in public service procurement

Public service procurement effectiveness has been emphasized as a major challenge in recent years. Well-managed partnerships between buyers and suppliers are needed in this domain to achieve collaboration fluency and improve the effectiveness of procurement. The main objective of this study is to determine which issues managerial teams must emphasize when aiming to create a solid partnership based on pre-existing collaborative relationships. The originality of this study lies in the domain approached (public service procurement in social and healthcare services), as well as the variable it attempts to explain (collaboration fluency). The study investigates two major issues: firstly, how collaboration risk perception influences communication, trust, and the governance of a collaboration and, secondly, how these factors (communication, trust, and governance) affect collaboration fluency. The study is performed via a survey regarding the collaboration of the public sector with organizations from the private and third (non-profit) sectors within public service procurement. The empirical evidence was gathered with a structured online questionnaire that was sent to organizations from the private and third sectors that provide services in the social and healthcare domain. The results indicate that in collaborative relationships in public service procurement, the higher the perceived relationship risks are, the more positive effects they will have in terms of increasing trust, communication, and the quality of collaboration management. Furthermore, communication, governance, and administration have strong influences on collaboration fluency.

ESTRATEGIA Y MERCADO DE TECNOLOGÍA: TIPOLOGÍA DE EMPRESAS INNOVADORAS ANDALUZAS

This paper analyzes the role played by innovative companies of Andalusia in the technology market and recognizes if they follow a Technological Strategy as a tool that sets the goals and guidelines to be followed in relation to the use of technology. We performed a survey process to 201 Andalusian innovative companies buy and / or sell technology whose data were analyzed with a mixed method of cluster analysis. Six types of companies have been identified basing on their position in the market, sectorial and territorial traits, the geographic scope of the relationship and the provision of skills, capabilities and internal resources for innovation. The technology procurement relationships abroad are predominating, while the sale of technology is reduced and regional.

Small manufacturing businesses: their interest in securing contracts from public agencies

A national survey of small manufacturing businesses (fewer than 100 employees) reveals prevailing attitudes about doing business with public agencies. Respondents describe a two tiered, nine variable model as representative of the public sector procurement process. Findings provide government agencies and private sector marketers with operational clues on what may help initiate and sustain procurement relationships with smaller suppliers.

Do relationship history and norms matter in overcoming inter-organisational difficulties in the procurement function?

This study underlines the importance of relationship duration and how it affects procurement and purchasing relationships. Relationship history and relational norms have become significant factors for explaining the scope and stability of purchasing relationships (Dwyer et al., 1987; Sweeney and Webb, 2002; Liu et al., 2009). Relationship duration facilitate in developing a combination of behavioural components, contractual arrangement and trust that overcome organisation problems in inter-firm businesses and it offers an opportunity to ensure stability, and comparative advantages for the procurement partners. The authors explore how the prior length of an inter-firm relationship helps in handling problems associated to behavioural uncertainty, opportunism and ex post transaction costs. The findings highlight the critical role of the prior length of business relationships and how it can help in attenuating organisation problems in procurement relationships. This study supports that relationship duration is a significant antecedent in overcoming organisational difficulties in business relationships and also enhancing relationship quality.

Fine-Tailored for the Cartel-Favoritism in Procurement

In this paper, we investigate the interaction between two firms, which are involved in a repeated procurement relationship modeled as a multiple criteria auction, and an auctioneer (a government employee) who has discretion in devising the selection criteria. Our main result is that favoritism substantially facilitates collusion. It increases the gains from collusion and contributes to solving basic implementation problems for a cartel of bidders operating in a stochastically changing environment. A most simple allocation rule where firms take turns in winning, independently of stochastic social preferences and firms’ costs, achieves full cartel efficiency (including price, production, and design efficiency). In each period the selection criteria is fine-tailored to the in-turn winner: the “environment” adapts to the cartel. This result holds true when the expected punishment is a fixed cost. When the cost varies with the magnitude of the distortion of the selection criteria (compared to the true social preferences), favoritism only partially shelters the cartel from the environment. We thus find that favoritism generally facilitates collusion at a high cost for society. Our analysis suggests some anti-corruption measures that could be effective in curbing favoritism and collusion in public markets. It also suggests that the much-advocated rotation of officials is likely to be counter-productive.

