Building knowledge integration in buyer-supplier relationships: The critical role of strategic supply management and trust

There are two major objectives in the research. First, the authors investigate the impact of knowledge integration in terms of joint decision-making and joint sense-making, on relational performance, including operational efficiency and innovation. Second, the authors examine the key antecedents that might facilitate knowledge integration: strategic supply management and trust. The paper aims to discuss these issues.

This paper expands and tests theory drawing upon survey data from 133 buyer-supplier relationships (BSRs). The authors employed a two-step process of analysis to evaluate first the measurement model and then the structural model. The measurement model test built upon confirmatory factor analysis, while the structural model quality test built upon path analysis.

The results suggest that both integrative mechanisms, joint decision making and joint sense making, affect performance although in different ways. This study also finds that while trust has multiple significant influences and consequently must be viewed as an organizing principle, strategic supply management is required to jointly understand the dynamic and complex context but not to jointly make ongoing decisions.

Three limitations: first, this study was cross-sectional rather than longitudinal. Second, in line with accepted practice, the authors surveyed only one side of the relationship. The suppliers’ viewpoint is thus not fully taken into account. Third, another potential limitation of the study is that the sample stems from just one country and its size does not distinguish subgroups in the analysis of the path model.

Managers should be advised that: first, a trusting partnership built on knowledge integration is a hard order, especially with a new, unknown supplier in a low-cost country, where intellectual property protection is less obvious; second, strategic supply management may not improve cost or operational performance, but in its absence, it is unlikely that a supplier has insight into the exact needs of its buyer and thus, may not add considerable value to their customers; third, building a dynamic knowledge integration capability (valuable, rare, and difficult to imitate) takes time, as does creating reliable learning mechanisms. Joint teams, visit partners’ workplace, early involve suppliers in developing new products or selection of supplier with high-learning capabilities may help to create a knowledge integration capability.

The authors suggest that companies should move from an arm-length relationship and turn their supplier relationships into a tool for innovating faster while cutting cost. In order to do this, joint sense-making and joint decision should be seen as institutionalized inter-firm routines rather than ad hoc activities. Thus, the authors recommend managers to proactively build certain knowledge-based capabilities that hinges heavily upon a strategic stance toward supply management and trustful relationships with selected suppliers.

The major intent of this research is to expand understanding of knowledge integration by building a more testable, complex model around its creation. While previous research relied on a configuration approach to explore the relationship between knowledge integration and performance, the authors evaluate causal relationships at the level of the formative dimensions rather than higher order knowledge integration, as this has proven to be a superior analytical method. Second, although supply chain scholars have expressed great interest in trust, an in-depth examination of prior studies in knowledge integration indicate that trust has been analyzed alone. In contrast, the study empirically examines the simultaneous effect of trust and strategic supply management in BSRs.