Leveraging cultural diversity in buyer-supplier relations? : an empirical study on the role of the procurement function

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Leveraging cultural diversity in buyer-supplier

relations? An empirical study on the role of the

procurement function

Name Sebastian Bart Tijl, BEng

Student Number 10867996

Date of Submission 26-01-2017

Course Thesis Strategy

Program MSc Business Administration

Track Strategy

Word Count 30.000

Supervisor Dr. A.E. Kourula

Second Reader Dr. L. Moratis

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Statement of Originality

This document is written by Sebastian Tijl, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

Acknowledgements

In writing this thesis, I have tried my very best to push beyond contemporary thinking, both my own thinking and the thinking found in so many of today’s books, articles and theses on management and organization. By doing so, I hope to have achieved at least a little bit more than finalizing a thesis for the sole purpose of graduating. I could not have completed this intellectually challenging task without some of the coincidences and opportunities in life that led me to cooperating and interacting with some people I would hereby like to thank deeply.

First of all, I am thanking Arno Kourula for his patience, flexibility and impressive ability to provide on-point feedback. My gratitude goes out equally to John Tros, for his confidence in the value of the research, for making me feel part of the SC&P-team, and for helping me arrange interviews with some invaluable people. Special thanks go out to Fons Trompenaars, for his generosity in the cooperation and for making me understand how intercultural competence is more of a differentiator than most people will ever realize, as well as to Hans Strikwerda, first of all for his phenomenal understanding of management consulting and his lectures on the subject, and second for taking the time to discuss his view on the role of culture in contemporary business. Last but not least, now that it’s time to close another chapter in life, I thank family, friends and Iris for always being supportive, and for being more certain than I ever was that, at some point, this project would be done and over with. It was an equally exhausting and inspiring experience.

Amsterdam January, 2017

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3 We cannot enter into alliances

until we are acquainted with the designs of our neighbors SUN TZU, THE ART OF WAR

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Abstract

The relational view draws on social exchange theory and the resource-based view of the firm to explain relational rents, which can only be generated through joint idiosyncratic contributions of partners in an exchange relationship. In this thesis, a specific type of interfirm relationship; the buyer-supplier relationship, and a specific organizational function; procurement, are examined. The general line of argument is that the procurement function is responsible for identifying and evaluating cultural complementarities and differences in the relationships of the buyer with its suppliers, so as to facilitate relational rents and reduce relational governance costs. The purpose of the research is to empirically conceptualize the impact of interfirm cultural diversity on buyer-supplier relations, and the role of the procurement function in dealing with this issue. To do so, both macro level and organization level cultural forces are considered. A grounded theory approach is utilized, in which a conceptual framework is developed based on extant literature, and refined through a multiple case study of nine purchasing organizations. The study provides descriptive and normative context to functional and relational buyer-supplier relations, while extending the notion of cultural compatibility in the relational view and elucidating the potential role of procurement in securing congruence of values and cultural compatibility at the strategic and functional level.

Keywords: Organizational culture, cultural compatibility, procurement, sourcing,

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1. Introduction

In late 2000, car manufacturer Chrysler shocked suppliers with an unexpected announcement. The firm, which had been famous for being a fair and trustworthy partner to such an extent that gains were shared with suppliers, now insisted suppliers had to tear up existing contracts and cut prices by five percent. In the Chrysler case, it turns out consolidation in the supply base, resulting from an increasing number of alliances, dulled the competitive edge of the firm by significantly limiting competition to turn to in times of lagging supplier progress. This, according to Green (2000), demonstrates how alliances between buyers and suppliers are not without risk. For Chrysler, this only became apparent when the firm started to suffer under pressure since the merger with Daimler Benz, and the subsequent stall of the industry. But why exactly did Chrysler break with its trust-based relationships with suppliers? Was this assumed to be the only possible response to market pressures, or was there a more fundamental issue at stake? What if the merger affected Chrysler’s culture – a culture of loyalty and trust toward suppliers?

1.1 Problem statement and research questions

Historically, insights from the social and behavioral sciences have relatively rarely been applied in the purchasing literature, despite calls from the academic community to endeavor beyond its strong functional boundaries (Van Weele & Rozemeijer, 1996; Tazelaar, 2007). Many of these insights, whether it be regarding trust, group behavior, emotion, collaboration, negotiation, or culture, can be related to the success of relationships, as relationships exist at the level of humans, not organizations. Organizations are rapidly becoming more dependent on their suppliers, as supply chains and global competition dynamics become more complex (Reuter et al., 2010; Blome & Schoenherr, 2011). In parallel, buyers increasingly dedicate more resources to developing collaborative supplier relations, as opposed to relying solely on traditional arm’s length arrangements (Gottfredson et al., 2005). However, when buyer and