Social enterprise and public sector voices on procurement

PurposeResearch on social enterprise and social entrepreneurship has sought to examine the role that can be played by selling to the public sector in the generation of social enterprises' traded income. The purpose of this paper is to analyse the perceived barriers to engaging in a procurement relationship from the point of view of social enterprise practitioners and public sector procurement professionals.Design/methodology/approachThis paper stems from focus group work carried out during 2007 with social enterprise practitioners and public sector procurement professionals.FindingsThe analysis of these “voices” demonstrates the progress that has been made in various parts of the UK towards a procurement relationship between the public sector and the social enterprise sector that is more mutually beneficial. However, it also permits reflection on the barriers and challenges that still remain for social enterprises that wish to sell to the public sector.Originality/valueThis paper, therefore, highlights the key areas of support that are needed by both sides in order to create a more productive two‐way relationship. In turn, this allows the paper to reflect on how future research into this topic can support action “on the ground”.

The Economics of Relational (Social) Capital: Exploring the Value of Exchange Relationships in Industrial Procurement

Organization scholars have highlighted the value of relationships in fostering effective exchange, yet the empirical evidence supporting such claims remains largely indirect. We directly measure the value of ongoing relationships between suppliers and a large buyer, using the buyer’s choices in internet-enabled reverse auctions to estimate the degree to which stronger relationships with suppliers increase its willingness to pay for standardized commodity parts. This setting permits us to focus more sharply on the anticipated benefits generated by pre-existing relationships, while minimizing the confounding influence on partner selection that social attachments associated with these relationships may generate. Our empirical analysis suggests that repeated interaction between firms leads to the formation of relational assets that share a number of properties with physical capital. We thus label these assets “relational capital.” We find evidence that suggests that both social attachments and incentive considerations underpin the value of relational capital. Further, we find that relational capital exhibits more value in some settings than in others and that it exhibits diminishing marginal returns.

Asset specificity roles in interfirm cooperation: Reducing opportunistic behavior or increasing cooperative behavior?

Extant research offers two alternative mechanisms for relating the asset specificity of a cooperative relationship to partnership performance. Transaction cost economics argues that the specific assets invested in a partnership increase the hazards of opportunism. As firms select appropriate governance structures to reduce opportunistic behavior, performance increases. On the other hand, relational exchange theory suggests that asset specificity enhances the trust between partners, which in turn leads to more cooperative behavior and higher partnership performance. This paper tests both mechanisms simultaneously on a sample of procurement relationships between Hong Kong trading firms and their Chinese suppliers using SEM methods. Our results support the predictions of relational exchange theory more than those of transaction cost economics. The paper also discusses the role of the Chinese context on theory application.

Coordination in Vertical Relationships: The (Un) Importance of Information Flows

We argue that common ground - knowledge that is shared and known to be shared - can reduce the need for information flows in coordinating specialized activities within the firm, compared to between firms. Consistent with our predictions, in a sample of procurement relationships in the automobile industry, we find that the relationships within the firm involve a lower level of information sharing compared to market relationships once we statistically ensure comparability of transactions within and between firms. This does not appear to be sub-optimal for performance. Tacit coordination based on common ground may therefore be a distinctive feature of how the division of labour is managed within the firm.

Multi-Criteria Markets: An Exploratory Study of Market Process Design

This paper explores market process design for multi-criteria markets using the electronic market process design work of Ribbers et al. (2002) and Kambil and van Heck (1998). The study utilizes a case study of a market intermediary in the utilities sector to examine how multi-criteria markets differ from price-only alternatives. The study reveals significant differences in the role of the intermediary in the operation of multi-criteria markets, as well as marked differences in market process design in the areas of authentication, product representation and communications/computing. We conclude that these differences represent a fundamental shift in B2B procurement relationships from those described by Kaplan and Sawhney (2000) towards strategic sourcing.

Subsistence and Food Sharing in Northern Siberia: Social and Nutritional Ecology of the Dolgan and the Nganasan

Traditional foraging activities and extensive food sharing are critical to the contemporary nutritional well-being of Dolgan and Nganasan people in the Taimyr Region, Russia. Despite recent economic transformations geared toward free-market capitalism in the post-socialist era, since 1991, a native communal resource-management regime has developed. This article outlines the social and nutritional significance of subsistence and food sharing within a remote indigenous community in Arctic Siberia. Empirical data on procurement processes and relationships, along with data on food distributions and rationales, are discussed. These data are relevant to questions about food sharing and its significance in hunting-and-gathering economies and the evolution of human sociality.