International Business Review 22 (2013) 112–125

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International Business Review

jo u r nal h o mep age: w ww.els evier .c o m/lo c ate / ib us r ev

Continental differences in purchasing strategies and tools

Katri Karjalainen a,1, Asta Salmi b,*a Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham NG8 1BB, United Kingdomb Aalto University, School of Economics, P.O. Box 21230, FI-00076 Aalto, Finland

A R T I C L E I N F O

Article history:

Received 27 September 2011

Received in revised form 19 February 2012

Accepted 25 February 2012

Available online 28 March 2012

Keywords:

Comparative study

Cross-cultural research

Europe

International purchasing

North America

Purchasing

Purchasing strategies

A B S T R A C T

This article focuses on the similarities and differences between the continental purchasing

strategies and tools of companies in Western Europe and North America. The main

question examined here is the strategic priorities and tools that European and North

American buyers use (at the category level) for direct purchases and how they differ. The

analysis is based on an empirical study of 224 companies from 10 countries. The results

suggest that Europeans emphasise a reduction in prices and total cost of ownership as

strategic objectives, while North Americans place greater emphasis on compliance with

social and ethical guidelines. Both groups place surprisingly little emphasis on

environmental objectives. In terms of tools, North American buyers have higher utilisation

of electronic tools in purchasing and in communicating with suppliers, while European

buyers appear to more extensively use purchasing tools associated with rating and

auditing suppliers. Overall, it appears that a majority of purchases take place in home

countries and close-by regions. Accordingly, we argue that practices adopted there offer

interesting insights for international purchasing of the companies.

� 2012 Elsevier Ltd. All rights reserved.

1. Introduction

While the academic literature has widely recognised the strategic role of sourcing, international management scholarsignored the topic of global sourcing for a long time (Arnold, 1989). However, the number of studies focusing on globalsourcing and international purchasing is increasing rapidly, as both academics and managers have acknowledged theirstrategic relevance for contemporary (international) business (Mol, van Tulder, & Beije, 2005; Trent & Monczka, 2003).Studies to date have tended to focus on international sourcing decisions (Cavusgil, Yaprak, & Yeoh, 1993; Lewin & Volberda,2011), barriers to international purchasing (Leonidou, 1999), country-of-origin effects (Andersen & Chao, 2003) andintegration and coordination of global sourcing (Gelderman & Semeijn, 2006; Monczka & Trent, 1991; Tsai, Huang, & Ma,2009). A recent addition to these discussions is the lively debate on the strategies and concepts for outsourcing andoffshoring (Contractor, Kumar, Kundu, & Pedersen, 2010; Hutzschenreuhter, Lewin, & Dresel, 2011; Kotabe & Murray, 2004).These studies on global sourcing have addressed the questions of what and where to buy. However, little is known about thehow question of international purchasing. Purchasing and operation management scholars have a long tradition of analysingpurchasing tools and strategies (e.g., Cousins, 2005; Day & Lichtenstein, 2006; Ogden, Petersen, Carter, & Monczka, 2005;Sharma & Dubey, 2010), but this research has had minimal interconnection with international business research, wherebusiness scholars have paid scant attention to the tools that companies actually use in their purchasing. The present study

* Corresponding author. Tel.: +358 50 383 2476.

E-mail addresses: katri.karjalainen@nottingham.ac.uk (K. Karjalainen), asta.salmi@aalto.fi (A. Salmi).1 Tel.: +44 115 84 66665.

0969-5931/$ – see front matter � 2012 Elsevier Ltd. All rights reserved.

doi:10.1016/j.ibusrev.2012.02.008

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125 113

aims to bring these two streams of research closer together by investigating, in a comparative setting, the type of strategiesand tools that Western companies adopt in their purchasing while operating within their own continent.

Current research predominantly treats Western firms as a homogeneous group in terms of its international purchasing.While earlier studies indicate that there are differences across countries when it comes to purchasing (Ogden, Rossetti, &Hendrick, 2007; Quintens, Matthyssens, & Faes, 2005), investigations that compare purchasing strategies and tools acrossthe two Western continents (Europe and North America) remain scarce. Even studies that rely on cross-national samplesfrom different continents tend to group all responding buyers together (Tsai et al., 2009), without comparing the buyingbehaviours between continents. Furthermore, studies on sourcing of US or US-based companies (Handfield, 1994; Murray,Kotabe, & Zhou, 2005; Thorelli & Glowacka, 1995) tend to dominate the field of international purchasing, with less scholarlyinterest being paid to European (or Asian) companies. The present investigation compares purchasing strategies and tools inNorth America with those in Europe and follows the research stream of continental comparisons (Carter & Narasimhan,1996; Kakabadse & Kakabadse, 2002; Quintens et al., 2005).

A lot of research attention in international purchasing and global sourcing has been directed towards the target marketsand/or the adaptations that all Western companies need to address in different foreign sourcing contexts. An alternative butmuch less utilised way of understanding international purchasing is to investigate the general norms of the companies interms of how they conduct purchasing on their home turf; that is, within their own country and continent. The focus on thisside is warranted by earlier research, which shows that an important part of purchasing takes place in domestic or nearbyregions (Mol et al., 2005). Therefore, the domestic and regional sourcing strategies and tools that organisations use withintheir own continent are bound to influence the ways in which they conduct international purchasing. Indeed, the homecountry institutional environment (including, for instance, socio-political, economic, and cultural features and firms in thereference group of the buyer) has been shown to influence global sourcing (Lewin & Volberda, 2011). Our comparison ofNorth American and European purchasing will indicate the ‘norms’ and practices of purchasing that prevail in thesecontinents. Our line of reasoning follows the example of Deng and Wortzel (1995), who looked at the purchasing of UScompanies in order to provide guidance to foreign (Asian) exporters aiming to enter US markets. Unveiling the strategies andtools within supply chains in the two continents can also provide important guidance for areas such as rising Chineseenterprises, which can be expected to move from acting just as suppliers to also becoming the buyers in international supplychains.

