The impact of electronic reverse auctions on purchase price reduction and governance structure: an empirical investigation

Published on Jun 12, 2006in International Journal of Services Technology and Management
· DOI :10.1504/IJSTM.2006.010048
Dawn H. Pearcy7
Estimated H-index: 7
(EMU: Eastern Michigan University),
Larry C. Giunipero30
Estimated H-index: 30
(FSU: Florida State University)
Sources
Abstract
The availability of various electronic services (e-services) has changed the buying experience for many purchasing professionals. An increasingly popular e-service, the electronic reverse auction has generated substantial interest due to its purported ability to provide lower purchase prices to buying firms even though it has the potential to negatively impact the buyer–supplier relationships. Due to the emerging nature of the reverse auction process, empirical research in the aforementioned areas is relatively sparse. The purpose of this research is to address these gaps in the academic literature. A survey of 142 purchasing professionals employed in diverse industries in the USA revealed that the electronic reverse auction use was significantly related to the purchase price reductions for the buying firm when purchasing standardised direct materials and MRO, but not for customised direct materials. The data also suggests that the buying firms develop different types of governance structure (short-term or relational) with the suppliers depending on the purchase category.
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#1Kenneth J. Petersen (ASU: Arizona State University)H-Index: 24
#2Gary L. Ragatz (SPbU: Saint Petersburg State University)H-Index: 22
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Summary Many organizations are attempting to gain a competitive advantage by integrating their suppliers more thoroughly into key supply chain processes. This calls for greater strategic and operational cooperation between buyer and supplier firms, often involving some degree of collaborative planning. Advances in information technology are making it possible for firms to share planning information more quickly and easily. This study surveyed purchasing executives whose firms are involved in col...
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#1Cindy Claycomb (WSU: Wichita State University)H-Index: 17
#2Gary L. Frankwick (OSU: Oklahoma State University–Stillwater)H-Index: 17
SUMMARY This study investigates the moderating effects of buying context on the relationship between communication elements and the effort buyers exert while searching for new suppliers throughout a buyer-supplier relationship development process. A mail survey of members of the Institute for Supply Management™ was conducted and the data were analyzed using moderated regression. The results suggest that company size, buyer experience, relationship duration and relationship importance affect the ...
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SUMMARY Trust is a critical factor fostering commitment among supply chain partners. The presence of trust improves measurably the chance of successful supply chain performance. A lack of trust among supply chain partners often results in inefficient and ineffective performance as the transaction costs (verification, inspections and certifications of their trading partners) mount. Although the literature often mentions a relationship between trust and commitment, there is a lack of empirical tes...
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#1M.L. Emiliani (RPI: Rensselaer Polytechnic Institute)H-Index: 26
This article discusses the use of online reverse auctions to source engineered components in global aerospace supply chains using online reverse auctions and examines the specific case where a long-established U.S. economic cluster supporting large tier-one aerospace companies must compete against globally distributed sources of supply favored by their customers due to unit price savings, principally the result of lower wages. The article also examines if global sourcing practices based on power...
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#1Kenneth H. Wathne (UW: University of Wisconsin-Madison)H-Index: 12
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Abstract The authors examine how a firm’s strategy in a (downstream) customer relationship is contingent on how a related relationship outside of the focal dyad is organized. Drawing on emerging perspectives on interfirm governance and networks, the authors propose that the ability to show flexibility toward a (downstream) customer under uncertain market conditions depends on the governance mechanisms that have been deployed in an (upstream) supplier relationship. The governance mechanisms take ...
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#1Larry R. Smeltzer (ASU: Arizona State University)H-Index: 22
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Abstract Because reverse auctions hold high promises, it has become a popular tool in the past several years. One estimate is that as much as US$50 billion worth of goods may be purchased with reverse auctions in 2001. However, risks exist with reverse auctions. To better understand purchasers' motivation for using reverse auctions, what they perceive as the risks and the conditions required for successful use, interviews were conducted with 41 purchasing professionals who had used reverse aucti...
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Despite the existence of research in the field of electronic reverse auctions (eRAs), there is still a limited understanding of the determinants of auction savings that exist in this process, especially factors that can change information asymmetry during auctions. In comparison with other studies, attempts have been made to test the effects of various levels of information asymmetry through the prolongation of auctions and through changes to minimum bid amounts on auction results, as well as ot...
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