THE EFFECTS OF STRATEGIC SUPPLIER SELECTION ON

BUYER COMPETITIVE PERFORMANCE IN MATCHED

DOMAINS: DOES SUPPLIER INTEGRATION MEDIATE
THE RELATIONSHIPS?
XENOPHON KOUFTEROS
Texas A&M University

SHAWNEE K. VICKERY AND CORNELIA DRÖGE

Michigan State University

This research examines whether the strategic selection of suppliers based

on supplier new product development capability, supplier quality capabil-
ity and supplier cost capability directly and/or indirectly enhances the
buyer’s competitive performance capabilities in the matched domains of
buyer product innovation, buyer quality and buyer competitive pricing,
respectively. The resource-based view of the firm is used to frame the
direct effects of strategic supplier selection as the capability of a buyer to
select a supplier with resources and expertise in a specified domain
should enhance the buyer’s performance capability in the matched
domain (but not necessarily buyer performance in unmatched domains).
Two supplier integration mechanisms — supplier partnerships and
supplier development — are modeled as potential mediators, implying
indirect paths. The research hypotheses focus on both direct and indirect
effects for each of the matched domains, but do not posit relationships
across different domains. For example, supplier selection for new product
development capability should impact buyer product innovation (matched
domains), but should not necessarily impact buyer quality capability
(unmatched domains). The direct effects of strategic supplier selection on
buyer performance are supported in each matched domain; however, the
indirect effects through supplier integration are not significant for the
matched domains. The results identify strategic supplier selection as a
promising source of competitive advantage in the resource-based view
sense. In contrast, supplier development and supplier partnership do not
provide performance benefits in a given domain above those arising from
strategic supplier selection in the same domain; i.e., it is the nature of the
resources selected that is key to competitive advantage.

Keywords: strategic sourcing; supplier selection; supply chain integration; matched

domains; resource-based view of the firm

INTRODUCTION suppliers, the capabilities of those suppliers serve as

Supplier selection encompasses the myriad activities
used to evaluate the capabilities of potential suppliers
and then to select them to configure a buyer’s supply
chain for long-term competitive advantage (Choi and
Hartley 1996; Vonderembse and Tracey 1999). Sup-
plier selection is critical (Lao, Hong and Rao 2010):
as firms become more and more dependent on their
key resources in the development of the buyer’s own
capabilities and performance. For example, Gonzalez
and Quesada (2004) found that supplier selection
was the most influential supply management process
for achieving product quality. However, a firm’s ability
to create or enhance its own capability in a strategi-
cally important domain such as quality by leveraging

April 2012 93
 Journal of Supply Chain Management

FIGURE 1
Matching the Domains of Exogenous and Endogenous Model Constructs

supplier capabilities in quality may depend not only
on its ability to select a capable supplier in the
quality domain but also on its ability to successfully
integrate the supplier into the firm’s operations and
network.
This study examines whether the effects of strategic
domain-specific supplier selection on buyer perfor-
mance capabilities in the matched domains are medi-
ated by supplier integration. Thus, we address two
important issues in this research: (1) supplier selection
in matched domains and (2) mediation by supplier
integration. First, in this research, the domains for
which the buyer selects supplier capabilities are new
product development (NPD), quality, or cost; i.e., the
buyer selects the supplier because the supplier is
expected to contribute capabilities in that domain. A
domain-specific supplier capability is viewed as an
input resource to the buyer. The matched buyer
domains are product innovation, quality and competi-
tive pricing, respectively; i.e., these are the output
domains in which the buyer expects to see enhanced
performance capabilities (see Figure 1). Thus, if a
supplier is selected based on NPD capability, that
supplier serves as an input resource to the buyer in
the NPD domain, and the buyer may expect to see
enhanced performance output in the product innova-
tion domain (but not necessarily in the quality or
competitive pricing domains; see Figure 1). Several
scholars contend that selection is paramount (Mandal
and Deshmukh 1994; Carter and Narasimhan 1996;
Krause, Pagell and Curkovic 2001). However, very lit-
tle empirical research has examined whether strategic
supplier selection actually leads to enhanced perfor-
mance capabilities in the intended domain.
Second, although there is some empirical evidence
that supplier integration does benefit the buyer (e.g.,
Scannell, Vickery and Dröge 2000), key questions
remain. Are these benefits domain-specific? Will they
still be significant once the impact of careful strategic
selection is accounted for? That is, given the resources,
time and effort expended in integrating suppliers by
initiating and maintaining close partnerships and/or
by developing suppliers, can additional contributions
toward domain-specific buyer competitive capabilities
be realized, beyond those already derived from strate-
gic supplier selection in the matched domain? Chen,
Paulraj and Lado (2004) note the paucity of empirical
research and call for the investigation of such factors
as strategic supplier selection and supplier integration.
Modi and Mabert (2007) concur, noting that the con-
tribution of supplier management to creating firm
value lacks empirical support.
From a theoretical perspective, we frame this gap
in the domain-specific supplier selection research
within the resource-based view (RBV) of the firm. We
view the capabilities of the supplier as resources for
the buyer (Hitt 2011). According to the RBV, firms
gain and sustain competitive advantages by deploying
valuable resources and capabilities1 that are difficult
to imitate (Wernerfelt 1984; Barney 1986, 1991; Pete-
raf 1993; Ray et al. 2004). The external resource or
capability acquired by the buyer from a supplier may
or may not be readily available to competitors. If it is
1
Following Barney (2001) and Ray, Barney and Muhanna
(2004), we use the terms “resources” and “capabilities” inter-
changeably to refer to the tangible and intangible assets firms
use to develop and implement their strategies.

