Effect of strategic purchasing on supplier development and performance: a structural model Cristobal �� Sanchez-Rodr��guez���� School of Administrative Studies, York University, Toronto, Canada Abstract Purpose ��� This purpose of this paper is to introduce strategic purchasing (SP) and supplier development (SD) as constructs that could have the potential to contribute to the success of relationship marketing efforts. Based on the relational view of the firm, the authors propose that SP is an antecedent of SD practices and can create value for the buying firm in terms of better purchasing performance. Design/methodology/approach ��� Hypotheses derived from the key features of SP and SD practices are tested using structural equation modeling through field research on a sample of 306 manufacturing companies in Spain. Findings ��� Findings from this study indicate that there is significant evidence to support the hypothesized model in which SP exerts a direct influence on SD practices and purchasing performance, as well as an indirect impact on purchasing performance mediated through SD. Research limitations/implications ��� Further research is necessary to increase our understanding of a buyer���s strategic purchasing and supplier development practices and more specifically how suppliers could develop a supporting environment to facilitate the strategic alignment of these two concepts. The limitations of the survey are also discussed. Practical implications ��� The findings from this study provide supplying firms with an understanding of how buying firms use SD to deploy their SP initiatives in order to achieve improvements in purchasing performance. Originality/value ��� While there is some literature analyzing SP and the implications for buyer-supplier relationships, the relationship between SP and SD practices and their effect on purchasing performance has not been yet analyzed. Keywords Buyer-supplier relationships, Purchasing, Supply chain management Paper type Research paper An executive summary for managers and executive readers can be found at the end of this issue. 1. Introduction Industrial markets have undergone fundamental transformations during the last decade making buyer- supplier relationships a matter of strategic analysis for industrial buyers and marketers (e.g. Cannon and Perreault, 1999 Dyer and Hatch, 2004 Jap, 1999, 2001 Wanger and Johnson, 2004). Researchers have suggested that buyer- supplier relationships are undergoing a paradigm shift from transaction-oriented to relation-oriented, thus, making relationship marketing an increasingly important organizational concern for business. Critical to the success of relationship marketing is the exchange of resources between buyer and supplier (Hunt and Morgan, 1994). In this regard, both supplier (Perrien et al., 1995 Perrien and Ricard, 1995) and buyer (Campbell, 1998, p. 199) play a key role in ensuring the overall quality and effectiveness of relationship marketing efforts. As one author has argued: Unsuccessful relationship marketing efforts by suppliers may not necessarily be attributed to an inherent weakness in the supplier, but rather to organizational barriers and constrains within the buying firm that inhibit the successful implementation of relationship marketing practices (Campbell, 1998, p. 199). Thus, successful relationship marketing requires that managers have a clear understanding of how each partner can contribute to this relationship building process. In this context, a buying firm���s efforts towards strategic planning in purchasing (strategic purchasing) and the realignment of a supplier���s capabilities to match the buyer���s needs (supplier development) has the potential to contribute significantly to the success of relationship marketing. Strategic purchasing has been identified as a critical antecedent of supplier involvement in the buyer���s new product development process (Carr and Pearson, 2002) and the implementation of effective communication and evaluation practices with suppliers (Carr and Pearson, 1999), thus making it an integral part of building successful buyer-supplier relationships. Similarly, supplier development has also been acknowledged to be a critical element of collaborative buyer-supplier relationships and has been identified to play a critical role in improving a supplier���s capabilities and performance (Krause, 1999 Krause et al., 2000). However, to date there has been no direct effort to analyze the relationship between strategic purchasing and supplier development practices. Thus, we use the relational view of the firm (Dyer and Singh, 1998) to gain a better understanding of this issue by empirically examining the implementation of a buyer���s strategic purchasing and supplier development activities, and relating them to the buyer���s The current issue and full text archive of this journal is available at www.emeraldinsight.com/0885-8624.htm Journal of Business & Industrial Marketing 24/3/4 (2009) 161���172 q Emerald Group Publishing Limited [ISSN 0885-8624] [DOI 10.1108/08858620910939714] 161