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supplier lack cultural compatibility, relationship performance and satisfaction are likely to suffer (Cadden et al., 2015), which would be in line with the propositions of the relational view (Dyer & Singh, 1998). The concept of culture, defined by Schein (2010: p. 18) as “a pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration”, and its effects on organizations, behavior and relationships, have been studied in a significant stream of research across multiple intra- and interdisciplinary fields. The seminal works of, among others, Pettigrew (1979), Schein (1985) and Trompenaars & Hampden-Turner (1998) have been cited, discussed, criticized and revisited numerous times, and continue to play an important role in contemporary studies that zoom in on the role of culture in various business fields. In many cases of firms that blew away their competitors in terms of financial returns, the key ingredient to success was something less tangible than market factors: organizational culture (Cameron & Quinn, 2011). This highlights the powerful role of culture on firm success from an intraorganizational perspective. Central to this perspective is the question how organizational units can gain useful knowledge from other units to enhance innovation and performance (Tsai, 2001). In contrast, the interorganizational perspective focuses on the information and resource flows that may exist between organizations (Owen-Smith & Powell, 2004). Unsurprisingly, intraorganizational practices posit challenges that are different from those raised by the diversity of the multifaceted nature of boundaries, cultures and processes involved in interorganizational practices (Easterby-Smith et al., 2008). Clearly, this complexity does not prevent firms from interacting; instead, “as evidenced by firms’ increased use of strategic alliances and mergers and acquisitions to acquire knowledge, transferring knowledge from external constituents has become central to firm success” (Van Wijk et al., 2008: p. 830).

Focusing on the role of national culture, Cannon et al. (2010) observe that, despite the need for cross-cultural supply chain research being advocated by some scholars, only a handful of

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studies aimed at understanding the role of cultural differences in the context of supply chain management have been undertaken. In addition, the authors note that the field of cross-cultural supply chain management research is still empirically limited by its dominant focus of previous studies on Asian samples. Focusing on the role of organizational culture, Cadden et al. (2013: 86) observe that “buyers and suppliers are increasingly forming strategic relationships throughout the supply chain to achieve success”, which resonates with the conclusion of a recent global survey conducted by Deloitte (2016), namely that chief procurement officers (CPOs) indicated supplier relationship management as one of the key areas in procurement to receive investment in the coming year. The authors note that several studies have recognized interorganizational cultural compatibility as “an essential ingredient within these relationships to achieve success”, and proceed by claiming that in fact many papers in the extant supply chain management literature make references to the significance of cultural fit and its linkages to performance, but fail to focus on or develop the concept. In 2006, Zhao et al. suggested a number of cross-cultural supply chain management research questions, along with the notion that little is known about the role of culture in the creation and maintenance of long-term relationships between buyers and suppliers. Given the widespread attention to culture in the scholarly business literature, and given the consensus among researchers about culture’s ability to produce distinctly different normative orientations towards relationship development (Cannon et al., 2010), it appears there are several opportunities for academic explorations of the linkages between culture and contemporary procurement practices. This opportunity, viewed in light of an era of intense global competition and disruptive change, creates a compelling rationale for developing a better understanding of ‘culture’ in the context of buyer-supplier relationships, and the role of the procurement function in coping with them (Tassabehji & Moorhouse, 2008).

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The emphasis of the current study is geared toward the role of the procurement function in dealing with the cultural forcefield surrounding buyer-supplier relations. Reasoning from the logic that culture is ubiquitous and therefore always ‘in action’, the assumption is made that issues of cultural diversity not only have an effect on the actual purchasing relationship, but as much play a role during interactions preceding the actual exchange, , e.g. during supplier selections and contract negotiations. In addition, it is assumed that the role of cultural diversity and cultural compatibility in buyer-supplier relations is shaped by a complex mix of macro- and organization level cultural forces. Resultantly, this thesis poses the following research questions:

[RQ1] How may macro- and organizational level cultural forces impact buyer-supplier relations? [RQ2] How may the procurement function deal with these forces in support of the underlying relation?

1.2 Research objective and structure

Sourcing strategy is becoming more critical to firm performance, leading firms in optimizing their product and service supplier base through the lens of value creation and collaboration (Tan et al., 1998). The increasing complexity of the globalized environment in which firms operate fuels a growing importance of partnerships and their strategic value. Since buyers cannot normally maintain equally strong relationships with each individual supplier, relationship management can be seen as managing a portfolio of supplier relationships. These suppliers may be located far away, often generating a rich mix of cultural issues to deal with, or nearby, in which case cultural issues occur more at the organizational level in relation to for instance a supplier’s entrepreneurial or collaborative characteristics. The issue of cultural diversity is expected to shape the activities of the procurement function to some extent. The research aims to reveal how buying organizations manage to find the right suppliers in various relational and cultural contexts, and to help managers advance their procurement decision system by incorporating the cultural factor. The research was conducted in three phases. First, a

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conceptual framework, linking cultural diversity, the role of procurement and buyer-supplier relationship performance, was developed based on extant literature. The framework was then used to guide qualitative empirical research, focusing in particular on examples of cultural differences between buyers and supplier, supplier selection and evaluation criteria, as well as on relevant examples of procurement activities and relationships. Finally, the framework was revisited in light of the results gained from a multiple case analysis of the procurement functions of nine buying organizations.

The current chapter is concluded by a brief section containing key definitions that shall remain unaltered throughout the research. In chapter two, multidisciplinary literature is reviewed to develop a theoretical framework as described above, upon which, in chapter three, the research methodology is outlined and assessed on strengths and limitations. In chapter four, primary data is presented and analyzed by means of individual case studies, prior to a cross-case analysis. The findings are discussed in chapter five, providing an integrated outcome by revisiting the sub questions and research question as formulated in this chapter. Chapter six concludes the thesis by outlining the managerial implications of the research, and suggesting avenues for further research.