94 Volume 48, Number 2

 Effects of Strategic Supplier Selection
available to all, perfectly substitutable, and equally
exploited by all buyers, then the RBV posits that a
supplier’s capability cannot lead to sustainable com-
petitive advantage for the buyer. However, if supply
contracts are exclusive, if a buyer has special capabili-
ties in identifying and then selecting combinations of
suppliers with needed expertise and technology in a
strategically critical domain, or if the buyer has special
capabilities in effectively integrating the acquired capa-
bilities with its own internal operations, then a sup-
plier’s capabilities could be a source of advantage (in
the RBV sense) for the buyer. For example, Terpend,
Tyler, Drause and Handfield (2008) emphasize the
increasing importance of both supplier capability-based
and supplier integration-based value to competitive
advantage.
If domain-specific supplier selection and then inte-
gration are sources of competitive advantage, then
they should affect competitive performance. Although
scant empirical research has examined the perfor-
mance effects of supplier selection (Petersen, Hand-
field and Ragatz 2005 is a notable exception), several
studies have investigated the effects of supplier inte-
gration. In some studies supplier integration is mod-
eled as a construct separate from customer integration
or internal integration (e.g., Scannell et al. 2000; Pet-
ersen et al. 2005; Swink, Narasimhan and Wang
2007), whereas in others it is subsumed into other
integration constructs (e.g., encompassing internal
and supplier integration; Maloni and Benton 2000;
Vickery, Jayaram, Droge and Calantone 2003; Droge,
Jayaram and Vickery 2004; Sanders and Premus 2005;
Aryee, Naim and Lalwani 2008). The global construct
“supply chain” integration encompasses supplier inte-
gration, customer integration and internal integration.
The small number of studies on integration and the
conflicting findings indicate that the verdict is still out
as to whether integration improves performance
(Petersen et al. 2005; Fabbe-Costes and Jahre 2007,
2008).
From a practitioner standpoint, the issue of selection
and its relationship to integration in fostering buyer
capability has become increasingly important (Mon-
czka, Trent and Handfield 1998; Krause et al. 2001).
Consider the case of Sun Microsystems which has
repeatedly tapped into the expertise of Imation, a
well-known developer of tape storage technology, to
obtain leading-edge product and process technologies
(leading to numerous enhancements to Sun’s prod-
ucts). In early 2006, the companies announced a part-
nership agreement to develop and launch an
extension to Sun’s T9840 drive platform and their
strategic collaboration continues to expand (Azadegan,
Dooley, Carter and Carter 2008). Such anecdotes
helped frame the inquiry at hand. For example, does
partnering mediate the effects of NPD-focused supplier
April 2012
selection on the buyer’s innovation capability? Or is it
the buyer’s capability to select the right supplier(s) in
the first place? Are supplier NPD effects domain-specific
to buyer innovation, or do they affect pricing and
quality as well? Should additional resources (e.g.,
investments) be directed toward strategic selection or
integration, or both? The answers to these questions
have implications for how resources should be allo-
cated to engender desired buyer capabilities, and ulti-
mately, sustainable advantage.
The study’s approach is patterned after Ray et al.
(2004), who suggest a business process level unit of
analysis for examining competitive advantage. NPD-,
quality- and cost-based supplier selection, as well as
subsequent supplier integration, are critical supply
management processes (Narasimhan, Jayaram and
Carter 2001; Lao et al. 2010). The paper is organized
as follows. First, the RBV research model is presented
and its associated hypotheses are developed based on
relevant literature. Second, the research methodologies
are described including sampling and measurement.
Results for the exploratory and confirmatory measure-
ment analyses, the hypothesized structural model
and the research hypotheses are presented next.
The findings and their managerial implications are
then explored and directions for future research are
identified.
THEORETICAL FRAMEWORK AND
HYPOTHESIS DEVELOPMENT
The RBV: An Overview
Consistent with neo-classical economics, the RBV
acknowledges that many factors of production are
elastic in supply: as demand for a particular resource
or capability increases, the price of acquiring the
resource increases, and consequently the total amount
of the resource increases as well. However, the RBV
also contends that under certain conditions, some
factors are inelastic in supply. These conditions include
path dependence (i.e., some resources and capabilities
can only be developed over long periods of time),
causal ambiguity (i.e., the mechanisms for developing
some resources and capabilities may not be evident)
and social complexity (i.e., some resources cannot be
bought and sold because they are embedded in com-
plex social networks) (Dierickx and Cool 1989;
Barney 1991, 2001). Supply inelasticity implies that
firms having these kinds of resources may be able to
generate above normal profits, but that these profits
don’t lead to an increased market supply. Thus,
supply inelasticity can lead to sustainable competitive
advantage (Peteraf 1993; Barney 2001).
Five characteristics potentially engender inelasticity
of supply for a resource (Barney 1991; Peteraf 1993).
First, the resource must provide superior value in
95
 Journal of Supply Chain Management
terms of the efficiency it provides or its ability to bet-
ter satisfy customer wants. Second, the resource must
be scarce (supply is insufficient to satisfy demand).
Third, the resource must be imperfectly imitable due
to “isolating mechanisms” (Rumelt 1984) which pre-
vent imitation by competitors (e.g., causal ambiguity
prevents would-be imitators from knowing what to
imitate or how to go about doing so). Fourth, the
resource must be imperfectly substitutable so that
competitors cannot identify good alternates. Last is
imperfect mobility: although the resource can be
traded, it is more valuable within particular firms (i.e.,
the resource is specialized to firm-specific needs).
From an RBV perspective, the buyer’s supply chain
can be described as constituting inter-firm relationships
that serve as mechanisms for acquiring resources or
supplier capabilities that the buyer intends to trans-
mute into buyer competitive advantage (see, e.g.,
Rungtusanatham, Salvador, Forza and Choi 2003; Hitt
2011).2 Buyer capabilities in strategic supplier selec-
tion, followed by integration, are potential sources of
advantage in the RBV sense for several reasons. First,
these buyer capabilities are embedded in socially com-
plex networks spanning internal and external actors.
Second, the pathways to developing these capabilities
are typically not obvious or easily known to competi-
tors. Third, the capabilities are often tailored to a
buyer’s specific needs, making them imperfectly
mobile. Finally, it may take a buyer a long time to
develop these capabilities (path dependence). These
RBV factors are used to frame the theoretical and practi-
cal contexts for understanding the relationships among
domain-specific strategic supplier selection, two differ-
ent integration mechanisms and the buyer’s competi-
tive performance capabilities. The application of the
RBV for developing insights into other forms of inter-
firm relationships (e.g., alliances) provides a strong
precedent for this approach (Eisenhardt and Schoonho-
ven 1996; Mowery, Oxley and Silverman 1996; Dyer
and Singh 1998; Lorenzoni and Lipparini 1999).
Matched Domains and Overview of the Research
Model
The concept of matched domains was illustrated in
Figure 1; the research model is pictured in Figure 2.
The model depicts both the direct effects and the indi-
rect effects (through integration) of strategic supplier
selection in a given domain on the buyer’s competi-
tive performance capability in the matched domain.
The supplier integration constructs are supplier part-
nering and supplier development. That buyer capabili-
2 tary resource endowments. That is, synergistic effects
The notion that competitiveness can derive from interfirm
sources of advantage has been called the relational view: it
extends RBV theory beyond the boundaries of the firm (see, e.g.,
Mesquita, Annand and Brush 2008).
96 Volume 48, Number 2
ties are the dependent constructs (rather than overall
firm performance such as ROI) is in accordance with
Ray et al. (2004): they argue that evaluating the effec-
tiveness of a business process (e.g., NPD) is preferable
to overall firm performance measures for assessing the
effects of RBV-based constructs. Although buyer capa-
bilities in the three domains examined in this research
might affect a firm’s bottom line, many other pro-
cesses might also affect it (positively or negatively);
thus, the performance effects of a particular capability
can be masked or distorted if only overall perfor-
mance is considered. Consequently, the direct and
indirect effects of domain-specific, strategic supplier
selection on buyer capabilities in matching domains are
investigated, instead of overall buyer metrics. This
approach avoids confounding due to the use of mea-
sures that reflect overall aggregation.
Strategic supplier selection in a particular domain
and its direct effect on the buyer’s performance capa-
bility in the matching domain (as opposed to some
other domain) is considered first: specifically, as in
Figure 1, (1) supplier selection based on NPD capabil-
ity?buyer product innovation capability, (2) supplier
selection based on quality capability?buyer quality
capability, and (3) supplier selection based on cost
capability?buyer competitive pricing capability.
Given these three hypothesized direct effects, the focus
then turns to possible indirect effects, and in particular,
mediation by supplier integration (i.e., supplier part-
nerships and supplier development) (see Figure 2). A
key purpose is to examine domain-specific supplier
selection, supplier integration and matched-domain
buyer capabilities to unravel direct and indirect effects.
The research hypotheses are formally developed
below.
Research Model Development
Through their supplier networks, firms often seek to
build competitive advantage that would not be possi-
ble otherwise; thus suppliers can provide resources in
the RBV sense. Suppliers can provide materials, ideas
and capabilities which, when blended with the
resources and knowledge bases of other suppliers as
well as the firm’s own, are valuable, rare and costly to
imitate and thus constitute the essence of dynamic
capabilities (Teece, Pisano and Shuen 1997; Chen
et al. 2004). The RBV value of suppliers can be also
viewed from the “social capital” perspective: i.e.,
rational actors (firms) deliberately form and exploit
ties to other actors (Steier and Greenwood 2000;
Krause, Handfield and Tyler 2007) and these ties
result in relational rents generated due to complemen-
occur when complementary resource endowments
generate more rents than the sum of the endowments
of each firm would suggest (Dyer and Singh 1998).
 Effects of Strategic Supplier Selection

FIGURE 2
Research Model of Direct Versus Indirect Relationships for Buyer’s Supply Management and Competitive
Performance Capabilities

Suppliers provide direct access to information and
knowledge resources that may be impossible to
acquire by other means (Ilinitch, D’Aveni and Lewin
1996; Powell, Koput and Smith-Doerr 1996; Kale,
Singh and Perlmutter 2000; Kogut 2000).
Firms face two important issues concerning their
supplier networks: choosing supplier members and man-
aging integration (if integration is desired) (Hitt 2011).
This distinction between partner choice versus manag-
ing ongoing collaboration has been noted, for exam-
ple, in studies of collaborative product development
success factors (Littler, Leverick and Bruce 1995). First,
choosing the “correct” or most appropriate partners
(i.e., selection, given a firm’s strategic purpose) is
important because partners can enable or disable
access to resources and thus determine success or fail-
ure. For example, Deck and Strom (2002) in their sur-
vey of firms involved in product co-development
projects revealed that the most important concern was
“poor foundation for collaboration” from the begin-
ning. More generally, across different contexts and dif-
ferent countries, Glaister (1996), Dev, Klein and
Fisher (1996), Hitt, Dacin, Levitas, Arregle and Borza
(2000) and Emden, Calantone and Droge (2006) link
partnership or alliance or joint venture success to
partner selection. Consider Toyota, which selects sup-
pliers with a long-term relationship in mind. Toyota
constantly scans for new suppliers with leading
edge capabilities, invests substantial time and effort to
explore capabilities and relationship potential, and
deploys a cross-functional team to work closely with
the potential supplier to resolve all critical issues as
part of its lengthy selection process. Toyota then reaps
greater effectiveness and lower transaction costs after
the contract is awarded (Kalkoffen, Momin, Signh and
Sticher 2007). Thus, we examine the strategic selection
of suppliers for three particular purposes and their direct
impact on the three corresponding “matched” buyer
outcomes (Figure 1).
Supplier capabilities in NPD, quality and cost are
matched with the buyer’s performance capabilities in
product innovation, quality and competitive pricing.
These three domains are examined because:
(1) NPD/innovation, quality and cost/price are core
competitive priorities for firms; and (2) the RBV sug-
gests that the ability to select a supplier with capabil-
ities in a strategically critical domain can affect the
buyer’s performance capability in that same domain
(as opposed to overall firm performance; Ray et al.
2004). For example, suppliers can enhance the
buyer’s product innovation capability because collec-
tively suppliers have extensive access to know-how
and an immense ability to process relevant informa-
tion. Likewise, suppliers’ knowledge and resources in
the domains of quality and cost efficiency can affect
the buyer’s quality and pricing capabilities, respec-
tively (but not necessarily the buyer’s product inno-
vation capabilities).