The aim of this study is to understand continental differences in Western companies’ purchasing strategies and tools, andtherefore the basis for their international purchasing, by investigating whether differences exist in purchasing across thecontinents of Europe and North America. Differences in the established ways of conducting purchasing may create differentchallenges when adopting similar approaches abroad. Investigation of differences between the two continents also providesimportant information to foreign suppliers looking to do business with these buyers. This article focuses on the strategies(the objectives emphasised for improvement by management) and tools (for managing suppliers, performance and thepurchasing process) that companies adopt in their direct purchasing for a selected category, which they source from theirown continent. The analysis is based on an empirical study of 224 companies from eight European and two North Americancountries (treated here as two groups: the European vs. North American buyers). Data for the study was collected in 2009.Due to the lack of comparative studies addressing these issues, this paper is explorative in nature. Carter and Narasimhan(1996) provided a comparison of expected purchasing trends in the mid-1990s in Europe and North America, but little hasbeen done since then in terms of continental comparisons. The present article provides a first attempt to fill this gap, and alsoto see whether our results can confirm the trends predicted by Carter and Narasimhan for purchasing in Europe and NorthAmerica.

Good comparative studies remain rare, even in the field of international business (Cadogan, 2010; Franke & Richey, 2010).The present paper makes two main contributions. Firstly, we contribute to current understanding of internationalpurchasing, by analysing the purchasing strategies and tools of Western companies on their home and regional markets.Since we rely on the purchasing literature for developing the measures for purchasing strategies and tools, we provide aninterdisciplinary approach, which is much needed in international business studies (Cantwell & Brannen, 2011). Secondly, bycomparing purchasing in Europe (Finland, France, Germany, Italy, Netherlands, Spain, Sweden and the UK) and NorthAmerica (the USA and Canada), we add an understanding of purchasing in the two continents. The results reveal differencesand similarities across the continents that are usually grouped together under the heading ‘Western’ in internationalpurchasing.

The remainder of the paper is structured as follows. The next section reviews the literature on international purchasing,with a particular look at the existing comparative works on purchasing. We then discuss the methods of the empirical study.This is followed by the statistical data and analysis, interpretation of the empirical results, and our conclusions.

2. Literature review

Globalisation has led to increasing cross-border purchases, as well as continuing fragmentation of global production andsupply chains. Global sourcing can benefit firms through improved price, quality, innovation and delivery times (Birou &Fawcett, 1993; Kotabe & Murray, 1990). Global supply chains are a source of competitive advantage, providing access tocheap labour and raw materials, better financing opportunities, larger product markets and arbitrage opportunities (Manuj &Mentzer, 2008). However, there are also some implicit trade-offs associated with using overseas foreign sources (Handfield,

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125114

1994). One typical example is lower-than-expected quality (Enderwick, 2009), which can have adverse impacts oninventory, production and operational costs (Sharma, 2010, 2011). The challenges of global supply chains include a need toarbitrage exchange rate fluctuations; shifts among international markets; cultural and communication barriers; the need torestructure supply chains; adoption of appropriate negotiation strategies; and increased lead times and transportation costs(Handfield, 1994; Prasad & Babbar, 2000). All of these challenges cause uncertainties and risks that managers need to face(Manuj & Mentzer, 2008). Due to global sourcing, manufacturing firms may not be agile enough to meet their customers’needs on a timely basis (Jin, 2004).

With all these challenges, along with rising labour costs in previously low-cost countries, increasing transportation costs,and environmental concerns, many companies are again increasing their sourcing from nearby markets. Global and domesticsourcing approaches are combined to minimise the cost/agility trade-off (Jin, 2004). Furthermore, the use of suppliers indomestic environments is supported by home country governments’ facilitation of relationships with suppliers in nearbycountries, as well as the cultural proximity that tends to minimise the transaction costs involved in developing relationships(Oke, Maltz, & Christiansen, 2009). The challenges that companies have faced in their global sourcing, in addition to thestrategic planning for global operations, bring to the fore the everyday practices and experiences of (sourcing) managers andbuyers. Successful global supply base management boils down to the ‘human factor’ in establishing positive supplierrelationships (Handfield & Nichols, 2004), which shows the importance of looking at the level of managerial actions.Therefore, analysis of the actual sourcing practices (Gelderman & Semeijn, 2006) brings us a fruitful understanding of thebasis of global sourcing. This leads us to focus on purchasing.

There is a lot of variation in the way the terms ‘international purchasing’, ‘global sourcing’, ‘offshoring’ and ‘globaloutsourcing’ are used and defined (for further discussion, see, for example, Mol et al., 2005; Quintens, Pauwels, &Matthyssens, 2006). Typically, the term global is connected not only with geographical extensiveness, but also with astrategic view to purchasing (Arnold, 1989). The present article builds on the view of Levy and Dunning (1993), who notedthat international sourcing means buying by a firm in one country from a firm in another country. Here, we aim to look at thestrategic objectives that are emphasised and the tools, rather than the strategic plans or global extension of the sourcingfunction. Furthermore, our analysis focuses on the level of a product category. This is more in line with the purchasingliterature, rather than international business studies, which typically analyse purchasing at the level of the company orindividual products. Not all products or buyer–supplier relationships are to be managed in the same way (Gelderman & VanWeele, 2003), and studies in the field of purchasing have demonstrated that purchasing strategies change according to thetype of category in question. Kraljic’s purchasing portfolio model, which presents a category-based approach to purchasingstrategies, was introduced in 1983 and remains the dominant approach in the profession (Gelderman & Van Weele, 2003).The category approach ensures that the tools studied are actually used for the continental purchases investigated.