1.3 Key definitions

In both academic and non-academic sources, an often confusing variety of definitions is used to describe the concepts of culture, sourcing, purchasing and procurement. For the purpose of the entire study, key concepts and elements are defined on the basis of triangulated content retrieved from dictionaries, academic literature, and a number of exploring conversations with cultural diversity and procurement consultants of a large multinational consulting firm. According to the Oxford Dictionaries, the correct definition of the verb sourcing is “the act of finding out where something can be obtained”. In accordance with Van Weele (2014), sourcing is defined equally to ‘global sourcing’ as “finding, selecting, contracting and managing the

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best possible source of supply for a good or service on a worldwide basis”. Sourcing as a business activity is generally related to the purchasing function, which is often used interchangeably with, but technically differs from the slightly broader concept of procurement (Van Weele, 2014). Crucial for the current study is a definition that captures procurement just broadly enough to be able to identify, both empirically and within extant literature, the complete spectrum of its possible linkages with cultural diversity. Hence, the procurement function is defined here in strong similarity with Van Weele’s (2014: p. 8) definition of purchasing, i.e. “the organizational function responsible for management of the organization’s external resources in such a way that the supply of all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the organization’s primary and support activities is secured at the most favorable conditions”. Important to note here is that procurement function is preferred over procurement department or procurement organization, as, where any buying organizations engages in procurement activities, some buying organizations may not have an actual department for these activities. According to the Oxford Dictionaries, a buyer is “a person who makes a purchase”, whereas a supplier is “a person or organization that provides something needed such as a product or service”. For the purpose of this study, these definitions are slightly altered and homogenized. The definition of buyer is formulated as “the organization or business unit at the purchasing end of the buyer-supplier relationship”, and can be equally read as and used for the terms client and customer. The definition of supplier is formulated as “the organization or business unit at the supplying end of the buyer-supplier relationship”, and can be equally read as and used for the terms contractor, provider, and vendor.

Relationships between buyers and suppliers can take many forms, and can change over time; a detailed categorical deconstruction is provided in [2.1]. Since, to the author’s knowledge, a dictionary definition of buyer-supplier relationship does not exist, and the dictionary definition

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of relationship lacks both the flexibility and specificity required for the purpose of this study, buyer-supplier relationship is defined as “a contractual agreement in which a buyer agrees to acquire from a supplier, based on commercial terms, a product, service or both, which may or may not involve sharing to some extent information, resources, risks, and/or rewards, for any length of time”. This definition allows for addressing various degrees of buyer-supplier relationship, whilst excluding those types of buyer-supplier relationship involving vertical integration or the creation of an enterprise through for instance a joint-venture or acquisition. Finally, some definitions are provided within the domain of culture and cultural diversity, prior to the theoretical deconstructions provided in [2.2]. It is observed that dictionary definitions of the concept of culture tend to address society at large, therefore lacking a connection with business, not to mention with the specific context of buyer-supplier relationships. According to Trompenaars & Hampden Turner (2012), culture presents itself on different levels, categorized as national or regional culture, organizational or corporate culture and functional or professional culture. In similar vein, Schein (2010) distinguishes: 1) macrocultures, involving nations, ethnic and religious groups and occupations that exist globally; 2) organizational cultures, involving private, public, nonprofit and government organizations; 3) subcultures, involving occupational groups within organizations, and finally; 4) microcultures, involving the cultures of microsystems that cut across occupational groups, e.g. teams or task forces. For the purpose of this study, national culture is defined in accordance with the “culture as a ‘normal distribution’” analogy by Trompenaars & Hampden-Turner (2012), i.e. “the wide spread of people’s sets of artifacts, norms, values and assumptions that patterns around an average”. However, it is important to note that artifacts, norms, values and assumptions are not exclusive to national culture, as will be explained in [2.2], hence these conceptual elements should be viewed as the building blocks of all types of culture. The current research primarily regards organizational culture, as it is at the level of the organization that

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interactions between buyers and suppliers take place, but notions of macroculture and subculture may be equally important. This resonates with Schein (2010), who states that in order to fully understand what goes on inside the organization, one must be able to understand both the organization’s macro context, often reflecting national culture, and the interplay of subcultures, often reflecting occupational cultures. In line with Schein (2010), organizational culture will be defined according to Fletcher & Jones (1992), as “the underlying values, beliefs and principles of the personnel as they are expressed in the management structures and practices”. In accordance with Trompenaars & Nijhoff Asser (2010: p.58), cultural diversity is defined as “the diversity expressed in viewpoints and values, in operational priorities, and in ways of doing things”. To conclude this section, Schein’s (2010: p. 18) formal, generic definition of culture is adopted as well, so as to be able to exclude overt behavior patterns, which in some cases may and in others may not be cultural manifestations, from the conceptualization of culture: “The culture of a group can now be defined as a pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration, which has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.”