April 2012 97
 Journal of Supply Chain Management
The second important issue is supplier integration.
Managing suppliers in an integrative way may be
necessary to insure trust and dependability and to
minimize supply risk (see, e.g., Forslund and Jonsson
2009; Matook, Lasch and Tamaschke 2009). The liter-
ature identifies supplier partnerships and supplier
development as two key integration mechanisms, and
our research includes both of these (see Figure 2)
(Kumar and Bragg 2003; Vickery et al. 2003; Swink
et al. 2007; Vickery and Droge 2010). First, supplier
partnerships (or alliances) represent close and long-
term relationships with suppliers (Lao et al. 2010).
Close ties and intense collaboration promote the
trustworthy behavior that dampens concerns about
opportunistic behavior (Granovetter 1985; cf. the
Transaction Cost Economics school), thus further
increasing the possibilities of future ties (Kogut 1989).
Close relationships make it more likely that all parties
share valuable information and that this information
will be absorbed and acted upon (Rogers 1995; Uzzi
1996; Terpend et al. 2008; Lao et al. 2010). Second,
supplier development refers to initiatives and actions tar-
geted at improving the performance of suppliers to
establish and sustain buyer competitive advantage
(Krause, Scannell and Calantone 2000; Scannell et al.
2000; Lao et al. 2010). Supplier development
embraces a range of initiatives (Dunn and Young
2004), and the supplier’s ability to contribute in the
intended domain may be enhanced if the buyer offers
supplier development as an integration vehicle.
The key research questions follow. First, does strategic
supplier selection in a particular domain directly impact
the buyer’s performance capability in the matching
domain? This direct effect is addressed in part (a) of
each hypothesis. Second, given that the direct impact
has been accounted for, does strategic supplier selection
indirectly impact buyer performance through supplier
partnering (part b of each hypothesis) and/or supplier
development (part c of each hypothesis)? To address
these indirect effects, two distinct paths must be consid-
ered: whether strategic supplier selection is related
to the two supplier integration mechanisms, and
whether the integration mechanisms are subsequently
related to the buyer’s competitive capability.
Direct Effects of Strategic Supplier Selection on
Buyer Capabilities (H1a, H2a, H3a)
Little empirical research has examined the perfor-
mance effects of supplier selection (Petersen et al.
2005 is an exception). We begin with selection for
NPD. Many firms understand the value of NPD, but
also recognize that handling NPD processes and activ-
ities on their own is risky, expensive and time con-
suming. The acquisition of new skills, information
and tacit knowledge from suppliers is crucial for
product innovation, and thus choosing the “right”
98 Volume 48, Number 2
suppliers is paramount (Petersen et al. 2005; Emden
et al. 2006). The ability to identify and then select
capable suppliers for NPD purposes entails consider-
able external scanning and assessment activity under
uncertain conditions. Competencies in such activities
would typically evolve over time and are likely
“embedded” in a complex web involving internal and
external players. The varied activities and expertise
constituting the buyer’s capability in selecting suppli-
ers in the NPD/innovation domain would probably
be opaque to an outside party. Overall then, the buyer
can possess a supplier selection capability in NPD that
is somewhat inimitable and imperfectly mobile. In
the RBV sense, such a “select-supplier-for-NPD” capa-
bility is thus a potential source of sustainable compet-
itive advantage for the buyer in the matched “buyer-
product-innovation” domain (see, e.g., Ray et al.
2004; Azadegan et al. 2008). Therefore:
H1a: Selecting suppliers based on NPD capabilities
is positively related to the buyer’s product
innovation capability.
Selecting suppliers based on quality capabilities can
be essential for the buyer achieving relatively defect-
free products and in implementing initiatives such as
Six Sigma. Given that component parts are often out-
sourced and given that their quality directly affects the
quality of the final product (Krause et al. 2007), the
influence of suppliers’ quality capabilities on the qual-
ity capability of the buyer is clear. A recent case study
identified supplier selection as the most influential
supply management process for achieving product
quality (Gonzalez and Quesada 2004). Although qual-
ity is often a key consideration in any supplier selec-
tion decision, there can be significant variation in the
level of scrutiny given to the identification and initial
vetting of suppliers to assess their quality competency.
A comprehensive process to identify and select sup-
pliers based on quality would be characterized by
extensive external scanning and research, as well as
considerable interaction between the buyer and sup-
plier prior to the selection decision. The knowledge
acquisition, assimilation and network building pro-
cesses underlying such a buyer capability would
require considerable time to develop (path depen-
dence), be difficult to discern by outside parties, and
would typically be customized based on the buyer’s
needs. These attributes make imitation inherently dif-
ficult. Thus, strategic selection of suppliers for quality
could be a source of competitive advantage, and if so,
should be reflected in the buyer’s own quality capabil-
ity. Consequently:
H2a: Selecting suppliers based on quality capabilities
is positively related to the buyer’s quality
capability.
 Effects of Strategic Supplier Selection
Next, consider the supplier’s cost capability. Global
competition has placed pressure on firms to become
more cost competitive. The proportion of purchased
parts and materials to the total cost-of-goods sold has
increased dramatically while at the same time leaving
very little to optimize through trimming internal costs
(Chen et al. 2004). Thus, significant cost improve-
ment potential resides with suppliers. The expectation
is that as supplier costs decline, the benefits are
partially shared with the buyer (Krause et al. 2007).
Therefore, choosing suppliers based on their cost
capabilities should, in turn, help the buyer build a
competitive pricing capability.
As the cost capabilities of a potential supplier are sig-
naled in the prices it quotes buyers, and assuming the
same prices are available to competitors, the capability
of selecting suppliers based on cost does not initially
appear to be a source of competitive advantage in the
RBV sense. Yet, an advantage may lie in the buyer’s abil-
ity to identify and select firms that not only provide
low costs currently, but that also have the processes and
expertise in place to continue to drive costs down in the
future, coupled with a willingness to share the results
with their best customers. The identification of such
suppliers would require research into cost drivers, a
comprehensive review and understanding of potential
suppliers’ cost management and control processes, and
precontract relationship building to facilitate cost sav-
ings sharing agreements. Such a cost-focused selection
capability on the part of the buyer might be difficult for
competitors to imitate, potentially providing a sustain-
able pricing advantage. Thus:
H3a: Selecting suppliers based on cost capabilities is
positively related to the buyer’s competitive
pricing capability.
Indirect Effects of Supplier Selection on Buyer
Capabilities (H1b, c, H2b, c, H3b, c)
The previous section focused on the direct effects of
strategic supplier selection in matched domains. How-
ever, equally important are the potential mediating
effects of the two supplier integration mechanisms
examined in this study (i.e., supplier partnerships and
supplier development; Figure 2). To demonstrate
mediation, the following sets of indirect paths are
proposed. First, the greater the focus on strategic sup-
plier selection, the more likely there will also be
enhanced integration. The rationale is quite straight-
forward: the more thought, time, money and effort a
buyer puts into the purposeful, strategically relevant
selection of suppliers, the more likely it is that the
same buyer will put thought, time, money and effort
into integrating these carefully selected suppliers into
its operations (see, e.g., Azadegan et al. 2008;
Sanchez-Rodriguez 2009). As the previous Toyota
April 2012
example demonstrates, strategic supplier selection is
often an intended precursor to integration initiatives
(Kalkoffen et al. 2007).
Second, support for mediation would require that
the more integrated the suppliers, the better the com-
petitive performance capabilities of the buyer. The rea-
son for this is clear: the ability of a supplier to
contribute may depend on cooperation, communica-
tion, training, dispute resolution procedures, informa-
tion sharing and so on. In other words, realized
supplier contribution (as opposed to potential contri-
bution) to buyer capabilities in a given domain may
depend on integration achieved through mechanisms
such as supplier partnering and supplier development.
Nevertheless, empirical support for the integration-
performance capability link is mixed. For example,
Swink et al. (2007) found that strategic supplier inte-
gration is not associated with manufacturing competi-
tive capabilities (cost efficiency, quality, delivery,
process flexibility, new product flexibility). In contrast,
others found that supplier integration is directly
related to: (1) flexibility and cost (but not quality and
innovation) (Scannell et al. 2000), (2) quality and
speed (Krause et al. 2000), and (3) NPD (Narasimhan
and Das 1999; Parker, Zsidisin and Ragatz 2008).
Two recent studies identified constructs which fully
mediated the effects of long-term buyer–supplier rela-
tionships on competitive performance, but did not
test for direct effects (Paulraj and Chen 2007; Paulraj,
Lado and Chen 2008). Direct and indirect effects of
supplier integration on overall firm performance have
also been found (Han 1993; Carr and Pearson 1999;
Krause et al. 2000; Chen et al. 2004; Petersen et al.
2005).
The arguments for the supplier integration–buyer
performance capability links focus on the premise that
the viability and efficacy of suppliers may rest upon
the relationships that the buying firm can construct.
Consider first supplier partnerships as an integrative
