Analyzing buyer behavior when selecting green criteria in public procurement

Publication Date01 March 2017
AuthorMieko Igarashi,Luitzen de Boer,Gerit Pfuhl
SubjectPublic policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue
Mieko Igarashi, Luitzen de Boer and Gerit Pfuhl*
ABSTRACT. Given the complexity of green public procurement, decisions are
likely to be driven by bounded rationality. However, we know little about what
determines supplier selection criteria in any given situation. This study
explores buyer behavior when considering environmental criteria. We first
conducted interviews and identified 12 operational procedures used by
buyers. We then develop ed a survey to explore the use of these procedures.
Our quantitative analysis suggests that public buyers are motivated by their
belief that t hey can make a difference. This is independent of buyers
experience or gender. However, their occupational position and the nature of
a procurement seem to influence how buyers seek information about
environmental criteria and which information source(s) they use. The data
suggest that four s pecific decision-making heuristics are associated with the
selected operational procedures.
How do we make decisions? Many real-life decisions are complex,
which prevents us from finding an analytical, optimal solution. We can
perhaps measure or observe the outcome of a decision, that is, the
alternative chosen. But what are the factors that lead to the decision?
* Mieko Igarashi, M.Sc., is a Ph.D. candidate, Department of Industrial
Economics and Technology Management, Norweg ian University of Science
and Technology. Her research focuses on green procurement, public
procurement and sustainable supply chain management. Luitzen de Boer,
Ph.D., is a Professor, Departme nt of Industrial Economics and Technology
Management, Norwegian University of Science and Technology. His teaching
and research interests are in purchasing and supply management, public
procurement, sustainability, cybernetics and system theory. Gerit Pfuhl, Ph.D,
is an Associate Professor, Arctic University of Norway, and Researcher,
Norwegian University of Science and Technology. Her research interests are
in decision-making under uncertainty, use of biases and heuristics and the
study of rationality.
Copyright © 2017 by PrAcademics Press
How and where do we start to look for relevant information or advice?
This seems more difficult to capture.
The study of the understanding of human behavior in
organizational research was pioneered most notably by Simon (1947,
1957), and March and Simon (1958). Behavioral research has been
referred to in different ways, such as behavioral economics (e.g.,
Tversky & Kahneman, 1974), behavioral decision-making (e.g., Cyert
& March, 1963; Payne, Bettman, & Johnson, 1993), and behavioral
operations (e.g., Bendoly, Donohue, & Schultz, 2006). The common
interest of this research is how decisions are made in reality by
individuals, a small group of individuals, or organizations. In the field
of purchasing and supply management, the behavioral perspective
has only in recent years started to receive broader attention (Carter,
Kaufmann, & Michel, 2007; Mantel, Tatikonda, & Liao, 2006),
especially with regard to supplier selection (Riedl, Kaufmann,
Zimmermann, & Perols, 2013). Interestingly, within the marketing
literature research on organizational buying behavior has a much
longer history, building on seminal studies by Webster and Wind
(1972) and Sheth (1973). The main purpose of organizational buying
behavior research, however, is to provide insights to marketers
(Bunn, 1993; Webster & Wind, 1972) rather than to develop more
effective buying strategies. With the exception of Wilson, McMurrian,
and Woodside (2001), who explicitly apply a behavioral decision-
making perspective to the study of problem framing by buyers,
organizational buying behavior research does not seem to be
particularly rooted in the behavioral decision-making literature.
The importance of a behavioral perspective in green economy is
illustrated by an Organisation for Economic Co-operation and
Development (OECD) project called “Behavioural and Experimental
Economics for Environmental Policy.” This project, launched in 2013,
recognizes the need to ensure that policy mechanisms have their
intended impact and that behavioral economics can inform public
policy (OECD, 2012). Since 2006, the EU has also executed a project
concerning consumer behavior relating to the purchasing of
environmentally preferable goods and has recently published a final
report (Umpfenbach & Colleagues Ecologic Institute, 2014). When it
comes to green public procurement (GPP), the question is if we have
enough insight into public buyer behavior in order to effectively inform
GPP policymakers. For example, determining the precise characteris-
tics that a product or service must possess to be considered
“environmental preferable” is a complex task (Coggburn & Rahm,
2005). One may ask, “How do buyers decide on the environmental
criteria to be included in tender documents?” The inclusion of
environmental criteria in tender should favor the more
environmentally sound products and hence promote the integration
of environmental considerations into procurement process (Amann,
Roehrich, Eßig, & Harland, 2014). It is therefore important to
understand how buyers establish a set of environmental criteria for
each purchase.
In this study, we are interested in understanding buyer behavior
by drawing on the main notion of behavioral decision-making, and in
particular bounded rationality (Simon, 1947) and the related concept
of heuristics (Newell & Simon, 1972). Specifically, this study focuses
on where and how buyers search for information and what kind of
procedures they follow when considering which environmental criteria
should be used in selecting suppliers. We compare our findings on
considering environmental criteria to general descriptions of
heuristics in the literature on bounded rationality. We expect that
buyers will exemplify bounded rationality, especially in a green
procurement context. This is because selecting suppliers while taking
into account environmental aspects further complicates an already
difficult decision, as it requires consideration of (a) multiple stages
with possible additional environmental criteria (Igarashi et al., 2015)
and (b) interaction between different categories of criteria from a
long-term (life cycle) perspective (Preuss, 2002).
This paper seeks to explore buyer behavior in identifying or
formulating potential environmental criteria and choosing concrete
environmental criteria to be used in supplier selection. The first
research question is: “What kind of contextual factors affect a buyer’s
environmental behavior?” The second question is: “Given the
complexity of procurement decisions, how does bounded rationality
as proposed in behavioral economics and psychology shape public
buyers’ behavior?” Gaining a better understanding of buyers’
behavior when considering environmental criteria fills a gap in the
GPP field. The implications of this research could lead to more
effective GPP policies and practices in organizations. In addition, our
research responds to the call by Flynn and Davis (2014) for a more
clear application of theory in public procurement research.

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