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Supplier Selection Behavior Under Uncertainty: Contextual and Cognitive Effects on Risk Perception and Choice
Author(s) -
Kull Thomas J.,
Oke Adegoke,
Dooley Kevin J.
Publication year - 2014
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/deci.12078
Subject(s) - purchasing , preference , context (archaeology) , selection (genetic algorithm) , risk perception , cognition , affect (linguistics) , supply chain , microeconomics , perception , business , marketing , stochastic game , psychology , economics , computer science , paleontology , neuroscience , biology , communication , artificial intelligence
Buyers often make supplier selection decisions under conditions of uncertainty. Although the analytical aspects of supplier selection are well developed, the psychological aspects are less so. This article uses supply chain management and behavioral decision theories to propose that attributes of the purchasing situation (category difficulty, category importance, and contingent pay) affect cognition that, in turn, affects a supply manager's choice. We conducted a supplier selection behavioral experiment with practicing managers to test the model's hypotheses. When the context involves an important or difficult sourcing category, higher risk perceptions exist that increase preference for a supplier with more certain outcomes, even when that choice has a lower expected payoff. However, the presence of contingent pay decreases risk perceptions through higher perceived supplier control. We also find that a manager's risk propensity increases preferences for a supplier with less certain outcomes regardless of perceived risk. Our model and results provide a theoretical framework for further study into the cognitive aspects of supplier selection behavior and provide insight into biases that influence practicing supply chain managers.