construct. A collaborative, longer-term orientation
with suppliers can build social capital (Chen et al.
2004), which may be particularly useful in high risk,
expensive NPD contexts (Krause et al. 2007). Ring
and Van de Ven (1992) conceptualize a cooperative
relationship as a process of working together over the
long-term for the benefit of both parties; a longer-term
relationship encourages investment and reduces uncer-
tainty. Supplier partnerships can alleviate fears for
opportunistic behavior and thus can motivate suppli-
ers to engage in continuous improvement programs.
Such long-term relationships are characterized by path
dependence, social complexity and causal ambiguity,
making them prime, potential sources of competitive
advantage in the RBV sense.
Consider next, supplier development as an integrative
mechanism. Many buyers find it useful to provide
99
 Journal of Supply Chain Management
training and other technical assistance to their suppli-
ers subsequent to supplier selection. For example, the
success of many Japanese auto manufacturers is cred-
ited to their extensive supplier development efforts as
well as their supplier partnerships (see, e.g., Womack,
Jones and Roos 1990; Kalkoffen et al. 2007). Direct
technical assistance and training can improve supplier
competencies and improve their quality or cost struc-
tures. Also, the ability of suppliers to contribute to
NPD, improve quality, or reduce cost may be predi-
cated on the buyer providing training and informa-
tion related to the buyer’s customers; i.e., specific
knowledge, resources and talent that reside either with
the buyer or the buyer’s customers can be shared
through supplier development. These factors motivate
mediation hypotheses (i.e., indirect effects):
H1(b,c): The effect of selecting suppliers based on
NPD capabilities on the buyer’s product
innovation capability is mediated by (b)
supplier partnerships and (c) supplier
development.
H2(b,c): The effect of selecting suppliers based on
quality capabilities on the buyer’s quality
capability is mediated by (b) supplier part-
nerships and (c) supplier development.
H3(b,c): The effect of selecting suppliers based on
cost capabilities on the buyer’s competi-
tive pricing capability is mediated by (b)
supplier partnerships and (c) supplier
development.
METHODS
Sampling
A key informant approach was used to collect data
(Phillips and Bagozzi 1986). Questionnaires were sent
out to supply management professionals in 1,000 ran-
TABLE 1
Sample Description: Respondents by SIC Code (n = 157)
SIC Code and Description
30: Rubber products and miscellaneous plastic
products
34: Fabricated metal products except mach and trans
equipment
35: Industrial and commercial machinery
36: Electronic, electrical equipment and components
37: Transportation equipment
Miscellaneous
100 Volume 48, Number 2
domly selected discrete-part manufacturing firms with
100+ employees located in the U.S. The list of firms
was derived from the National 100 Manufacturers
industrial database (with over 200,000 firms listed)
produced by Manufacturer’s News, Inc. (Evanston, IL).
The five SIC codes targeted are representative of dis-
crete manufacturing industries who are at the leading
edge of procurement practice (Table 1).
Key informants were alerted twice to complete the
survey. A notification card requesting participation
was sent 2 weeks prior to survey administration and
respondents were offered a report as an incentive. Of
170 surveys received, 157 were complete, useable
responses. The 17 percent response rate compares
quite favorably with response rates in other studies of
this nature (see, e.g., Narasimhan and Das 1999; Das
et al. 2006; Narasimhan et al. 2001; Careva, Lawsonb
and Krause 2011). To ensure adequate sample size,
power and parameter estimate precision for the analy-
ses conducted, the procedures outlined in Muthén
and Muthén (2002) and Marcoulides and Saunders
(2006) were followed. Given the model specification,
results indicated there are sufficient levels of power
(well above 0.80, considered by most researchers as
an essential level of power).
The sample descriptors in Table 1 show that 91 per-
cent came from targeted SIC codes. The majority of
respondents were supply management professionals
from firms with <500 employees. The distribution of
firms is not surprising given the demographics of U.S.
manufacturing firms: <2 percent of manufacturers
employ more than 500 (US Small Business Adminis-
tration 2011). Although small and medium-sized
firms may face more challenges in selecting suppliers,
nothing prevents them from doing so according to an
implicit or explicit competitive strategy. In addition,
our survey included an item that measured the rela-
tive size of the focal firm against the size of its major
supplier (“When compared to your firm’s sales vol-
ume, your major supplier’s sales volume is”: with
Number Firm Size: No. Number
(%) Employees (%)
21 (13) Up to 499 96 (61)
28 (18) 500–999 22 (14)
33 (21) 1,000–4,999 30 (19)
31 (20) 5,000–9,999 5 (3)
30 (19) Over 10,000 4 (3)
14 (9)
 Effects of Strategic Supplier Selection
scale 1 = Considerably Below, … to 7 = Considerably
Above, with 4 = About the Same). About 49.7 percent
of the suppliers have lower (36.8 percent) or about
the same (12.9 percent) sales volume as the focal
firm. Overall then, the sample firms are adequately
sized to be engaged in strategic supplier selection, as
well as to be involved in integration activities.
Two methods were employed to assess for nonre-
spondent bias. First, differences in mean responses
between the late respondents (i.e., last 25 percent)
and the rest of the respondents were examined (Arm-
strong and Overton 1977; Calantone, Garcia and
Droge 2003); no significant differences were detected.
Second, we tested whether the sample differed from
the “population” on: SIC, type of operation (i.e.,
continuous flow, assembly line, batch, job-shop or
project) and firm size (no. of employees). The test
compared the observed distributions with the
expected (based on the mailing list); p-values were
SIC = 0.778, type of operation = 0.807 and firm
size = 0.936. Thus, the responding firms do not differ
from the “population” in these three important char-
acteristics.
Measurement
Some of the study measures were based on existing
scales whereas new scales were developed for other con-
structs. The items for each construct were reviewed by
10 purchasing practitioners who were members of the
Institute for Supply Management (ISM). They com-
mented on item appropriateness and suggested: (1)
that one item be dropped from “Supplier Develop-
ment” because it lacked clarity; and (2) that the Sup-
plier Selection for Quality item “The firm is selecting
suppliers based on ISO certification program” be chan-
ged to “… based on a certification program” as ISO is
just one of many certification programs.
The constructs with their final measures are listed in
the first column of Table 2. The buyer’s strategic sup-
plier selection capability (three constructs) is followed
by two supplier integration constructs. Each measure
used a 5-point scale to capture the extent of use of
practices associated with these capabilities (with
1 = not at all, 2 = a little, 3 = moderately, 4 = much
and 5 = a great deal). Items for supplier partnerships
and supplier selection based on NPD capabilities were
drawn from Koufteros et al. (2007). Measures of sup-
plier development and supplier selection based on
quality or cost were developed based on a literature
review (e.g., Choi and Hartley 1996; Agrawal and
Nahmias 1997; Cousins 1999, 2002; Ahuja 2000;
Krause et al. 2001; Choi and Krause 2006) as well as
interviews with practitioners and academics.
Table 2 lists the buyer competitive performance
capability constructs next. The product innovation,
quality and competitive pricing items were measured
April 2012
(compared with the average in the industry) using 7-
point scales, where 1 = much below, 2 = moderately
below, 3 = slightly below, 4 = about average,
5 = slightly above, 6 = moderately above and
7 = much above. Numerous other empirical studies
(e.g., Rondeau, Vonderembse and Ragu-Nathan 2000;
Koufteros, Vonderembse and Doll 2001, 2002a,b;
Koufteros, Vonderembse and Jayaram 2005; Koufteros
and Marcoulides 2006) have used similar scales.
Confirmatory Analysis Methods
The measurement model was examined using confir-
matory factor analysis, with the covariance matrix as
input and using Maximum Likelihood Estimation
(Anderson, Gerbing and Hunter 1987). To test the
hypotheses, a structural model was evaluated. Overall
fit was assessed using the following fit indices: ratio of
chi-square to degrees of freedom (v2/df), non-normed
fit index (NNFI), comparative fit index (CFI) and root
mean square error of approximation (RMSEA). Crite-
ria can be found in Byrne (1998) and Hu and Bentler
(1999); v2/df < 2; NNFI > 0.90 and a CFI > 0.90;
and RMSEA below 0.05 all support model fit.
To test for indirect effects, two approaches were fol-
lowed. First, the indirect path coefficients were exam-
ined for statistical significance using Sobel’s (l982)
approach. Second, six additional structural models
were constructed to scrutinize potential mediating
effects that may be masked due to model complexity.
For example, the indirect effect of supplier selection
based on NPD capabilities on the buyer’s product
innovation capability may be mediated by supplier
partnerships and supplier development simulta-
neously. Thus, two structural models were developed
for the NPD/product innovation domain: the first
model relates to the first mediator, whereas the second
separate model analyzes the second mediator. Baron
and Kenny’s (1986) paradigm was then used to deter-
mine whether mediation effects were significant
enough to warrant further examination using structural
equation modeling techniques (Hopwood 2007).
MEASUREMENT AND STRUCTURAL MODEL
RESULTS
Measurement Model Results
The examination of the measurement model began
with exploratory analyses. Each construct’s items were
first factor-analyzed (EFA) separately to assess unidi-
mensionality; only one factor emerged for each con-
struct. Internal consistency (reliability) was assessed
using Cronbach’s alpha. Other than one construct (i.e.,
supplier selection based on quality, with Cronbach’s
alpha = 0.78), all constructs had Cronbach’s alphas in
excess of 0.80. Finally, as a single informant provided
101
102
TABLE 2
Constructs, Items and Measurement Model Results