Many of the existing international purchasing studies have addressed the features of the sourcing markets, with recentinterest focusing on emerging markets and developing countries (for example, Murray et al., 2005; Oke et al., 2009; Salmi,2006). Country-of-origin studies in industrial purchasing have focused on purchasing managers’ perceptions of productsourcing in newly industrialised countries or from a specific country, as well as comparing the perceptions towards productssourced in a range of different countries (Andersen & Chao, 2003). These studies show the differences in sourcingenvironments and suggest strategies and tools that these far-away countries call for. While it is important to understand thetarget supply markets, remarkably little attention has been paid specifically to the buying side, on the potential differencesamong the purchasing tools and strategies of companies in various Western countries. Lively interest in distant countries,like China and India, as sourcing markets tends to blur the picture of global sourcing further. Quintens et al. (2006, pp. 170–181) argued that ‘not all global search activities should lead to cross-border purchase’. This shows that local suppliers, if wellargued for, also fit within a global purchasing strategy. For analyses of cross-border purchasing, it then becomes relevant toanalyse domestic, regional, international and global purchasing. In fact, several empirical findings show that neighbouringcountries within nearby regions are as important for companies as foreign purchasing targets. Servais and Moller Jensen’s(2001) survey of 139 small Danish manufacturers found that while international purchasing was widespread, it was largelylimited to nearby countries. Therefore, the European region and, particularly the neighbouring countries, formed animportant supply base. Mol et al. (2005) found that most international outsourcing is intra-regional in nature. They analysedinternational sourcing using survey data on 200 manufacturing firms located in the Netherlands. They distinguishedbetween domestic (Netherlands only), regional (EU), foreign or international (outside the Netherlands), and global (outsideof EU) sourcing as the degrees of internationalisation of the supply base. An important finding on Dutch companies was thatinternationalisation of the supply base was mainly limited to other EU countries, with the exception of a few firms andindustries. Mol et al. (2005) found that only 11% of foreign sourcing stems from other areas of the world. Domestic sourcingaccounted for around 55%, while 34% was sourced from other EU countries. This calls for a focus on continental purchasing,Europeans within Europe and Americans and Canadians within North America.

The present study, which compares purchasing tools and strategies in two continents, follows the research tradition ofcomparing sourcing across different continents. For example, earlier works have compared sourcing of companies from theNetherlands, US and Japan (Kotabe, Mol, & Ketkar, 2008); international purchasing of European and Japanese multinationals(Kotabe & Omura, 1989); and strategic purchasing between seven European and North American countries (Ogden et al.,2007). Swamidass and Kotabe (1993) concluded that differences in the home base matter, as Japanese and European firmsdisplay different international sourcing patterns. Swamidass and Kotabe (1993) suggested that this finding can be attributedto differences in the strength of the home supply bases of European and Japanese firms. A further call for comparative studies

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125 115

across different cultures comes from Deng and Wortzel (1995), who argued that different cultural environments have abearing on the perceived importance of the buying criteria.

Institutional theory provides support for our assumption that there is unlikely to be one single Western approach topurchasing. Haunschild and Miner (1997) argued that organisations often imitate other organisations with common traits,such as those from the same geographical region (or country). According to institutional theorists, as organisations withinthe same region compete with one another and are exposed to a similar set of practices through trade groups, socialnetworks, similar education, culture and legal systems, patterns of adoption are expected to vary systematically by region(Huang, Gattiker, & Schroeder, 2010). The occurrence of such isomorphism is often not recognised as the adoption decisionsare driven by institutional pressures deeply embedded within the environment. The ability to recognise the possible normsof purchasing and typical strategies and tools used can provide companies in these two continents with a reflectiveviewpoint to their selected approach, and also how certain established practices may help or hinder them when venturingoutside their continent for new suppliers.

Empirical studies on international purchasing have been dominated by analysis of US-based companies (Bozarth,Handfield, & Das, 1998; Deng & Wortzel, 1995; Handfield, 1994; Murray et al., 2005; Thorelli & Glowacka, 1995). Recently,European countries have been included in the analysis (Agndal, 2006; Mol, Pauwels, Matthyssens, & Quintens, 2004; Molet al., 2005; Nassimbeni, 2006; Salmi, 2006), which has also provided a basis for continental comparisons on purchasing.Earlier studies explicitly comparing US and European views on purchasing form the key comparison point for our study.Comparison of the two continents by Quintens et al. (2005) was based on case studies in two countries: seven US companiesand five Belgian companies. Our (quantitative) approach is broader as we analyse 10 countries and 224 companies.

Two roundtable studies from the mid-1990s analysed American and European executives’ views on purchasing trends(Carter & Narasimhan, 1996). The three most significant future trends listed by Americans were increased use of informationtechnology, the use of TCO (total cost of ownership) in purchasing decisions, and strategic alliances. European executives, onthe other hand, considered the three most significant trends to be the use of sourcing teams, strategic sourcing, and TCO.Furthermore, European purchasing executives saw cooperative networks of suppliers as one of the least significant trends. Amore recent study by Leach (2009) revealed a difference between American and European expectations in terms of the use ofinformation technology. Leach suggested that European firms perceive information technology as being less valuable andutilise it to a lesser degree, whereas American firms viewed e-procurement practices proactively.

Interestingly, the roundtable study of 1994 revealed a more pronounced rate of evolution within the purchasing andsupply management arena within North American industries than in their European counterparts. Part of this difference wasattributed to the need for European firms to plan for the integration of a common market within Europe (Carter &Narasimhan, 1996). With regard to the area of logistics, there is evidence that cultural and contextual factors shape differentattitudes between managers in the UK/Europe and the US/North America regarding management across logistical functionsand environments (Grant, 2004). It has been suggested that US and other North American logistics and SCM managers maybe more concerned with transactional criteria in supplier exchanges than relational criteria, and their counterparts in the UKand Europe may have the opposite views (Grant, 2004).

The above-mentioned findings suggest that treating Europe and North America as identical (representing Westernthinking) can be an over-simplification, and that cross-national research is needed, not only between established andemerging economies, but also to discover the different practices of countries classified as developed or Western. Therefore,our analysis concentrates on a deeper analysis of Western purchasing practices, by comparing the views of North Americansourcing managers with those of Western European ones. Our continental comparison focused on direct spend category levelstrategies. To our knowledge, there are no previous studies at this level. We investigated purchasing of European and NorthAmerican companies within their own country and continent (Europe and North America, respectively) and analysed thestrategies and tools used at a category level for direct purchases. We have excluded investment goods and indirect purchasesfrom the analysis, as they are suggested to involve different transaction mechanisms (Kwon, Yang, & Rowley, 2009). Morespecifically, we focused on two areas: priorities of the category strategy (for instance, reduction of price, cost, or ecologicalimpact, and improving social and ethical compliance) and general and electronic purchasing tools used in managing thecategory’s purchases and supplier relationships.