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2. Literature Review

2.1 The procurement function

The essence of this section is that collaborative relationships with suppliers, as opposed to adversarial arm’s-length relations, are becoming more important for gaining a competitive advantage. From an organizational theory perspective, the procurement function, being responsible for satisfying internal customer demands by coordinating sourcing and supply processes as well as supplier performance and relation management, must adapt accordingly. 2.1.1 The strategic role of procurement

In strategic management research, two paradigms were particularly dominant influencers of subsequent views and theories on competitive advantage. The positioning school argues that value creation for buyers, e.g. consumers or corporate clients, is central to a firm’s competitiveness, and that competitive advantage grows fundamentally out of the portion of the value that exceeds the cost of creating it (Rumelt, 2003). In the product market-based view of the positioning school, this portion equals a monopoly rent (Saric, 2012). According to Knudsen (2003, p: 728), procurement’s contribution to the generation of monopoly rents is to “maintain or enhance power over suppliers, refrain from long-term relationships as this might reduce power advantage, and reduce cost in all stages of the procurement process”. In the factor market-based view of the RBV, Peteraf (1993) defines competitive advantage as sustained above-normal returns, generated by resources who’s rents cannot be offset entirely by their opportunity costs, i.e. their theoretical value to other firms. In the factor market-based view of the RBV, this portion equals a Ricardian rent (Saric, 2012) to which procurement contributes by means of “finding and matching suppliers with resources complementary to one’s own resources, and development of close supplier relationships that become idiosyncratic, valuable and hard to imitate” (Knudsen, 2003: 728). The economic components of both views on strategy outline the notion that competitive advantage is correlated with a firm’s capability to generate above-average returns and sustain these returns by erecting barriers in both its product and factor markets. Even more specifically, Barney (2012) argues, in response to Hunt & Davis (2008), that from a factor market (Barney, 1986) and attributes of resources (Barney, 1991)

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perspective, purchasing (more narrowly) and supply chain management (more broadly) can be sources of sustained competitive advantage. According to Ellram & Carr (1994: p.17): “it is critical to understand that there is a difference between purchasing strategy and purchasing performing as a strategic function”. As the authors explain, the procurement organization may be pursuing its own strategies without regard to the overall business strategy. When procurement is viewed as a strategic function, “the purchasing function’s activities and strategies are then specifically patterned to support the corporation’s overall strategies”. In similar vein, the seminal paper of Henderson & Venkatraman (1993) addresses the issue of lacking fundamental frameworks within which the strategic potential of information technology (IT) can be understood, despite a clear movement from IT’s traditional orientation of administrative support toward a more strategic role within organizations. The authors propose the Strategic Alignment Model, defined in terms of four fundamental domains of strategic choice, each with their own underlying dimensions.

Figure 1 – Strategic fit and functional integration of procurement and business

Conceptualizing the strategic role of procurement, figure 1 shows an adaptation of the Strategic Alignment Model in which the internal strategic alignment framework proposed by Pohl & Förstl (2011) is integrated, yielding the following domains of strategic choice: 1) the business strategy, 2) the sourcing strategy, 3) business infrastructure and processes and 4) purchasing infrastructure and processes. In line with Henderson & Venkatraman (1993), the

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power of this model is illustrated in terms of two fundamental characteristics of strategic management: 1) strategic fit, i.e. the interrelationships between external and internal components, and 2) functional integration, i.e. the integration between business and procurement domains. As procurement gradually develops into a strategic function, suppliers are approached in more mature, i.e. strategic ways. This involves long-term collaborative buyer-supplier relationships and strategic partnerships, in which techniques such as joint planning, joint problem solving and joint product development are applied (Van Poucke et al., 2014). Some authors pointed at the need for a different approach to establishing contracts in order for these relationships to be possible (Seshadri & Mishra, 2004; Trent & Monczka, 1998). Others addressed the moment whereupon procurement functions are involved in the various steps of the purchasing process, including specification definition, supplier selection, contract management and supplier evaluation, as well as the degree of procurement’s internal integration (Ellram & Carr, 1994; Van Weele et al., 1998; Werr & Pemer, 2007). Each of these issues can be viewed as a proxy element of procurement maturity and thus of the extent to which the procurement department is able to satisfy the internal customer in the most optimal way, so as to deliver service quality to the external customer (Van Poucke et al., 2014). However, the insights from research conducted under these topics provide little insight into how the procurement function can differentiate its processes and activities according to the unique characteristics of individual suppliers in each of the steps described above, as the research frameworks tend to ignore the cultural heterogeneity of suppliers that is inherent to the (global) marketplace.

2.1.2 Sourcing decisions and differentiated supplier relations

The sourcing activity is the execution of a buyer’s ‘sourcing strategy’, which “identifies from how many suppliers to buy, what types of relationships to pursue, contract duration, type of contract to negotiate for, and whether to source locally, regionally, or globally” (Van Weele,

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2014: p. 10). As described in the previous section, in practice we may find this form of strategy to be integrated with or independent from the business strategy, whereas the former is empirically proven to be all-round superior (Gonzalez-Benito, 2007; Baier et al., 2008). Supply base management can thereby range from transactional sourcing to a relational orientation based on cooperative relationships with suppliers (Lindgreen et al., 2013), depending on which supplier strategy is considered best for a certain commodity or product category. Different types of relationships constitute different levels of integration, collaboration and sharing. As Van Weele (2014, p: 352) puts it: “of course, it is not necessary to develop deep, collaborative relationships with all suppliers a company does business with”. The tipping point where overall costs incurred to deepen the relationship with a supplier exceed the benefits gained from that relationship differs per supplier. Thus, arguing in line with Dwyer et al. (1987), buyers should seek and maintain the optimal economy of association with each of the individual suppliers. In further elaboration on this notion, a closer look on the origins of supplier relation benefits and costs is provided below.