Construct, with Measurement Items Std. Loading t-Value (All p < 0.01)
Supplier selection based on NPD capability
The firm is selecting suppliers based on their product development capabilities 0.82 —
The firm is selecting suppliers based on their innovation capabilities 0.94 10.28
Supplier selection based on quality capability
The firm is selecting suppliers based on a certification program 0.62 —
The firm is selecting suppliers based on their quality performance 0.84 7.83
The firm is selecting suppliers based on their quality practices 0.86 7.89
Supplier selection based on low cost capability
The firm is selecting suppliers based on their cost 1.00 —
Supplier partnership
Our firm has been building a long-term relationship with its suppliers. 0.71 —
Our firm has been involved in developing partnerships with its suppliers 0.75 8.37
Our firm has been creating a cooperative relationship with its suppliers 0.88 8.87
Supplier development
Our firm has been involved in developing its suppliers 0.40 —
Our firm has been providing technical assistance to its suppliers 0.64 4.22
Our firm has been providing training to its suppliers. 0.83 4.35
Buyer product innovation capability
Our capability of developing unique features 0.76 —

Volume 48, Number 2

Our capability of developing new products and features 0.88 11.91
Our firm’s capability in developing a number of “new” features 0.96 13.04
Our capability of developing a number of “new” products 0.87 11.70
Journal of Supply Chain Management

Buyer quality capability

Our capability of offering a high value product to the customers 0.78 —
Our capability of offering safe-to-use products that meet customer needs 0.80 11.10
Our capability of offering reliable products that meet customer needs 0.95 13.89
Our capability of offering durable products that meet customer needs 0.88 12.51
Our capability of offering quality products that meet customer expectations 0.86 12.10
Our capability of offering high performance products that meet customer needs 0.72 9.77
Buyer competitive pricing capability
Our capability of offering prices as low or lower than competitor’s prices 0.78 —
Our capability of offering prices that are competitive 0.85 10.66
Our capability of competing based on prices is 0.92 12.74
Our capability of offering prices that match competition 0.84 11.38
Supply management variables are measured on 5-point scales; competitive capabilities on 7-point scales. Model fit indices: Chi-
Square = 438.89 (272 df), Chi-square/df = 1.61, NNFI = 0.92, CFI = 0.93, RMSEA = 0.059.
 Effects of Strategic Supplier Selection
responses, we assessed common method bias using
EFA. All 26 variables were subjected to principal axis
factoring without rotation (Harmon’s one factor
approach). If only one factor with eigenvalue >1 is
extracted, common method bias may exist. Five factors
with eigenvalue >1 emerged, with the first explaining
about 25 percent of the variance. This indicates that
common method bias is not a significant problem.
Confirmatory measurement analyses were then run.
The posited measurement model was supported over-
all: v2 = 438.89 (272 df), v2/df = 1.61, NNFI = 0.92,
CFI = 0.93, RMSEA = 0.059. Table 2 shows that all
items loaded on their respective factors (p < 0.001),
providing evidence of convergent validity. Table 3
provides the descriptive statistics, composite reliability
(CR), average variance extracted (AVE) and correla-
tions among constructs. Discriminant validity was
assessed by comparing the AVE with the squared cor-
relation between constructs (Fornell and Larcker
1981). The highest squared correlation was between
supplier development and supplier partnerships
(0.38) and it was lower than the respective AVEs. Reli-
ability evaluation involved AVE and CR (Fornell and
Larcker 1981; Hair, Anderson, Tatham and Black
1998). CR estimates were above 0.80 (Table 3) except
for supplier selection based on quality and supplier
development, which were both above 0.60. Overall,
there is support for the measurement model.
Structural Results and Hypothesis Testing
The results for the hypothesized model are in
Table 4 and Figure 3. The overall fit indices indicate a
good fit: v2 = 504.49 (285 df), v2/df = 1.77,
NNFI = 0.90, CFI = 0.91, RMSEA = 0.067.
Direct and Indirect Effects of Supplier Selection
Based on NPD (H1a–c)
Hypothesis 1a relates supplier selection based on
NPD directly to the buyer’s product innovation capabil-
ity. H1a is supported at the 0.05 level (c = 0.19,
t = 1.69). To assess whether H1b and H1c are sup-
ported, two links must be evaluated because these are
indirect effects: (1) supplier selection based on NPD
capability linked to each of the two mediators (i.e., sup-
plier partnerships and supplier development), and (2)
each of the two mediators linked to the buyer’s product
innovation capability. Table 4 shows that supplier
selection based on NPD capability is indeed related to
the two mediators (c = 0.27, t = 2.97; c = 0.55;
t = 3.47 respectively); however, neither of the media-
tors is related to product innovation capability
(b = 0.06, t = 0.64; b = 0.15, t = 1.21 respectively; ns).
The indirect effect on the buyer’s product innovation
capability via supplier partnerships and supplier devel-
opment is not statistically significant (t = 1.45).
April 2012
To examine potential mediating effects in more
depth, two additional models were constructed with
only supplier selection based on NPD capability, the
integration constructs and product innovation capabil-
ity (models 1 and 2, Table 5). Although in both cases
supplier selection based on NPD capability is related
to each of the mediators, each mediator fails to
impact product innovation (model 1: b = 0.12,
t = 0.87; model 2: b = 0.40, t = 1.56). Both indirect
effects of supplier selection based on NPD capability
on product innovation are nonsignificant (model 1:
t = 0.86; model 2: t = 1.59), providing additional
evidence for rejecting H1b and H1c.
Direct and Indirect Effects of Supplier Selection
Based on Quality (H2a–c)
Selecting suppliers based on quality positively
impacts the ability of the buying firm to compete
based on quality (c = 0.28, t = 2.68). This supports
H2a concerning the direct effect.
To examine whether supplier partnerships and sup-
plier development are mediators, the overall model is
examined first (Table 4) followed by an assessment of
two additional models (Table 5; models 3 and 4), as
was done previously for supplier selection based on
NPD. Selecting suppliers based on quality appears to be
followed by investments in supplier partnerships and
supplier development (c = 0.38, t = 3.74; c = 0.24,
t = 2.24 respectively). However, these are not subse-
quently related to buyer quality capability. Table 5
(models 3 and 4) also attest to the lack of mediating
effects because the potential mediators do not impact
quality capability (model 3: b = 0.04; model 4:
b = 0.14, ns) and thus the indirect effects are nonsig-
nificant (model 3: t = 0.33; model 4: t = 0.82
respectively). H2b and H2c are consequently rejected.
Direct and Indirect Effects of Supplier Selection
Based on Cost (H3a–c)
Selecting suppliers based on cost capability was
expected to directly impact the buyer’s competitive
pricing capability; H3a’s direct effect is marginally
supported at p  0.06.
Table 4 also shows that supplier selection based on
cost capability does not lead to supplier partnerships
(c = 0.04, ns) and only marginally impacts supplier
development (c = 0.14, t = 1.55, p  0.06). Conse-
quently, the indirect effect of supplier selection based
on cost on competitive price capability is nonsignifi-
cant (t = 0.30). Likewise, Table 5 (models 5 and 6)
demonstrates nonsignificance (model 5: t = 1.45;
model 6: t = 0.05). H3b and H3c are thus rejected.
However, the results show that supplier partnerships
have a significant, positive impact on the buyer’s com-
petitive pricing capability. This is consistent with
Scannell et al. (2000) who found that supplier inte-
103
104
TABLE 3
Descriptive Statistics, Reliability and Correlation Matrix for the Constructs

Construct Mean per SD (1) (2) (3) (4) (5) (6) (7) (8)
Itema
(1) Selection based on NPD 3.54 2.68 0.82b
capability 0.61c
(2) Selection based on 2.61 1.83 0.50d 0.62b
quality capability (0.25)e 0.45c
(3) Selection based on low 3.80 0.90 0.14 0.24 —
cost capability (0.02) (0.06)
(4) Supplier partnerships with 3.80 2.34 0.48 0.43 0.15 0.85b
suppliers (0.23) (0.18) (0.02) 0.61c
(5) Supplier development 2.76 2.31 0.48 0.62 0.27 0.34 0.67b
(0.23) (0.38) (0.07) (0.12) 0.42c