3. Methodology

3.1. International purchasing survey and our sample

The empirical data for this study is drawn from the first round of the international purchasing survey (IPS), whichexplores purchasing and supply management practices and their effects on purchasing and business performance. Thesurvey was managed by a community of universities in 11 European and North American countries, which strengthens theinternational nature of the study (Ellis & Zhan, 2011). Data collection was carried out in the following countries: Finland,France, Germany, Italy, the Netherlands, Spain, Sweden, the UK, Canada, and the United States. Having 10 countriesrepresented in the study overcomes the common limitation of contemporary studies, which base their comparisons on alimited number of countries (typically two or three) (Cadogan, 2010). Our study is in line with the recent suggestion byFranke and Richey (2010) to increase the number of countries (to a minimum of 7–10) in multi-country internationalbusiness research studies. With regard to the data collection in each country, a general guideline was provided related to

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125116

company size and industries to be targeted, although some freedom was allowed in sampling methods and in determiningthe population (association lists vs. other contact lists, degree of random sampling).

The international purchasing survey contained questions (in addition to company descriptives) on business objectivesand performance, demand market characteristics and purchasing improvement programmes, and purchasing organisationon the company level. Respondents were also asked to select a purchasing category and answer questions on thecharacteristics of this category, as well as on the strategy, processes and tools used for it. Respondents were free to self-selectthe category to respond to, which could reflect that the chosen categories are strategically significant or significant in termsof money spent. In total, 681 usable responses were received. This study focuses only on the category-level items from thesurvey.

The focus of the present study is on continental differences, which means that the analysis only included thoserespondents who indicated that their purchases in their selected category are made solely from domestic suppliers orsuppliers located in the same continent (that is, either in Europe or North America, respectively). Accordingly, it can beexpected that external influences stemming from foreign suppliers and environments will not have a significant effect on thepurchasing strategies and tools used, and that the differences are more likely to reflect the differences between European andNorth American buyers. Furthermore, the study excluded responses on indirect purchases or capital expenditure categoriesin order to focus on direct purchases only. As a result of these focusing operations, 224 responses remained for analysis. Thisdata was used to test for overall differences in the strategies employed and the purchasing tools used by the North Americanand European companies in their respective domestic continents.

Before proceeding with the main analysis, we will first examine the descriptive statistics on sourcing locations for thetotal number of responses on direct purchasing. This shows that continental sourcing markets are important for bothEuropean and North American companies. We will also discuss the theme of equivalence in our study.

3.2. Why focus on continental sourcing?

Firstly, analyses were conducted in order to gain an overall picture of the location of purchases; that is, the countries fromwhich companies make purchases for their selected category. This was done using the full dataset, containing responsesregarding direct spend categories (a total of 527 responses). Respondents were asked to select all possible geographical areasfrom which at least 10% of the category in question is sourced. For the majority of respondents, both European and NorthAmerican, the home country is either the only source of supply or among two or more sourcing countries. Interestingly,despite the increasing hype about low-cost country sourcing, the continental sources of supply seem to hold strong. Theresults are depicted in Table 1.

The results show that (as one may expect) USA and Canada source much less from Eastern or Western Europe thanEuropean companies. The reverse applies for sourcing from North America. Out of all the European countries included in thesurvey, UK companies are the most active in sourcing from North America. Surprisingly, sourcing from Latin America seemslimited for all buyer countries. It is most often used as a sourcing location by Spanish, Canadian and US companies, perhapsdue to cultural and language ties. Also somewhat surprisingly, there is very little sourcing from Russia and CIS countries byany respondents. Between one-fifth and one-third of respondents from each country use China as a source for their selectedcategory. These results clearly show the importance of both country and continental suppliers for most companies, andprovide further motivation to investigate the differences in continental purchasing practices between Western countries ingreater depth.

3.3. Data equivalence with a multinational survey

Before reporting our data analysis and results in detail, it is important to comment on data equivalence related tomultinational surveys. Data equivalence refers to the extent to which the elements of a research design have the samemeaning and can be applied in the same way in different cultural contexts. Prior to data collection, researchers must considerfunctional equivalence; that is, the extent to which the objects and behaviour take the same role or function across cultures(Hult et al., 2008). Bensaou, Coyne, and Venkatraman (1999) have suggested that in strategy studies, functional equivalenceis satisfied at a basic level when two countries have similar economic philosophies (for example, capitalist). The above-mentioned study looked at purchasing and design, suggesting that these were universal functions with functionalequivalence. Extensive reviews of literature were also conducted in preparation for IPS survey to identify pre-existing itemson the selected topics, a practice suggested for increasing equivalence (Hult et al., 2008). Furthermore, researchers withexperience conducting purchasing research from all the surveyed countries took part in designing the questionnaire, andpilot tests with purchasing professionals were conducted in each country. No major issues with the interpretation of thelanguage and categories were identified. The IPS survey was developed in English and translated into seven languages. Tomaximise translation equivalence (Bensaou et al., 1999), each country followed the TRAPD (translation, review, adjudication,pre-testing and documentation) procedure when translating into local languages from the English version.

Typically, problems with equivalence have arisen in cross-cultural studies comparing American and Asian samples (thatis, in contexts with potentially large cultural differences), not between Western countries. Point scales (the type of scalesused in this study) have previously been referred to as ‘Western-style’ (Agarwal, 1993). Additionally, metric equivalence canbe assessed post-data-collection. More advanced approaches that rely on structural equation modelling can be used to

Table 1

Sources of direct spend per country (share (%) of companies sourcing at least 10% of the selected category in this country).

Buyer country

of origin

N (527) Category purchasing region

Home

country

(%)

Eastern

Europe

(%)

Western

Europe

(%)

North

America

(%)

Latin

America

(%)

Japan, South

Korea, and

Taiwan (%)

Australia and

New Zealand

(%)

Russia and

other CIS

countries (%)

India, Pakistan,

and Bangladesh

(%)

China

(%)

South

East

Asia (%)

Middle

East (%)

Finland 29 66 21 69 21 0 10 0 3 7 24 7 0

France 33 67 24 61 12 0 9 0 0 9 21 0 0

Germany 54 87 44 74 19 6 15 4 4 7 26 6 4

Italy 39 69 18 59 15 8 8 0 5 13 33 0 0

Netherlands 45 62 24 64 16 2 2 0 0 4 24 11 4

Spain 43 77 12 63 7 12 5 0 5 7 30 5 5

Sweden 128 84 23 57 13 0 9 0 2 5 28 5 1

United Kingdom 67 78 16 51 28 4 3 1 0 9 19 4 7

Canada 37 68 3 16 73 11 11 3 5 11 32 0 5

United States 52 81 8 27 52 10 29 2 2 6 40 4 0

Average 49 10 29 18 3 7 1 2 4 18 2 2

K.

