The Purchasing Performance of Organizations Using e‐Marketplaces
| DOI | http://doi.org/10.1111/j.1467-8551.2007.00555.x |
| Author | Sun‐Dong Kwon,Chris Rowley,Hee‐Dong Yang |
| Published date | 01 March 2009 |
| Date | 01 March 2009 |
The Purchasing Performance of
Organizations Using e-Marketplaces
Sun-Dong Kwon, Hee-Dong Yang
1
and Chris Rowley
2
College of Business Administration, Chungbuk National University, Korea,
1
College of Management, Ewha
Woman’s University, Seoul, Korea, and
2
Cass Business School, City University, London, UK
Corresponding author email: hdyang@ewha.ac.kr
We apply transaction cost economic theory and perspectives in an empirical test
regarding purchasing performance using electronic marketplaces. Basically, buyers can
purchase products either by hopping across multiple electronic marketplaces or
maintaining close relationships with a particular electronic marketplace. We investigate
which is more beneficial for a buyer organization’s purchasing performance in terms of
price reduction and purchasing efficiency. We undertake this task by developing
hypotheses and a research model and subjecting them to testing and analysis using the
purchase of maintenance, repair and operations products in a large and important
market, South Korea.
Introduction
Business-to-business (B2B) transactions for orga-
nizations and industries are a critical part of
doing business and management. However, such
transactions, and the relationships and differen-
tial benefits between buyers and sellers, have
often been under-emphasized in the past. Also,
more recently such transactions themselves have
been radically transformed. This has been by
the development and spread of the Internet
allowing radically new ways of doing this parti-
cular aspect of business with the emergence of
on-line operations via electronic marketplaces
(e-marketplaces).
1
An e-marketplace is a virtual
marketplace on the Internet where organiza-
tions can conduct economic transactions. These
e-marketplaces are seen as possibly generating
significant benefits for all the participants.
Besides this topicality, there are several further
reasons to investigate buyer–seller relationships
with e-marketplaces, including a lack of research.
First, most e-marketplace studies emphasize the
standpoint of market-makers or vendors, yet
buyers are also critically important. Second, there
is interest not only in the possibility of benefits
emerging from e-marketplaces, but also their type
and if they are mutually exclusive. Third, the type
of relational governance structure of buyers–
sellers in e-marketplaces is crucial. Supply chain
management (SCM) studies traditionally concen-
trate on relational governance structures that
maintain long-term and close relationships with a
few suppliers, whereas short-term, market-based
governance structures also exist in e-market-
places. Fourth, most SCM studies focus on
purchasing direct materials, not indirect materials
such as maintenance, repair and operations
(MRO) items which are important to business.
Given the above, we can see that so far no
study has compared how purchasing MRO
products via different e-marketplace governance
structures might produce varied benefits with
Support from the Economic and Social Research
Council Advanced Institute of Management Interna-
tional Study Fellowship (2004, RES 331-27-0002) is
kindly acknowledged by Professor Rowley.
1
Also known as web marketplaces, virtual marketplaces,
market-spaces, market-makers, electronic intermedi-
aries, exchanges and e-hubs (Bakos, 1997; Kaplan and
Sawhney, 2000; Malone, Yates and Benjamin, 1987).
British Journal of Management, Vol. 20, 106–124 (2009)
DOI: 10.1111/j.1467-8551.2007.00555.x
r2008 British Academy of Management. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford
OX4 2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
implications for businesses and management.
Therefore, our paper helps add detail to this
gap with the following research questions:
(1) What are the main benefits of using e-
marketplaces for purchasing MRO products?
(2) What is the relationshipbetween these benefits
and are they simultaneously attainable?
(3) Are buyers better off committed to one or
multiple e-marketplaces for MRO procure-
ment?
To answer these questions our paper has six
further sections. Next we outline the specific
focus of our research and a brief overview of e-
marketplaces. The next section reviews the key
constructs and also introduces the research model
and hypotheses. The following section discusses
the research methodology, including the opera-
tional definitions of the constructs in our research
model. Analysis of the results and hypothesis
testing follow. Th e last sections pro vide a discus-
sion and some implications and conclusions.
Focus and overview of e-marketplaces
Purchasing in e-marketplaces is a huge area.
Therefore, we narrow down the topic of purchas-
ing in e-marketplaces in the following four ways:
in terms of type of organization, benefit, relation-
ship and product. First, we are interested in
buyers rather than vendors. Second, we are
interested in benefits in the purchasing area.
Popular measurements for purchasing perfor-
mance relate to cost, time and price (Gebauer and
Buxmann, 2000; Perlman, 1990). Perceptual
measures (e.g. satisfaction) are also used in
relation to quality, delivery, sales, after-sales
service and technical assistance (Cannon and
Perreault, 1999). We focus on purchasing price
and purchasing efficiency (Brunn, Jensen and
Skovgaard, 2002; Cannon and Homburg, 2001;
Choudhury and Hartzel, 1998; Noordewier, John
and Nevin, 1990). However, reducing purchasing
price while improving purchasing efficiency are
traditionally regarded as trade-offs or contra-
dictory in off-line-based SCM. We are interested
whether e-marketplaces could help overcome this
trade-off in transaction cost economics (William-
son, 1975). Third, we are interested in the
implications for benefits from different types
of relationship (multiple, short, one-off versus
single, long-term, continuous) that buyers have
with e-marketplaces. For example, buyers can
conduct purchasing operations either by compar-
ing various bids across multiple e-marketplaces
(market exchange) or by maintaining close
relationships with particular e-marketplaces (re-
lational exchange). This typology follows the
traditional governance
2
structure in transaction
cost economics (Williamson, 1975). Market ex-
changes tend to be short term and unrepeated
interactions and so buyers purchase by price,
taking advantage of the number of vendors.
Relational exchanges are long-term transactions
based on trust and close relationships and buyers
put less importance on price and show commit-
ment towards particular partners (Dwyer, Schurr
and Oh, 1987; Frazier, Spekman and O’Neal,
1988; Spekman and Johnston, 1986).
3
Fourth, we
are interested in examining not all products but
MRO items in e-marketplaces.
There are about 1000 e-marketplaces globally
(Standing et al., 2006) and the portions of B2B
transactions through them are expected to reach
35% in 2006 (Granot and Sosic, 2005). e-
Marketplaces have been launched by private
firms and industry consortia. For example, Cisco
and Dell run their own private e-marketplaces to
sell their products while Harley-Davidson invites
multiple vendors’ bids on its private e-market-
place. Industry consortia include Covisint (auto
industry led by GM, Ford and Chrysler) and
Exostar (airplane industry led by Boeing).
Independent industry marketplaces, such as
ChemConnect, maintain a neutral position (for
neither buyer nor seller) to facilitate transactions
on their own sites.
These e-marketplaces can be used to purchase
products that are direct materials for final
products or indirect materials, such as MRO
items. Even though about80% of total purchasing
2
The term ‘governance’ of e-marketplaces can otherwise
mean the possession of ownership or control (O’Reilly
and Finnegan, 2005), the status of neutrality, and seller-
side or buyer-side initiative (Brunn, Jensen and Skov-
gaard, 2002).
3
Examples are horizontal and vertical integration, joint
ventures, collaborative R&D, collaborative logistics and
franchising. Pseudo-companies (Eccles, 1981; Luke,
Begun and Pointer, 1989), virtual integration (Zaheer
and Venkatraman, 1994) and re-intermediaries (Clem-
ons, Reddi and Row, 1993) are synonyms for this type
of governance.
Purchasing Performance Using e-Marketplaces 107
r2008 British Academy of Management.
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