purchasing performance. Next, we describe the research model, methodology and results. Finally, we discuss our research findings and the limitations of the study. 2. Literature review and research model In recent years, researchers have adopted a relational approach to explain how buyer-supplier relationships can be a source of competitive advantage. The relational view (Dyer and Singh, 1998) argues that firms who combine resources in unique ways may realize a competitive advantage through four important mechanisms: joint investments, knowledge exchange, combining valuable and scarce resources, and more effective governance. Thus, both supply management and relationship marketing activities are critical elements to a firm���s competitive advantage. However, for such efforts to be effective it is necessary that they are aligned with the firm���s overall goals and strategies. Thus, for a supplying firm to effectively address the needs of the customers, it would need to strategically target individual customers (buyers) and realign the firm���s capabilities to match the customer firm���s buying priorities. Similarly, the buying firm���s supply management activities need to be strategically oriented towards the accomplishment of the firm���s overall goals and strategies. This is known in the literature as strategic purchasing (Carr and Pearson, 1999 Carr and Smeltzer, 1997). Thus, any effort on the part of the buying firm to realign the supplying firm���s capabilities with the buyer���s needs should be part of the buying firm���s planned strategy (strategic purchasing) if they are to contribute to the attainment of the firm���s overall goals. This suggests that strategic purchasing should precede the adoption of supply management practices including supplier development. Figure 1 depicts our theoretical model that links strategic purchasing with supplier development and purchasing performance. We model strategic purchasing as a direct antecedent of supplier development and purchasing performance. 2.1 Linking strategic purchasing and supplier development The literature has provided support for the strategic importance of purchasing in the corporate strategy and provides a classic approach to strategy formulation that identifies purchasing as a key functional element to address the business overall objectives (e.g. Porter, 1980). It has been argued that the focus of purchasing should be on strategies that are planned, implemented, and controlled in order to achieve the long-term goals of the firm (Aguilar, 1992) and when purchasing���s operations are designed around the needs of the total organization, then, purchasing has the ability to support the corporate planning framework and the corporate value system (Freeman and Cavinato, 1990). This is referred to as strategic purchasing. Carr and Pearson (1999) provided a formal definition of strategic purchasing as the process of planning, implementing, evaluating, and controlling strategic and operating purchasing decisions for directing all activities of the purchasing function toward opportunities consistent with the firm���s capabilities to achieve its long-term goals. Thus, a strategic purchasing function is characterized by having direct communication links with top management and the focus is on short term as well as long-term purchasing decisions (e.g. involvement in the product design process, cost and value analysis, involvement in the company���s strategic planning process) (Ellram, 1994). More recently, Pressey et al. (2007) in their empirical study found that high strategic purchasing oriented firms evaluate their suppliers differently on a number of issues including a fit with the buyer���s competitive strategy. A firm���s strategic planning process generally involves three organizational levels: corporate, business unit, and functional (Leenders et al., 2002 Monczka et al., 2002). Corporate strategic plans are the important basis for the subsequent development of the business unit goals and strategies, which in turn drive the operational strategies and daily activities of functional areas (Carr and Smeltzer, 1997). According to Watts et al. (1992) a buyer���s purchasing strategy can be viewed at the functional level as the ���pattern of decisions related to acquiring required materials and services to support operations (e.g. manufacturing) activities that are consistent with the overall corporate competitive strategy���. Consequently, a firm���s purchasing and manufacturing strategies must be congruent with the business unit and corporate level strategy. This also requires that supplier capabilities need to be congruent with the buying firm���s purchasing and manufacturing requirements. In order to do so, the buying firm can initiate a supplier development program. Narasimhan and Das (2001) suggested that strategic purchasing actions should preferably precede investments in purchasing activities (e.g. supplier development activities) and, in any case, not be delayed beyond the start of such investments. Carr and Pearson (1999) analyzed the relationship between strategic purchasing, supplier evaluation systems, and the establishment of collaborative relationships with suppliers, finding evidence that strategic purchasing precedes the implementation of strategically managed buyer-supplier relationships and evaluation systems. Zsidisin and Ellram (2001) reported evidence of a positive association between strategic purchasing and supplier alliances. In 2002, Carr and Pearson replicated their earlier study (Carr and Pearson, 1999) through an investigation involving small-sized firms and found that strategic purchasing precedes efforts to involve suppliers in the firm���s new product development process (Carr and Pearson, 2002). Accordingly, it would be reasonable to assume that strategic purchasing is an antecedent of supplier development, thus, the following hypothesis was formulated: H1. Strategic purchasing will be positively related to supplier development Figure 1 Research model Effect of strategic purchasing on supplier development Cristobal �� Sanchez-Rodr��guez �� �� Journal of Business & Industrial Marketing Volume 24 �� Number 3/4 �� 2009 �� 161���172 162