Ka

rjala

inen

, A

. Sa

lmi

/ In

terna

tion

al

Bu

siness

Rev

iew 2

2 (2

01

3)

11

2–

12

5

11

7

Table 2

Tests for metric equivalence – overall response statistics.

European respondents North American respondents Difference

Mean 3.18 3.22 �0.03

St. dev. 1.35 1.44 �0.09

Range 4.98 4.88 0.10

Minimum 1.00 1.03 �0.02

Maximum 5.98 5.90 0.07

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125118

estimate equivalence for multi-item constructs (Singh, 1995) but they are not used here due to the single-item approach. Asimple approach is to compare the subjects’ responses over a large number of items across cultures (Hult et al., 2008). Thepresent study adopted this approach because it was found to be most suited for our approach of investigating differences atthe item level. If North American and European respondents are found to have similar means and standard deviations onaverage for a large set of items, this would suggest they answer on similar scoring scales; that is, they use the same scale ofresponses. For all of the survey items used in this study, we compared the average means and standard deviations, as well asthe range, minimum and maximum values, for North American and European respondents. The differences among thegroups were not large. Table 2 shows the differences in the averages of all these figures. Additionally, ANOVA was used to testwhether the differences in means were statistically significant for the averages of all variables between Europeans and NorthAmericans. This was not found to be the case.

A sampling frame was set for all countries, with the objective of targeting large enterprises, selected industries and highlevel purchasing personnel. This type of similar selection of sample is expected to increase data collection equivalence (Hultet al., 2008). Data was collected in all countries at the same time period (in the summer and autumn of 2009), whichincreases data collection equivalence (Hult et al., 2008).

3.4. Methods for analysis

To compare the purchasing strategies and tools across the continents, we used analysis of variance (ANOVA) test. Firstly,the Levene test of homogeneity of variance was run in order to test that the assumptions for ANOVA are not violated. Forsome of the cases tested, the assumption was violated. T-tests were then run for those instances; the results supported thoseof the ANOVA for all but one of the purchasing tools. The analysis regarding this tool, long-term contracts, was removed fromthe discussion. Only the ANOVA results are presented for all cases.

The analysis is based on the following questions posed to the respondents (purchasing/sourcing managers):

(1) F

or category strategy, the respondents indicated the extent to which management had emphasised certain priorities forthe chosen category over the past two years. The following priority options were listed: reducing prices, reducing thetotal cost of ownership (TCO), reducing internal process costs, reducing the ecological impact of the category,improving social and ethical compliance, improving time-to-market with suppliers, and the introduction rates of newproducts.

(2) P

urchasing tools (which support the purchasing activity and the relationship with supplier(s) for the chosen directcategory) were divided into two groups: general purchasing tools (such as TCO, portfolio analysis, benchmarking,supplier auditing) and electronic tools (for example, electronic supplier database, electronic catalogues, electronic dataexchange). Respondents were asked to indicate the frequency with which the tools are used.

3.5. Data analysis and results

Category strategy was investigated by asking respondents about the priorities they adopted for the chosen (direct spend)category over the past two years. The six-point response scale ranged from ‘Not at all’ to ‘Completely’. Results are presentedin Table 3 with significant differences marked. Based on the results, Europeans buyers appear to emphasise reducingproduct/service unit prices as well as reducing the total cost of ownership (TCO) more than North American companies.North American buyers, on the other hand, expressed a higher emphasis on improving social and ethical compliance.Somewhat surprisingly, neither group showed high strategic emphasis on reducing the ecological impact of the category.Emphasis on improving time-to-market with suppliers or introduction rates of new products are, on average, not very highfor either group.

Purchasing tools were divided into general purchasing tools and electronic tools. For each group, respondents were askedto indicate the frequency with which they use the tools to support the purchasing activity and the relationship withsupplier(s) for the chosen direct category. The six-point response scale had the following options: Never, Rarely, Sometimes,Frequently, Very frequently and Always. Tables 4 and 5 present the results regarding differences in tool usage.

From the results, it can be concluded that European firms use spend analysis and reporting more, as well as supplier ratingsystems and supplier auditing. North American firms, on the other hand, utilise value analysis/engineering and VMI (VendorManaged Inventory) more. Overall, both groups have a high average usage of spend analysis and high levels of sharing

Table 3

Differences in category strategy emphasis between European and North American home market buyers (scale from 1 (‘Not at all’) to 6 (‘Completely’)).

Category strategy Country group Mean St. dev.

Reducing product/service unit prices* Europe (N = 180) 4.24 1.09

North America (N = 41) 3.68 1.04

Reducing total cost of ownership of purchased inputs* Europe (N = 182) 4.12 1.13

North America (N = 41) 3.68 1.04

Reducing (internal) purchasing process cost (e.g., e-procurement) Europe (N = 181) 3.13 1.32

North America (N = 41) 3.34 1.20

Reducing asset utilisation for this category (e.g., headcount, inventory) Europe (N = 182) 3.42 1.20

North America (N = 41) 3.17 1.09

Improving conformance quality of purchased inputs Europe (N = 181) 3.74 1.18

North America (N = 41) 3.83 1.20

Improving specifications and functionality of purchased inputs

(e.g., customisation, standardisation, redesign)

Europe (N = 181) 3.49 1.24

North America (N = 41) 3.80 1.24

Improving supplier lead-time (time between order taking and delivery) Europe (N = 182) 3.86 1.15

North America (N = 41) 3.68 1.25

Improving supplier accuracy in delivery dates and quantities Europe (N = 182) 3.98 1.11

North America (N = 41) 3.78 1.28

Improving time-to-market with suppliers Europe (N = 181) 3.40 1.31

North America (N = 41) 3.17 1.47

Improving introduction rates of new/improved products/services Europe (N = 178) 3.11 1.24

North America (N = 40) 2.85 1.44

Reducing ecological impact for this category Europe (N = 180) 3.02 1.36

North America (N = 41) 2.93 1.46

Improving compliance with social and ethical guidelines for this category* Europe (N = 179) 2.91 1.36

North America (N = 40) 3.45 1.45

* Difference is significant at p < 0.05.