Volume 48, Number 2

(6) Buyer product innovation 5.43 4.55 0.13 0.32 0.17 0.19 0.30 0.92b
capability (0.02) (0.10) (0.03) (0.04) (0.09) 0.76c
(7) Buyer quality capability 6.06 4.75 0.26 0.11 0.21 0.10 0.05 0.25 0.93b
Journal of Supply Chain Management

(0.07) (0.01) (0.04) (0.01) (0.00) (0.06) 0.70c

(8) Buyer competitive pricing 4.50 4.44 0.28 0.18 0.16 0.27 0.06 0.12 0.22 0.91b
capability (0.08) (0.03) (0.03) (0.07) (0.00) (0.01) (0.05) 0.72c
a
Supply management variables are measured on 5-point scales; competitive capabilities on 7-point scales.
On the diagonal: bComposite reliability and caverage variance extracted. Off the diagonal: dCorrelation and esquared correlation in parentheses.
 Effects of Strategic Supplier Selection

TABLE 4
Structural Model Results and Hypothesis Testing

Structural Path Effect Hypothesis Coefficient

(t-Value)
Supplier selection based on NPD capability?buyer product Direct H1a 0.19a (1.69)
innovation capability
Supplier selection based on NPD capability?supplier 0.27 (2.97)
partnerships
Supplier partnerships?buyer product innovation capability 0.06 (0.64)
Supplier selection based on NPD capability?buyer product Indirect H1b 0.10 (1.45)
innovation capability
Supplier selection based on NPD capability?supplier 0.55 (3.47)
development
Supplier development?buyer product innovation capability 0.15 (1.24)
Supplier selection based on NPD capability?buyer product Indirect H1c 0.10 (1.45)
innovation
Supplier selection based on quality capability?buyer quality Direct H2a 0.28 (2.68)
capability
Supplier selection based on quality capability?supplier 0.38 (3.74)
Partnerships
Supplier partnerships?buyer quality capability 0.01 ( 0.05)
Supplier selection based on quality capability?buyer quality Indirect H2b 0.01 ( 0.26)
capability
Supplier selection based on quality capability?supplier 0.24 (2.24)
development
Supplier development?buyer quality capability 0.03 ( 0.36)
Supplier selection based on quality capability?buyer quality Indirect H2c 0.01 ( 0.26)
capability
Supplier selection based on cost capability?buyer Direct H3a 0.13 (1.55)
competitive pricing capability
Supplier selection based on cost capability?supplier 0.04 (0.56)
partnerships
Supplier partnerships?buyer competitive pricing capability 0.27 (2.78)
Supplier selection based on cost capability?buyer Indirect H3b 0.01 (0.30)
competitive pricing capability
Supplier selection based on cost capability?supplier 0.14 (1.55)
development
Supplier development?buyer competitive pricing capability 0.03 ( 0.35)
Supplier selection based on cost capability?buyer Indirect H3c 0.01 (0.30)
competitive pricing capability

Fit indices (overall): v2 = 504.49 (285 df), v2/df = 1.72, NNFI = 0.90, CFI = 0.91, RMSEA = 0.067.
a
= Completely Standardized Coefficient.

gration practices were positively related to cost (and
hence a buyer’s capability to offer competitive prices),
but not to quality and innovation performance.
An Alternate Model: Direct Effects from All
Supplier Selection Criteria to All Outcomes
An alternate model in which each of the supplier
selection criteria constructs directly impacts all the
buyer competitive performance capabilities was also
tested. Whereas previously NPD-focused selection
affected only buyer product innovation outcomes,
quality-focused selection only buyer quality outcomes,
and cost-focused selection only competitive pricing
(i.e., three “matched” paths were hypothesized),
the alternate model had each of NPD-focused, quality-
focused and cost-focused selection affect each of
product innovation, quality and competitive pricing
capabilities (nine direct paths). The overall fit indices

April 2012 105

 Journal of Supply Chain Management

FIGURE 3
Results for the Hypothesized Model

Note: *, **, *** means significant at p < 0.10, p < 0.05 and p < 0.01 respectively.

for this alternate model are: v2 = 490.98 (279 df),
v2/df = 1.76, NNFI = 0.90, CFI = 0.92, RMSEA = 0.066.
As the original hypothesized model is nested within
this alternate model, a difference in chi-square test was
conducted first. The result was 13.51 with 6 df
(p = 0.036). Also, the consistent versions of Akaike’s
(1987) Information Criterion were estimated (CAIC;
Bozdogan 1987). The CAIC fit index addresses the
issue of parsimony: statistical goodness-of-fit, the esti-
mated parameters, as well as sample size are taken into
account (Byrne 1998). Smaller CAIC values represent a
better fit (Hu and Bentler 1995). The CAIC for the
original model (CAIC = 883.44) was lower than the
CAIC for the alternative (CAIC = 903.88); and thus,
the more parsimonious model originally hypothesized
is preferred to the more complex alternative.
Nevertheless, some features of the alternative model
are instructive. The differences between the models
concern the direct effects of strategic supplier selection
(three constructs) on performance outcomes (three
buyer capabilities constructs): the alternative model
specified all nine possible direct paths, three of which
are “matched” as to strategic domains whereas the
other six are not matched. The results show that: (1)
as before, supplier selection based on NPD was signif-
icantly related to buyer innovation capability, supplier
selection based on quality was significantly related to
buyer quality capability and supplier selection based
on cost was significantly related to buyer pricing capa-
bility (all at p < 0.05); (2) supplier selection based on
NPD capability was not significantly related to buyer
pricing or quality capabilities (p > 0.10); (3) supplier
selection based on cost or quality capability was not
related to buyer innovation capability (p > 0.10); but
that (4) supplier selection based on quality was signif-
icantly related to buyer competitive pricing (0.23;

106 Volume 48, Number 2

 Effects of Strategic Supplier Selection

TABLE 5
Results for Individual Structural Models

Model and Paths Effect Hypothesis Coefficient

(t-Value)
Model 1 (Innovation): Mediation by supplier partnerships
Selection based on NPD capability?buyer product innovation Direct H1a 0.29a (2.91)
Selection based on NPD capability?supplier partnerships 0.32 (4.55)
Supplier partnerships?buyer product innovation 0.12 (0.87)
Selection based on NPD capability?buyer product innovation Indirect H1b 0.04 (0.86)
Model 2 (Innovation): Mediation by supplier development
Selection based on NPD capability?buyer product innovation Direct H1a 0.18a (1.60)
Selection based on NPD capability?supplier development 0.29 (3.48)
Supplier development?buyer product innovation 0.40 (1.56)
Selection based on NPD capability?buyer product innovation Indirect H1c 0.12 (1.59)
Model 3 (Quality): Mediation by supplier partnerships
Selection based on quality capability?buyer quality Direct H2a 0.24 (2.55)
Selection based on quality capability?supplier partnerships 0.34 (4.37)
Supplier partnerships with suppliers?buyer quality 0.04 ( 0.33)
Selection based on quality capability?buyer quality Indirect H2b 0.01 ( 0.33)
Model 4 (Quality): Mediation by supplier development
Selection based on quality capability?buyer quality Direct H2a 0.27 (2.72)
Selection based on quality capability?supplier development 0.28 (3.27)
Supplier development?buyer quality 0.14 ( 0.83)
Selection based on quality capability?buyer quality Indirect H2c 0.04 ( 0.82)
Model 5 (Cost): Mediation by supplier partnerships
Selection based on cost capability?buyer competitive pricing Direct H3a 0.14 (1.49)
Selection based on cost capability?supplier partnerships 0.09 (1.68)
Supplier partnerships?buyer competitive pricing 0.45 (2.72)
Selection based on cost capability?buyer competitive pricing Indirect H3b 0.04 (1.45)
Model 6 (Cost): Mediation by supplier development
Selection based on cost capability?buyer competitive pricing Direct H3a 0.18 (1.78)
Selection based on cost capability?supplier development 0.13 (2.50)
Supplier development?buyer competitive pricing 0.01 ( 0.05)
Selection based on cost capability?buyer competitive pricing Indirect H3c 0.00 ( 0.05)
a
Completely standardized coefficients.