As procurement and supply chain practices mature, the procurement function is increasingly tasked with relation development activities (Andersen & Rask, 2003). Analogous to this development, procurement is increasingly allocating more of its attention and resources to a smaller number of ‘preferred’ suppliers (Pemer et al., 2014), while suppliers devote more of their resources to preferred customers (Baxter, 2012; Schiele et al., 2011). We observe a trend in which buyers and suppliers integrate more profoundly than before, while reducing the number of suppliers at arm’s length. Under the influence of intensifying competition and globalization in the factor market, businesses and academics alike have been exploring the opportunities and benefits of collaborative relationships (Cadden et al., 2010) and supplier relationship management (Chicksand, 2015) since the 1980s. During the 1990s, a fundamental shift in the buyer-supplier relationship landscape occurred, as short term cost-based

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relationships were giving way to longer term knowledge-based relationships. According to Cadden et al. (2010), this development led to the distinction between the two most recognized forms of buyer-supplier relationships: cost-driven, i.e. arm’s length or transactional relationships, versus strategic, i.e. collaborative relationships. The economic benefits of cooperation were even demonstrated on the basis of transaction cost economics, as Jones (1993, p:423) explains: “Hill (1992), in a recent game theory analysis of transaction cost economics, argued that market forces favor ‘actors whose behaviors are biased toward cooperation’”. According to Cadden et al. (2010), combining resources, sharing knowledge and increasing speed to market are outcomes of collaboration that can lead to competitive advantage. In this light, especially in relation to relationship governance, transaction cost economics and the strongly related RBV (Williamson, 2002) were reported to be inadequate for explaining relational rents, hence to be in need of complimentary theory. The relational view, introduced by Dyer & Singh (1998), is widely acknowledged as a complementary extension of the RBV, as it includes interfirm linkages in the notion that idiosyncratic capabilities increase barriers to competition (Lavie, 2006). The relational view draws from social exchange theory (Emerson, 1976), which centers around the proposition that “when organizations invest in relational-specific assets, engage in knowledge exchange, and combine resources through governance mechanisms, a supernormal profit can be derived on the part of both parties” (Cadden et al., 2015: p. 4). Hence, the more intense the relationship between buyer and supplier, the higher the idiosyncrasy, the higher the barriers to completion, and the more likely financial benefits are to accrue. While theoretically sound, reality seems to be more complex as exemplified by studies of Cadden et al. (2012) and Cousins et al. (2008) which suggested that performance is generally achieved at the operational level. In such cases, performance levels are capped for as long as senior management fails to develop the same levels of trust, cooperation, understanding and shared values found at the operational level, where staff may work together on a daily basis.

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The implication is that collaborative cultures may develop over time at the operational level, even without active support from the procurement function, but only deliver their full value when collaboration is embraced at strategic levels too. A real challenge here is that senior managers tend to misuse the collaboration term for what is essentially risk management instead of long-term relationships, open-book costing, information transparency and two-way communication (Cadden et al., 2015). The relational view has been used successfully to explore buyer-supplier relationships, for instance in a study by Chen & Paulraj (2004) who found that when supply chain professionals manage the ‘socialization of values’ both within the organization and across supplier relations, higher profits can be realized. Social exchange theory explains how social interactions between buyers and suppliers result in mutual trust, which adds to a ‘stock of relational capital’ and subsequently higher levels of performance and satisfaction for both members of the relationship (Cadden et al., 2015). In addition, social exchange theory can be referred to when linking dependence and organizational culture, as it proposes that attitudes, norms and behaviors arise from the use of punishments and rewards in interdependent relationships. When parties are interdependent, opportunistic behavior is reduces contributing positively to relation norms, which become more collaborative. Conversely, an imbalance of dependence negatively impacts development of collaborative norms thus increasing opportunistic behavior of the more powerful party.

Challenges to organizational collaboration and relationships have been well-documented, but are generally framed in the bright side of collaboration and social capital. An important extension of the relational perspective comes with the exploration of the dark side of social capital by Villena et al. (2011). The study takes the three dimensions of social capital as identified by Nahapiet & Ghoshal (1998), i.e. cognitive, relational and structural, and hypothesizes there is an inverted curvilinear relationship between each of the dimensions and buyer performance. The cognitive dimension was operationalized by the degree of

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organizational culture congruence, as well as the level of similarity between business approaches and philosophies, goals and objectives, and vision on the relationship. Buyer performance was operationalized, in line with other studies, by five items each for strategic and operational performance. The survey, based on a diverse sample of 132 Spanish companies, reveals an inverted curvilinear relationship only between the relational dimension and performance. For the cognitive and structural dimensions, the curvilinear relationship was significant only for operational performance. In fact, a positive linear relationship between cognitive capital and performance was found, although this may be case because the sample has not reached the threshold point yet. Two important implications are provided: researchers and managers should be aware that there are limits to social capital value in buyer-supplier relationships, and that these limits are reached faster when pursuing operational benefits than when pursuing strategic benefits. A final remark is made with regard to cultural differences in a business context. Where some countries and cultures value close and friendly interpersonal and interfirm ties, e.g. China, Japan, and Spain, others value more distant, non-friendly systemized relationships. The first category of cultures automatically makes relationship building between buyers and suppliers more complex yet significant, hence procurement managers should carefully examine the social context of suppliers to determine the mechanisms that will balance out value and liability of social capital investments.