Table 4

Differences in purchasing tools usage between European and North American home market buyers (scale from 1 (‘Never’) to 6 (‘Always’)).

Purchasing tools Country group Mean St. dev.

TCO, life cycle costing Europe (N = 183) 2.83 1.45

North America (N = 39) 2.56 1.41

Portfolio analysis Europe (N = 177) 3.23 1.39

North America (N = 39) 2.74 1.48

Scenario and risk planning Europe (N = 182) 3.27 1.31

North America (N = 40) 3.20 1.40

Spend analysis and reporting* Europe (N = 183) 4.20 1.23

North America (N = 40) 3.52 1.39

Purchasing performance reporting (i.e. scorecard) Europe (N = 181) 3.64 1.63

North America (N = 40) 3.38 1.44

Benchmarking Europe (N = 181) 3.61 1.30

North America (N = 40) 3.18 1.47

Value analysis/value engineering (VA/VE)* Europe (N = 179) 2.67 1.36

North America (N = 40) 3.20 1.54

Target costing Europe (N = 183) 3.40 1.41

North America (N = 40) 3.51 1.50

Supplier rating systems* Europe (N = 183) 4.01 1.38

North America (N = 40) 3.05 1.63

Supplier auditing* Europe (N = 179) 3.77 1.36

North America (N = 39) 3.03 1.53

Share inventory level knowledge with suppliers Europe (N = 181) 3.52 1.32

North America (N = 40) 3.52 1.54

Share production planning and/or demand forecast

information with suppliers

Europe (N = 182) 3.93 1.20

North America (N = 40) 3.62 1.56

Dedicated capacity from suppliers Europe (N = 179) 3.42 1.19

North America (N = 41) 3.29 1.49

Vendor (supplier) managed inventory* Europe (N = 177) 2.31 1.28

North America (N = 40) 3.22 1.63

Joint planning and replenishment with suppliers Europe (N = 179) 2.65 1.29

North America (N = 40) 3.05 1.38

Quality management tools with suppliers

(e.g. pareto, fishbone, quality circles)

Europe (N = 180) 2.33 1.28

North America (N = 40) 2.30 1.40

* Difference is significant at p < 0.05.

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125 119

Table 5

Differences in electronic purchasing tools between European and North American home market buyers (scale from 1 (‘Never’) to 6 (‘Always’)).

Electronic purchasing tools Country group Mean St. dev.

Electronic supplier database Europe (N = 180) 3.37 1.71

North America (N = 41) 3.49 1.60

Reverse e-auctions Europe (N = 180) 1.44 0.90

North America (N = 41) 1.44 0.87

Electronic request for quotation/proposal/information (RfX)* Europe (N = 182) 2.46 1.72

North America (N = 41) 3.80 1.45

Electronic catalogues* Europe (N = 182) 2.29 1.44

North America (N = 41) 3.41 1.45

Electronic workflow and order management Europe (N = 182) 3.02 1.84

North America (N = 41) 3.15 1.81

Order tracking and tracing Europe (N = 180) 3.65 1.66

North America (N = 41) 3.90 1.56

Electronic document and contract management Europe (N = 182) 3.14 1.64

North America (N = 41) 3.27 1.79

Electronic invoicing and automated payment Europe (N = 181) 2.69 1.73

North America (N = 41) 3.22 1.74

Purchasing cards (P-cards)* Europe (N = 182) 1.40 0.83

North America (N = 41) 2.10 1.64

Electronic data exchange (EDI, XML, web-EDI) with suppliers* Europe (N = 182) 2.33 1.67

North America (N = 41) 3.00 1.86

* Difference is significant at p < 0.05.

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125120

production planning and/or demand forecasts with suppliers. Somewhat surprisingly, the average use of qualitymanagement tools is low for both groups.

Overall, North American firms appear more advanced in their use of electronic tools in purchasing, utilising the followingelectronic purchasing tools significantly more than European buyers: electronic requests for quotation or proposal,electronic catalogues, purchasing cards and electronic data exchange. Overall, there is a high average usage of supplierdatabases, electronic order tracking and tracing, and e-document and contract management tools for both Europeans andNorth Americans when operating with domestic suppliers. Use of reverse auctions and purchasing cards are, on average,both low for all respondents; surprisingly, the same applies for electronic invoicing and automated payment tools forEuropean respondents. Given the standards in banking and payment systems within EU, one would expect higher usage ofthese.

As discussed above, purchasing practices at home (within one’s own continent) were expected to carry over to how firmsapproach global sourcing. Our data does not allow for comparisons of European and North American purchasing in directcategories overall, due to the significantly higher number of Europeans in the full dataset; ANOVA would not be reliable withsuch large differences in group sizes. Nonetheless, out of interest, we did conduct such an analysis, even though the resultscannot be claimed to be statistically verified. With the exception of one of the strategic objectives (compliance with socialand ethical guidelines), all the differences found within continental purchasing were between North American and Europeanbuyers overall. The direction of the difference remained the same for all. This would indicate that different norms forconducting purchasing exist between the two continents, and the strategies and tools found to be in use when operatingwithin one’s own continent are, overall, the norms that buyers apply.

In relation to control variables, it was noted above that certain controls towards company profiles were included in datacollection; only large enterprises were included, and no public sector organisations. Likewise, the responses selected foranalysis here only contained direct purchases; capital and indirect expenditure were excluded, as they may have differentpurchasing mechanisms. As the study is of an exploratory nature, all industries in the sample were included. Thecomposition of different industries was roughly similar within both groups. For Europe, the division between industries was69% manufacturing organisations, 18% service organisations and 13% other. For North America, the corresponding figureswere 46%, 35% and 14%, respectively.

4. Discussion

International purchasing has become an increasingly important topic in the field of international business (Lewin &Volberda, 2011; Mol et al., 2005). The present study contributes to this area by analysing the strategies and tools thatcompanies in Europe and North America actually use in their purchasing.

