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How Supplier Economies of Scale Drive Supplier Selection Decisions
Author(s) -
Badorf Florian,
Wagner Stephan M.,
Hoberg Kai,
Papier Felix
Publication year - 2019
Publication title -
journal of supply chain management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.75
H-Index - 92
eISSN - 1745-493X
pISSN - 1523-2409
DOI - 10.1111/jscm.12203
Subject(s) - automotive industry , supplier relationship management , business , selection (genetic algorithm) , scale (ratio) , economies of scale , industrial organization , balance (ability) , microeconomics , marketing , economics , supply chain , supply chain management , computer science , medicine , physics , quantum mechanics , artificial intelligence , engineering , physical medicine and rehabilitation , aerospace engineering
Supplier selections are complex but nonetheless strategically important decisions that are influenced by numerous factors. Drawing on the resource‐based and relational view of the firm, we investigate how suppliers’ economies of scale influence the buyer's selection decision, and we illustrate how the influence of scale is contingent upon important economic, buyer, and relationship characteristics. We test the model with a large secondary dataset of actual supplier selection decisions from the automotive industry and show that economies of scale have a strongly positive but diminishing effect on the buying firm's supplier selection decision. These effects are reinforced or extenuated by economic, buyer, and relationship characteristics, with characteristics that are more specific to the buyer‐supplier situation (e.g., relationship duration and power balance) having a stronger moderating effect than do characteristics that are more global (e.g., economic cycle). Our research helps suppliers to better understand how to manage selection probabilities with buyers and provides buying firms with a better understanding of how contextual factors affect the benefit of supplier‐provided economies of scale.