A specific type of collaborative buyer-supplier relationship is the partnership, characterized by trust, long-term commitment and interdependence between parties (Chicksand, 2015). The partnership literature has been focused on several different themes, including partnering success variables (Lönngren et al., 2010; Srinivasan, 2011; Lehtonen, 2014), implementation (Ellram & Edis, 1996; Lettice et al., 2010; Van de Vijver et al., 2011) and partner selection factors (Wu & Barnes, 2010; Cummings & Holmberg, 2012). In addition, it appears that partnership objectives differ per case, and that the ‘depth’ of a partnership may depend on its related

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objective (Kedia & Lahiri, 2007). This resonates with Pyke & Johnson (2004), who claim that the type of relationship pursued should fit with the characteristics of both the product and the marketplace. Purchasing scholar Arjan van Weele found the results of a cross-industry study on the partnership topic sufficiently striking to coin ‘the myth of partnership’ (Gelderman, 2003). In this study (Ellram & Hendrick, 1993), the authors demonstrate that less than 1% of buyer-supplier relationships can be characterized as a partnership-type relationship. Simultaneously however, the suppliers of these relationships were responsible for 12% of the total purchasing volume of the sample. Later, Cousins (2002) contended that partnerships do not exist as all buyer-supplier relationships are competitive. Chicksand (2015), in defining the concept, adapted a typology of buyer-supplier relationships by Cox et al. (2003) and shows in a simple matrix that any ongoing relationship characterized by a collaborative way of working and a balanced distribution of surplus value can be considered a partnership. Both benefits and obstacles to partnering between buyer and supplier are well-reported, and include access to resources, higher levels of knowledge-sharing and innovation, and improved stability under environmental uncertainty on the plus side. With regard to obstacles, several factors may lead to deterioration of the partnership business case including a lack of adaptability in the process of interacting with other contextual elements such as power, structure, and culture (Sanderson, 2008). According to Van Weele (2014), relationship-type preferences are a central issue in buyers’ sourcing strategy development, i.e. the decision whether to buy from a supplier in the context of a partnership, or to keep the supplier at a distance in a context of competitive bidding. Cadden et al. (2015) propose a ‘hierarchy of relationship needs’, which takes transactional mechanisms as the fundamental basis for buyer-supplier relations and overlays collaborative and relational mechanisms. In their model, which distinguishes approved, preferred and strategic suppliers in order of increasing relationship levels, business strength is regarded the most basic, and cultural fit the highest level relationship need.

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The notion of cultural fit becomes more complex when looking specifically at global sourcing, i.e. sourcing across country and macroculture borders. Global sourcing is quickly developing from a differentiation tactic (Murray, 2001) into an omnipresent component of multinational business (Kedia & Lahiri, 2007), under the influence of increasingly intense global competition. Kotabe & Murray (2004: p. 13) discuss how the scope of global sourcing has expanded over time. In the early days of international procurement, price, strongly influenced by exchange rate fluctuations, was the only metric upon which firms’ sourcing decisions were based. Today, a variety of factors allows companies to “design their sourcing decision on the basis of the interplay between their competitive advantages and the comparative advantages of various sourcing locations for long-term gains”. Interestingly, the examples and conclusions provided by the authors suggest that dominant models supporting the global sourcing decision do not exist, which appears to be so due to frequent high-impact changes in the global market. Based on Teece, Pisano & Shuen (1997), the authors advice companies to include in their sourcing strategy a combination of quasi-hierarchical (e.g. strategic partnerships with suppliers) and a pure hierarchical governance structure. This would enable organizations to gain sustainable competitive advantage, as it allows to explore new technologies or capabilities through learning, sharing risk and synergizing with partners, in addition to the exploitation of its own capabilities. In many cases, naturally, activities of global sourcing and collaboration even coexist (Kedia & Lahiri, 2007; Murray, 2001). In fact, according to Meirovich (2010, p. 3), “the steady rise of international partnerships such as strategic alliances, international joint ventures and selling partnerships is one of the prominent features of the process of globalization”.

In some cases, firms may decide not to source the supplies needed for performing a certain activity, but to source instead for a supplier that can take over the actual activity. This practice, called outsourcing, has become a global movement over the past two decades, and is strongly

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related with cost-reduction objectives. In practice, outsourcing (alias offshoring when the supplier is located in another country than the buyer) covers a wide array of opportunities, ranging from the tactical outsourcing of specific tasks or business processes to complex strategic outsourcing projects. Outsourcing is generally considered difficult and highly contingent on a variety of contextual factors (Wiengarten et al., 2013), and research on performance variance has focused on contractual, relational and cultural mechanisms (Ang & Inkpen, 2008) Although academic research has been conducted on the procurement function's role in strategic outsourcing from a process perspective (Carter, 2007), outsourcing is a concept in its own right, generally stretching well beyond the scope and ownership of the procurement organization. As Gilley & Rasheed (2000: p. 764) put it: “defining outsourcing simply in terms of procurement activities does not capture the true strategic nature of the issue”. Interestingly, the authors emphasize why many organizational procurement activities are falsely considered outsourcing. Indeed, externalized activities which could otherwise be internalized in terms of the acquiring firm’s managerial and financial capabilities are to be considered outsourcing. Activities for which internalization is not an option in the first place, e.g. because of a lack of capital or expertise, are acquired by means of procurement instead of outsourcing. The implication for the current research is considerable, as many of the activities that were considered ‘outsourced’ in prior research ought to be considered ‘procured’ instead.