This research has revealed that there are general differences between the Western European and North American countriesin our sample in terms of direct purchasing category strategies and tools. With regard to strategic objectives, Europeans placegreater emphasis on reduction in prices and total costs, while North Americans emphasise compliance to social and ethicalguidelines. In regard to purchasing tools, North American companies, overall, are more advanced in their use of e-tools,particularly in eRfX, e-catalogues, P-cards and EDI; this may indicate an emphasis on making transactions more efficient.Europeans, on the other hand, utilise spend analysis, supplier rating and auditing systems (that is, control-oriented tools) more

Europe North AmericaStrategic difference s

Higher price and cost focus in purchasing strategy

Higher emphasis on social and ethical compliance issues

Differences iin purchasing tools usedSupplier auditing and rating, aswell as spend analysis tools in

High usage of e-tools in purchasing combined with

high use

Signifies an emphasis on control

higher VMI usage

Signifies an information sharing and integration

emphasis in practice

Fig. 1. Summary of key continental differences.

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125 121

extensively, but less VMI than their North American counterparts. Fig. 1 summarises the key continental differences found inthe empirical analysis.

The study by Carter and Narasimhan (1996), which compared the views of American and European executives in 1994regarding future purchasing trends, forms a comparison point for the present study. Specifically, our study indicates that twoof the three trends that Carter and Narasimhan suggested are now visible in the practices of North American buyers. Firstly,they have high utilisation of electronic tools (higher than Europeans), and secondly, like Europeans, they also seem to widelyutilise TCO costing practices widely. With regard to the other trends predicted by European purchasing executives (Carter &Narasimhan, 1996), our study cannot provide comparisons as it did not include items on strategic sourcing and the use ofsourcing teams.

In Carter and Narasimhan’s study (1996), North American buyers expressed that improved information systems andtechnology were the routes with which to achieve cost reduction and, ultimately, cost avoidance. Europeans consideredthis approach to be a case of short-term planning and gains and tended to be more longer-term-oriented, stressingeffectiveness measures rather than efficiency-based measures (Carter & Narasimhan, 1996). Our results indicate that NorthAmerican firms have indeed tended to place greater emphasis than their European counterparts on adopting informationsystems and technology for purchasing, as they had higher average usage rates of all e-tools tested for. European firmsseemed to have a more cautious and perhaps more realistic view of the benefits of information technology and e-procurement systems than American firms (Carter & Narasimhan, 1996); in this respect, they are followers rather thanearly adopters. The results of our study support these earlier findings, at least when it comes to direct purchases fromcontinental suppliers. This would also seem to support earlier findings suggesting that Americans view e-procurementmore proactively (Leach, 2009) and are more concerned about incompatible systems as barriers to SCM implementation(Halldorsson, Larson, & Poist, 2008).

Our study found that North American buyers are more advanced in their use of the various e-tools. As the level of strategicpurchasing elevates, the exchange of information is likely to be more timely and frequent as it takes place through advancedinformation systems (Paulraj, Chen, & Flynn, 2006). Our results point towards North American buyers possibly being morestrategically elevated in their practices than Europeans, at least when purchasing direct categories in continental markets.This finding is in line with the predictions of the 1994 roundtable study (Carter & Narasimhan, 1996).

Earlier studies have indicated that US firms have moved from traditional purchasing habits towards Japanese practices,such as working closely with suppliers to improve quality and reduce defects (Prasad & Babbar, 2000). However, the currentstudy suggests that this is not the case, based on the fact that use of quality tools was not found to be significantly higher forNorth American buyers (nor extensive at all in general).

In the roundtable study of 1994, the emphasis on integration within the supply chain and transaction cost managementwas much stronger in the participating North American industries than in the European industries (Carter & Narasimhan,1996). Overall, US/North American managers have been found to be more transaction-oriented, while relationships tend tobe more important in the UK/Europe (Grant, 2004). Our results provide mixed support for these findings regardingtransaction costs. On one hand, they are supported by our findings of higher e-tool usage by North Americans (as e-tools aretypically used to lower process costs; see, for example, de Boer, Harink, & Heijboer, 2002; Puschmann & Alt, 2005). On theother hand, our results suggest that North Americans focus less on reducing input TCO than Europeans; this area is related totransaction costs such as maintenance and contract enforcement costs.

In the 1990s, environmentally sensitive purchasing was a distinct competitive direction in the European industry group,but not a major factor in North American industry (Carter & Narasimhan, 1996); it appeared that European industries werefurther developed in this area. However, the results of the present study indicate that neither group of buyers has focused onenvironmental aspects of purchasing, as neither group emphasised it as a strategic objective in the direct categories selectedby respondents. These goals may be more pronounced in purchases from developing nations, as many companies face media

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125122

scrutiny regarding their actions regarding suppliers in the developing world (Awaysheh & Klassen, 2010). Perhaps theyshould be subject to the same level of attention in their home territory, and this may be an area in which both groups wouldbenefit from more work in the future.

Institutional theory has gained widespread adoption as a means of explaining companies’ behaviours across regions (Cai,Jun, & Yang, 2010; Sila, 2007). The present study indicates that continental differences in purchasing do exist and that thereare clear differences in the adoption of certain tools. The question of what specific institutional pressures may have causedcertain tools to become more prevalent within the two continents is beyond the scope of the study. However, given that suchtraditionally adopted practices within a continent may be carried forward to sourcing from foreign locations, without payingsufficient attention to their adaptability and appropriateness, it is important to acknowledge the difference in continentalpurchasing practices.

As mentioned, the continental practices of Western companies can also provide interesting viewpoints regarding how thesame companies may fare in their international purchasing practices overall. Firstly, the more pronounced use of e-tools byNorth American companies can indicate that they need to adapt more to their processes and approaches to managingtransactions when dealing with suppliers from developing countries, as those are likely to be less equipped for electronicprocesses. A high usage of electronic tools may also be seen as a distancing approach to relationships, something that couldbe perceived negatively in certain cultures. Overall, more rigorous and set electronic processes can be harder to adapt to localsupplier capabilities and requirements than less formal and/or paper-based processes. Indeed, Handfield and Nichols (2004)have suggested that organisations must recognise that processes that work in the USA may not be at all appropriate in otherparts of the world. For example, while information systems are a key enabling factor that enables the management of supplychains, they are not enough to guarantee a capable global supply base. Foreign suppliers aiming to do business withEuropean buyers should be prepared to be subjected to more stringent evaluations, reporting and auditing, as Europeanbuyers utilised related tools significantly more than their American counterparts. The high usage of these tools, as along withthe high emphasis on cost-related strategic objectives, would indicate that control is highly valued by European buyers. Thepreference of North Americans for use of VMI practices in our sample may prove more complex in international sourcing dueto distances. As early as 1995, Deng and Wortzel found that US importers valued on-time delivery highly when selectingAsian suppliers.