t = 2.19) and supplier selection based on cost capabil-
ity was significantly related to buyer quality (0.21;
t = 2.63). These results show that supplier selection
based on quality or cost affects both buyer quality
and buyer competitive pricing; these are cross-domain
effects. It appears that the quality and cost domains
are closely related, but that the NPD/innovation
domain stands apart. The other results from the alter-
nate model were not materially different from those
reported for the original hypothesized model.
DISCUSSION AND IMPLICATIONS
Discussion and Managerial Implications
In this research, the buyer’s purpose is to acquire
supplier capabilities that can be transmuted
into buyer competitive advantage in a particular
domain: should the buyer focus on strategic selection
or integration, or both? We begin with strategic supplier
selection. The strong direct effects (p  0.05) of sup-
plier selection based on NPD or quality capabilities
highlight their promise as sources of buyer competi-
tive advantage. Selection capabilities in these two
domains require significant time to develop and are
characterized by interactions embedded in complex,
relational networks involving the buyer, its candidate
suppliers and potentially, its customers. The buyer’s
internal processes and methods for identifying,
researching, engaging (precontract) and then selecting
highly capable suppliers in each of these domains are
not transparent. Thus, strategic supplier selection
tends to be imperfectly imitable and imperfectly

April 2012 107

 Journal of Supply Chain Management
mobile — two RBV conditions favoring advantage.
The strength of the findings, combined with their
solid theoretical underpinnings, provide a powerful
incentive for managers to invest in these selection
capabilities. On the other hand, the capability to
strategically select suppliers based on cost was less sig-
nificant in directly determining buyer advantage in
pricing (p-value about 0.06). Perhaps this capability is
more imitable, and in some cases even generic, due to
the outsized role that supplier prices play in commu-
nicating a supplier’s capability in this domain.
In the alternate model, which contained all possible
direct effects (nine) between strategic supplier selec-
tion and buyer competitive performance capabilities,
two significant patterns were revealed. First, selecting
suppliers for NPD capability is directly related only to
buyer product innovation, and not to buyer quality or
competitive pricing. Furthermore, buyer product inno-
vation was predicted only by NPD-directed supplier
selection capability and not by supplier quality or cost
capabilities. Therefore, the relationship between strate-
gic supplier selection and buyer competitive capability
in the NPD domain is one-to-one: the supplier selec-
tion capability impacts the buyer in the matched
domain and only in the matched domain, whereas the
buyer’s competitive capability is impacted by the sup-
plier selection capability in the matched domain and
only the matched domain. The NPD/innovation
domain stands apart from the other domains exam-
ined in this research. The managerial implications for
buyers are evident: the only way to obtain direct
support for innovation is to a priori select suppliers
for this purpose. Petersen et al. (2005) concur that
supplier selection in NPD projects is key (regardless
of the stage of the NPD cycle and regardless of the
supplier’s level of responsibility).
The second substantive pattern produced by the
alternate model centered on the quality and cost
domains. The results show that supplier selection
based on quality was significantly related both to
buyer quality and to buyer competitive pricing; simi-
larly, supplier selection based on cost was significantly
related both to buyer competitive pricing and to buyer
quality capabilities. These cross-domain effects mean
that the quality and cost domains are closely inter-
twined (but, as noted above, the innovation domain
stands alone). However, these findings must be inter-
preted in view of the base model analysis in which a
weak relationship was found between supplier selec-
tion based on cost and the buyer’s competitive pricing
capability. With these results in mind, if both quality
and cost are strategic priorities, but a choice must be
made, managers would be well advised to favor qual-
ity-driven supplier selection because of the stronger
potential for enhancing buyer performance capabili-
ties in both quality and cost domains. This course of
108 Volume 48, Number 2
action is also supported by the total quality manage-
ment literature, which has repeatedly touted the cost
benefits of quality-related initiatives (see, e.g., Deming
2000).
We now turn to the role of integration. Given the
direct effects in the base model (Figure 3), there were
no significant indirect effects of selection on buyer
capabilities through either supplier partnerships or
supplier development in any matched domain. The
lack of indirect effects was due primarily to the lack of
relationships between integration and buyer capabili-
ties. Although we did find that the more thought,
time, money and effort a buyer puts into the purpose-
ful, strategically relevant selection of suppliers for
NPD and quality, the more likely overall it is that the
same buyer will attempt to integrate these suppliers,
we also found that buyer outcomes do not depend on
these integration efforts. We found little support for
the contention that selection reflects potential in sup-
plier contribution, but that integration is necessary for
realized supplier contribution. This is an interesting
finding given the sizable investments, financial and
otherwise, that are required for implementing supplier
partnerships, supplier development and other supplier
integration mechanisms. These results support authors
who view supplier selection as paramount (as
opposed to supplier integration efforts). For example,
Krause et al. (2001), Carter and Narasimhan (1996)
and Mandal and Deshmukh (1994) all focus on sup-
plier selection, in particular, as the fundamental task
of strategic supply management. From a managerial
perspective, the results suggest that buyers could real-
ize significant benefits by redirecting some of their
investment to supplier selection, as supplier partner-
ing and supplier development do not appear as effica-
cious in the domains studied here.
Although there are no indirect effects in the matched
domains, the findings from the original model reveal
that supplier partnerships impact the buyer’s competi-
tive performance in the competitive pricing domain.
Specifically, two paths leading to a competitive pricing
capability for the buyer were identified: (1) supplier
selection based on NPD capability?supplier partner-
ing?competitive pricing capability, and (2) supplier
selection based on quality?supplier partnering?com-
petitive pricing capability. These paths suggest that
within the context of strategic supplier selection for
NPD or quality, partnerships provide a fertile plat-
form for collaborative and cooperative behaviors
focused on identifying and sharing the benefits of
strategies and practices designed to reduce costs. Thus,
supplier partnering is shown to be a complementary
resource to strategic supplier selection in the NPD and
quality domains — a resource that could potentially
create a pricing advantage in addition to any direct-
effect, matched-domain advantage. Companies
 Effects of Strategic Supplier Selection
competing on the basis of innovation or quality
should first select suppliers accordingly, and then part-
ner with those suppliers having the greatest perceived
ability to facilitate competitive pricing and/or to
enhance profitability in the long run.
Discussion and Theoretical Implications
Supplier selection and integration and their impact
on buyers were modeled within an RBV framework.
This perspective means that buyers acquire supplier
capabilities for the purpose of transmuting them into
competitive advantages (perhaps through integrative
mechanisms); this perspective also reflects the rela-
tional interfirm view that competitive sources of
advantage can be found in relationships, thus extend-
ing RBV theory beyond the boundaries of the firm.
The RBV has been applied to other forms of inter-firm
relationships: across different contexts and countries,
Glaister (1996), Dev et al. (1996), Hitt et al. (2000),
Gonzalez and Quesada (in the case of quality; 2004),
Petersen et al. (for NPD; 2005), Emden et al. (for
NPD; 2006) and others link partnership or alliance or
joint venture success to partner selection. In our con-
text, the results also show that selection is key, thus
confirming the RBV’s value in framing these supplier
management issues.
The advantages of examining “integration effects”
within a broader RBV theoretical framework that
encompasses “selection effects” are twofold. First,
such a framework more closely mimics real world
decision environments where managers must choose
how much time, money and effort to allocate to
selection and integration. Second, a more holistic
model may explain the conflicting findings generated
by previous studies on supplier integration (e.g.,
“positive direct effects” on cost and flexibility
(Scannell et al. 2000) versus “no effects” on cost and
flexibility (Swink et al. 2007)). The RBV framework
proposed in this research explicitly addresses whether
the effects of supplier integration are significant when
the effects of selection are already accounted for. The
RBV suggests that selection of a resource with certain
characteristics is paramount, and our results support
the dominance of selection over integration in deter-
mining buyer outcomes. We also argue that the abil-
ity of a buyer to select suppliers is embedded in
complex systems; the way to developing these buyer
abilities is not obvious; the buyer’s abilities are tai-
lored, making them imperfectly mobile; and, it may
take a long time to develop these buyer abilities
(path dependence). This study is the first to assess
the performance effects of strategic supplier selection
versus integration mechanisms (such as supplier part-
nerships and supplier development) in such a holistic
RBV framework representing supplier management by
buyers.
April 2012
This study also confirms the validity and benefits of
testing RBV theory at the business process level (Ray
et al. 2004), rather than at the firm performance level
considered by most RBV research. For each of the
three domains examined in this research, buyer
capabilities might affect a firm’s bottom line; but
other processes might also have positive or negative
impacts. Thus, the specific performance effects of par-
ticular buyer capabilities in supplier selection or inte-
gration can be masked, distorted and in general
confounded due to aggregation and then measure-
ment of firm level metrics. A business process level
unit of analysis enables a more concise explication
as to why some activities, business practices, or
capabilities are able to generate competitive advanta-
ges wheresas others cannot (Ray et al. 2004).
Furthermore, we extensively analyzed supplier-buyer
performance linkages in “matched” domains, versus
unmatched domains. This extension allows for a more
targeted evaluation of RBV predictions as testing is
focused on the most theoretically relevant outcome
(i.e., the buyer’s performance capability in the