2.1.3 Organization and culture of the acquiring firm

In its most simplistic form, procurement can be identified as the organizational function tasked with coordinating the purchasing of goods or services. However, there are certain contextual factors that strongly influence the nature of an organization’s procurement processes. In light of the current research, three such factors are discussed in more detail, as they are reported to influence how buying organizations engage with suppliers, and thus how they may go about dealing with cultural differences. The first factor entails whether the

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organization is primarily product or service oriented. Professionalization of strategic sourcing enables both product and service firms to focus on their core competencies, and source other parts of the value chain (i.e. interrelated activities) from suppliers. However, significant differences are observed between the structures and strategic importance of procurement functions in service firms versus manufacturing firms, which is primarily explained by the differences between predominant direct spend (most of manufacturing firms) and indirect spend (most often service firms) (Blome & Schoenherr, 2011). Since, evidently, both product and service firms need both goods and services to bring their own products to market, it may be useful to differentiate various types of service activities. Bateson (1992) argued that intangibility is the key to differentiate between ‘pure’ and ‘non-pure’ service activities, where the first category involves activities embedded in services, e.g. a bank sourcing a service from a supplier in order to realize its own service delivery, and the second category involves activities embedded in goods, e.g. a train services provider sourcing construction of a new train station. Kotabe & Murray (2004: p.628) found that pure services firms tend to engage in less international sourcing of core service activities than non-pure service firms, who may be more likely to have experience in international markets. In comparison with manufacturing firms, it was found that “the inseparability and customization characteristics of services inherently make it fundamentally more difficult for both [types of] service firms to outsource core services from outside service providers both domestically and from abroad than it is for manufacturing firms”. A plausible explanation is given, i.e. that the standardization of core service activities such that they can be transferred across national boundaries, as well as dealing with different cultures, languages and laws in global sourcing, is significantly more challenging for service firms than for manufacturing firms.

The second factor is whether the acquiring procurement function operates within a private or a public organization. Public procurement plays a major role in global business, as for many

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suppliers, e.g. construction firms and service providers, public authorities are among the most important customers. In some sectors, e.g. defense systems or civil infrastructure, public organizations may have the position of a monopolist. When comparing public with private organizations, major differences in procurement processes appear across three themes (Van Weele, 2014). First comes public procurement’s legality of tendering and public accountability. For instance, EU procurement law prescribes how buying organizations should award contracts and make their purchases, with heavy emphasis on buyers’ obligation to communicate supplier selection criteria clearly and early in the sourcing process. If an organizations fails to comply with these regulations, it runs a risk of being sued by private companies. According to Van Weele (2014, p:375), “the legitimacy of procurement decisions often overrides their efficacy, i.e. efficiency”. This would explain why public organizations are primarily procedure driven rather than result or performance driven, which is troublesome as it hampers the possibility to learn and gain value measured on a broader scale (Arlbjørn & Freytag, 2012). Second is the difference between the origins of income. Where the income of private organizations is primarily generated from customers and markets, are public organizations dependent on the income provided by taxpayers. Lacking commercial incentives, political objectives may therefore override economic objectives in public procurement decision-making (Bratt et al., 2013). A third major difference lies in the maturity of the total cost of ownership concept. From a finance perspective, generally, private organizations will strive to consider total lifecycle cost of a purchase over its initial investment cost. Public organizations’ finances on the other hand are managed by means of budgets based on spending in the previous year. In addition, there is often a clear separation between investment and exploitation budgets. As a consequence, introducing new concepts such as total cost of ownership, sustainability supplier management in public procurement has been troublesome (Brammer & Walker, 2011; Oruezabala & Rico, 2012; Van Weele, 2014).

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The third factor is the cultural context of the buying firm. Governmental organizations offer a particularly clear example, as their cultures are generally budget-oriented and politically influenced, and thus fail to strive for the best price-value sourcing relationships or look beyond local and national suppliers. One of the most widely applied scientific dimensions along which cultures differ, individualism/collectivism, has demonstrated its impact on the values and norms for behavior, and researchers generally agree that “individualist and collectivists cultures produce distinctly different normative orientations toward establishing and maintaining relationships” (Cannon et al., 2010: p. 508). Drawing from psychology literature, it appears that predominantly individualist buying organizations generally hold norms that emphasize assertiveness and confrontation in interdependent situations and values that promote autonomy, competition, freedom, independence and achievement (Markus & Kitayama, 1991). Predominantly collectivist buying organizations’ norms favor harmony and cooperation with similar others in interdependent situations, and values emphasize belongingness, preserving public image and conformity (Triandis et al., 1990). Cannon et al. (2010) studied a sample of buyer-supplier relationships in the United States, Canada and Mexico, and found statistical evidence for the impact of culture on buyers’ normative orientations toward relationship development. It is important to note that this study provides a clear example of cultural forces at macro level playing out in the organizational culture of organizations, i.e. the impact of macro level norms and values on organizations’ ways of doing business. Even more precisely, the impact of macro-level culture was operationalized here as moderating the importance of supplier firm performance and buyer firm trust on the long-term orientation of buyers. Cadden et al. (2013) pose that the organizational cultures of a buyer and its supplier each contribute proportionally to the success or failure of their association, and emphasize the importance for buyers to evaluate the current culture of their own organization, so as to prevent blind spots and unknowns of each partner from impacting buyer-supplier relations. A buyer exercising

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style cultural practices through the transaction cost economics lens, e.g. high scores on inflexibility, process and internal focus, will lose from a best-value oriented competitor (Balthazard et al., 2006; Ketchen & Hult, 2007). If the buyer would have a collaborative culture, characterized by high scores on e.g. external operating environment orientation, openness to constructive criticism, and absorptive capacity through employee development, performance outcomes may range from poor to maximum, depending entirely on the characteristics of the supplier culture (Cadden et al., 2013). To conclude, an increasingly observed phenomenon in the procurement world is the ‘supplier diversity program’. In such programs, there is an explicit objective to source from minority suppliers. For several reasons, these programs often fail to deliver the expected outcomes. Past research has emphasized the important role of organizational culture for implementing supplier diversity programs (Whitfield, 2003). As supplier diversity turns out to work better for some organizations than for others, Whitfield & Landeros (2006) argue that buyers must understand their own culture before developing diversity sourcing strategies and supplier culture assessment processes.