5. Limitations and future research

Although this exploratory analysis covers different industries and countries, it is limited by its cross-sectional nature.The composition of different industries is largely similar for both groups, but industry effects could not be directlycontrolled for due to the limited number of firms in some industries. This is something that needs further investigationand we would suggest comparative studies of North American and European companies focusing on, for example, eitherthe service or the manufacturing sector, in order to reveal a more detailed picture of how the two continents differ inpurchasing. Another limitation relates to sample representativeness. Due to the differing sampling methods, not allcountry samples are equally representative of the total population. For this reason, the results do not represent aconclusive finding on the European and North American way of purchasing. Instead, they serve as an indication ofcontinental differences that are likely to exist, and as a basis for hypotheses in future empirical studies. Furthermore,we see that comparative analysis should be extended to cover Asian countries, which are playing an increasinglyimportant role in global supply chains and international purchasing. Indeed, there is a general need to makeinternational business studies more extensive geographically to strengthen the link between international trade andresearch (Ellis & Zhan, 2011).

In addition to continental differences, it is possible that some country-level differences could be found. Even though theEuropean Union has reduced trade barriers and brought in a common continental market, some cultural aspects are stilllikely to influence purchasing practices. Indeed, studies show that the institutional environment in the home countryinfluences offshoring (Hutzschenreuhter et al., 2011) and that barriers to international purchasing result from spatialdistances and environmental differences (Leonidou, 1999; Tsai et al., 2009). Therefore, there is a need for studies that analysepurchasing with multi-level frameworks that consider the institutional, economic, political and cultural contexts whereinbuying companies are embedded. Cultural differences are especially likely to affect management of relationships withsuppliers, which is an aspect that the present study did not touch upon. Therefore, we encourage further interdisciplinarystudies drawing from supplier relationship management literature and international business to drill closer into suchpossible country differences.

In order to understand the dynamics and potential shifts in internationalisation of purchasing, a longitudinal study wouldbe required, preferably with data collected from the same companies over several years. Future studies may continue onthese lines. Our other suggestions for further research concern a more rigorous approach to the scope of internationalpurchasing – our results indicate that scholars interested in international purchasing would benefit from analysing regionaland domestic sourcing, not just global. Furthermore, our study raises the fundamental question of whether there is a‘Western’ way of purchasing. Indeed, the findings suggest that there are regional norms for purchasing and that, to someextent, we may find indications of ‘American’ and ‘European’ ways of purchasing. Within Europe, future studies may evenfind smaller, more homogeneous groups of countries following similar practices in their purchasing. Therefore, the presentstudy sets the stage for more studies comparing buying companies from different countries.

K. Karjalainen, A. Salmi / International Business Review 22 (2013) 112–125 123

6. Conclusions

The present study adds to the increasing literature on international purchasing in the field of international business.Quintens et al. (2005, p. 58) noted that ‘companies from different countries and regions do not look at internationalpurchasing in the same way’. Our study suggests that a reason for this is that companies from different countries andcontinents look at purchasing per se differently. However, there has been a lack of studies analysing the extent to whichcompanies from the North American and Western European continents do differ in their purchasing tools and strategies. Thispaper has aimed to fill in this gap.

This paper shows that Western companies tend to source from nearby markets – domestic purchasing and purchaseswithin both continents are extensive. This finding is in line with earlier studies, but the present study extends the previousliterature in terms of its geographic scope (investigating 10 countries in total) and by showing that the finding applies notonly in Europe but also in North America. Because our survey targeted medium-sized or larger companies, we expect thatcontinental orientation is more than just a matter of resources. This finding supports the view that, despite the ever-increasing potential for international/global sourcing, scholars and managers should not underestimate the role of marketswithin their own continent when analysing their current purchasing. We have looked at the purchasing strategies and toolsof companies in the two Western continents. This followed Deng and Wortzel’s (1995) call for a comparative study acrossdifferent cultures: different cultural and institutional environments seem to have a bearing on the perceived importance ofthe factors affecting purchasing. We have shown that there are both differences and similarities across the two continents interms of their approach to purchasing. We would argue that these different starting points give companies at least a partlydifferent basis for decision-making and operations in their foreign sourcing.

The study also provides managerial implications. This first large-scale comparative study between the two Westerncontinents serves as a reflecting point for managers in both continents when developing their purchasing strategies andtools. European companies had lower overall usage rates of electronic purchasing tools than North Americans; closing thistechnology gap can be seen as an important short and medium-term objective to ensure that their purchasing efficiencyremains competitive. Neither set of companies seemed to use quality management tools extensively when working withsuppliers in their own continent. This is a factor that companies must consider if, for example, they include suppliers fromlow-cost countries, given quality cannot always be taken for granted in those supply chains. In terms of strategicorientations, Europeans’ emphasis on cost may make them better prepared for the current economic conditions, but theymay also need to consider matching the North Americans levels of focus on social and ethical compliance guidelines withsuppliers, given the increasing media scrutiny and consumer interest in these issues. Our findings also offer advice to foreignsellers approaching these markets. For instance, Europeans seem to be more stringent in terms of supplier evaluations andthe level of reporting expected, while North American buyers are likely to expect high levels of e-capabilities from thesuppliers with which they interact.

Acknowledgements

We are grateful to the editor and two reviewers for their constructive comments. We also thank all members of theInternational Purchasing Survey (IPS) group, in particular Melek Akin-Ates, Lars Bengtsson and Desiree Knoppen for theircomments on an earlier draft of this paper. This research was supported by a research grant from the Jenny and Antti WihuriFoundation.

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