matched supplier domain). Our study demonstrates
that this further refinement in focus provides addi-
tional insights for practice and theory building.
In particular, our results suggest that a strategic focus
on cost in selecting suppliers is more likely to be asso-
ciated with “arms-length” supplier relations, although
a differentiation-focused (NPD, quality) selection of
suppliers is associated with more collaborative rela-
tionships. The division of cost versus differentiation
has a long history in the strategic management litera-
ture (Porter 1980, 1985). For the case where cost is
paramount, we found that a concomitant pursuit of
partnership relationships and/or efforts to train and
develop suppliers is absent. The lack of relationships
between cost-based supplier selection and supplier
development is consistent with Dunn and Young
(2004) who found that cost/price-based relations are
not sufficiently valued by either the buyer or supplier
and hence meant little supplier development. Low
cost supply alone does not seem to be a “valuable”
rare and imperfectly substitutable resource in the RBV
sense. Mesquita et al. (2008) provide another, more
compelling explanation: although trained suppliers
outperform untrained ones, buyers who do not invest
in supplier development can “free ride” or “cream-off”
supplier knowledge acquired from other sources.
Thus, even though strategic supplier selection for NPD
or quality is strongly associated with supplier develop-
ment efforts, the consequent effects on buyer capabili-
ties in any domain may not be sufficient to engender
an advantage over and above both (1) the direct effects
of selection and (2) competitors who may be “free-rid-
ing.” If other buyers can “free ride,” then supplier
development by a particular buyer cannot make that
109
 Journal of Supply Chain Management
supplier comparatively more valuable to that buyer in
the RBV sense because such skills and knowledge are
not imperfectly mobile.
Other explanations lie in studies that detail the
difficulties North American and European firms have
experienced in replicating Japanese automakers’ sup-
plier development successes (see, e.g., Sako 2004). In
particular, differences in historic trajectories and chal-
lenges associated with codifying the tacit knowledge
typically taught to Japanese suppliers may mean that
Japanese firms have succeeded in creating isolating
mechanisms such as causal ambiguity, as well as
immobility due to buyer-specific tacit knowledge
training over time. Japanese firms engage in supplier
partnering rather than supplier development. In our
research, the differing performance impacts of supplier
partnerships (positive effect on buyers’ competitive
pricing capability) vis-à-vis supplier development (no
effects) may be attributable to partnership-specific
assets (tangible or intangible) that are jointly devel-
oped over time in an atmosphere of mutual learning
and trust (see, e.g., Kotabe, Martin and Domoto
2003). Thus, the long-term nature of a supplier
partnership (by definition) may provide a distinct
advantage over supplier development activities which
can be short-term (Dunn and Young 2004). Creating
a resource valuable in the RBV sense takes time, but
then that resource may become more and more valu-
able. For example, Kotabe et al. (2003) discovered
that the effect of higher-level technology transfer (as
opposed to ordinary technical exchanges) grows more
positive as relationship duration increases (path
dependence in RBV).
In summary, the results of this study underscore the
potential of viewing supply management capabilities
(especially supplier selection) within an RBV perspec-
tive. The RBV points to characteristics that potentially
engender inelasticity of supply and make suppliers
more valuable to the buyer; the buyer can then gener-
ate sustainable, competitive advantage by selecting the
right suppliers and perhaps by integrating them. In
particular, our results identify the ability of a firm to
select capable suppliers to support differentiation with
respect to innovation or quality as a significant source
of advantage.
DIRECTIONS FOR FUTURE RESEARCH
The study was concerned with discrete parts manu-
facturing. Although the sample spanned several differ-
ent industries, the results may not be globally
applicable to other manufacturing environments (e.g.,
OEM assembly). Future research might focus on
examining whether the findings are generalizable to
other types of manufacturers. The sample was charac-
terized by considerable variance in size of manufac-
110 Volume 48, Number 2
turer (from <500 employees to >10,000) (see
Table 1). Future research could investigate if size
affects the strategic supplier selection and supplier
integration practices of manufacturers, and whether it
could influence the nature of the relationships existing
among strategic selection, supplier partnering and
supplier development.
This research focused on three pairs of matched
domains (supplier NPD capability?buyer product
innovation capability; supplier quality capability?
buyer quality capability; and supplier cost capability?
buyer competitive pricing capability). Future research
should focus on other domains, and in particular, those
domains for which the integration of suppliers is seen
as critical to the development of competitive capabili-
ties for the buyer. This would suggest a focus on flexi-
bility, agility and time-based capabilities. These
domains are concerned with a firm’s ability to
respond effectively and/or rapidly to customers’
demands and needs and may offer a possibly signifi-
cant role for integration in mediating the effects of
strategic supplier selection on buyer capability. There
may also be more instances of mutual reinforcement
on buyer capabilities across these domains as speed
and responsiveness often go hand-in-hand.
Additional attention should also be paid to the
potential role of integration mechanisms in mediating
the relationship between strategic supplier selection
and buyer performance capability for the same
domains studied herein, but using more precisely
defined integration mechanisms in terms of kind and
scope. For example, early supplier involvement in product
design could potentially mediate the relationship
between supplier selection based on NPD capability
and the innovation capability of the buyer. Although
this practice often falls under the auspices of “supplier
partnerships,” it is a more precisely defined construct
in terms of activity and scope. Likewise, if the supplier
development construct in the current study had been
more explicitly (yet more narrowly) defined (e.g., sup-
plier development focused on process improvement), it is
possible that some mediation effects (if only partial
mediation) on the supplier selection/buyer capability
relationship for the quality and cost domains might
have been detected.
Although factors which would motivate buyers to
pursue an NPD capability versus a cost capability, for
example, were not considered in this study, future
studies could examine potential antecedents. For
example, product characteristics could affect the strate-
gic importance of a given capability. Companies with
highly innovative products are likely to be motivated
to pursue suppliers with exceptional NPD capabilities,
companies with products that compete based on their
reliability or functional performance may be more
concerned with a supplier’s quality capability, whereas
 Effects of Strategic Supplier Selection
companies with more generic or commodity products
may focus on cost capable suppliers.
Although great care was taken to ground our mea-
sures in extant literature, they are imperfect. Future
research should consider adding more items to formu-
late more robust scales. A single respondent was used
in this research and individuals who would be the
most knowledgeable in responding to the survey ques-
tions were specifically targeted. It would be desirable
for future research to have multiple respondents from
each firm as this would improve the validity and reli-
ability of the responses.
Hitt (2011) points to the need for more empirical
research regarding “the management of resources and
the resource flow from suppliers to the focal firm ···”
(p. 10). The need for empirical evidence is urgent
given the hype and cost associated with supplier selec-
tion and supplier integration. We would like to
amplify Hitt’s message and suggest that future research
empirically examines the aforementioned relation-
ships using perhaps other theoretical lenses as well
such as those proposed in Hitt (2011).
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Xenophon Koufteros (Ph.D., University of Toledo)
is an associate professor of supply chain management
and the Jenna & Galvin Guest Professor in Business
Administration, at Texas A&M University in College
Station, Texas. His recent research has focused on the
empirical study of supply chain security, disruptions
and risk management. Dr. Koufteros has published
widely in journals such as the Decision Sciences Journal,
the Journal of Operations Management, the International
Journal of Production Research and the Structural Equa-
tions Modeling Journal. He serves as an Associate Editor
for several peer-review publications, including the
Decision Sciences Journal, the Journal of Business Logistics,
 Effects of Strategic Supplier Selection
the Journal of Operations Management, and the Journal
of Supply Chain Management.
Shawnee K. Vickery (Ph.D., University of South
Carolina) is professor of operations and supply chain
management in the Eli Broad College of Business at
Michigan State University in East Lansing, Michigan.
She also serves as the Faculty Director of the Demmer
Center for Business Transformation and is the Faculty
Co-Founder of the Master of Science program in Sup-
ply Chain Management. Dr. Vickery’s research inter-
ests are in the areas of operations strategy, supply
chain integration and manufacturing performance.
Her work has focused on relationships among strate-
gic operations and/or supply chain initiatives, compe-
titive performance and bottom-line firm performance.
Dr. Vickery has published her research in a variety of
peer-reviewed publications, including the Journal of
Product Innovation Management, the International Jour-
nal of Production Research, the Journal of Operations
Management, and the Journal of Supply Chain Manage-
April 2012
ment. She is an Associate Editor for the Journal of Sup-
ply Chain Management and a member of the Editorial
Advisory Board for the Journal of Operations Manage-
ment.
Cornelia Dröge (Ph.D., McGill University) is a pro-
fessor in the Department of Marketing at the Eli Broad
College of Business at Michigan State University in
East Lansing, Michigan. Her research interests focus
on integration research in new products, marketing,
operations and supply chain management. She also is
interested in organization design issues – including
strategy, structure and performance interrelationships,
functional interaction and coordination – as they are
applied to integrative research in new product devel-
opment and marketing. Dr. Dröge’s research has been
published in a wide range of journals, including the
Journal of Product Innovation Management, the Journal of
the Academy of Marketing Science, the Journal of World
Business and the Journal of Applied Business Research, as
well as numerous books and book chapters.
115