2.2 Cultural diversity in buyer-supplier relations

The essence of this section is that culture, whether observed at the level of nations or organizations, can utilize a generic conceptual model constructed of basic assumptions at the core, then norms, values and finally behaviors and artefacts at the most visible layer. However, the operationalization of cultural differences roughly falls into two categories. National culture differences are generally “measured” along bipolar dimensions. Organizational culture differences are generally measured by means of discrepancies between personal and organizational values. The link between cultural diversity and supplier relation performance is ambiguous, as it appears diversity can be beneficial to some organizations, whereas other buying firms benefit from relationships with more equal associates. Buyer-supplier relationships develop gradually over time, and as the relationship develops, cultural factors, most importantly norms and values, become more salient determinants of success.

2.2.1 A deconstruction of the culture concept

The culture concept has its roots in anthropology, where for many decades, the concept was crystallized around the idea of “customs”, interpreted on the scale of time as “tradition” or “social heritage” (Kroeber & Kluckhohn, 1952). With his article ‘On studying organizational cultures’, Pettigrew (1979) is widely accredited for introducing the organizational culture

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concept to the field of business research. The concept subsequently attracted increasing scholarly attention, yielding, to name a few, the seminal works of Schein (1985; 1990), Hofstede (1983; 1993) and Trompenaars & Hampden Turner (1996; 1997). These and other approaches to and conceptualizations of ‘culture’ continue to influence the ongoing debate of how to both interpret and manage its role in organizations. One can expect the contemporary trends of globalization and technological advancement to feed this debate substantially by questioning some of the outmoded conditions that underpin the foundational theories of organizational culture. Clearly, implicit assumptions of closed organizations, life-time employment, lower average levels of education, and the absence a powerful Internet have been disrupted (Strikwerda, 2014). Here thus lies a problem stretching beyond organizational theory, into the fields of anthropology and sociology. Interestingly, Kroeber & Kluckhohn (1952) already observed how even among intellectual and semi-intellectual circles, the culture concept generally is loosely used as a synonym for society, lacking a fundamental understanding of culture in the anthropological sense. Over more than half a century, this appears not to have changed to any significant extent. In fact, the term culture is most often used as a symbol, with those involved acknowledging the importance of culture, but neglecting the quarry to understand its fundamental meaning and function (Strikwerda, 2014).

By the late 1980s, the culture concept was commonly referred to within organizations, as both organizational scientists and practitioners were increasingly using the term organizational culture or corporate culture to provide a focus for improving business performance (Cadden et al., 2010). Along with steeply increasing academic interest came a sea of both definitions and different model suggestions, with the model of Schein (1985) arguably being most influential. This model deconstructs organizational culture into three layers. Situated at the most visible and accessible layer are an organization’s surface manifestations, such as rituals, ceremonies and artifacts. These manifestations are underpinned by values, at the second layer of

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organizational culture, which are invisible yet still accessible. At the third and deepest level of an organization are the basic assumptions and norms providing even further insights through individual behavior patterns. Schein’s model is explanatory of how organizational cultures are actually born, and how they might be developed: behaviors may become institutionalized values, values in turn may become institutionalized in norms, and norms may finally be institutionalized in basic assumptions. Schein (1990) deems this final level, embedded much deeper into the organization, mostly inaccessible, making its operationalization in the context of cultural compatibility between organizations practically impossible. Still, the notions of organizational culture’s deeper levels are important, as they acknowledge the individual as part of a cultural ecosystem, which must not be forgotten in the context of buyer-supplier relationships. This is acknowledged by Trompenaars & Woolliams (2003), who explain that values are not artefacts that can be added, but are created continuously by interactions between human actors. Coming back to the issue of how behavior of individuals relates to culture, Trompenaars & Woolliams (2003: p. 364) note: “just as individuals in a culture can have different personalities while sharing much in common, so too can groups and organizations”. The authors distinguish personal values from organizational values; what constitutes the organizational culture is the pattern of individuals’ personal values in relation to the collective values of the entire organization. These patterns differ greatly between organizations, as, for instance, some organizations value the individualization of all individuals, and others value a task-orientation over individualization. Both, just two examples, can be highly effective cultures, but may experience conflict should they attempt to develop a relationship. What follows are two implications for buyer-supplier relations requiring congruence of values to any extent: 1) shared values cannot be dictated in a top-down manner but are a result of interfirm interaction at the level of the individual, and 2) attention must be given to both individual values

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and organizational values in order to make inferences about the organizational culture of the supplier.

Trompenaars and Hampden-Turner (1992; 1996; 2008) built on Schein’s model of culture, by conducting extensive empirical research on national and organizational cultures. In their view, the fundamental difference between the conceptualizations of national culture and organizational culture determination is single versus multi-dimensionalism. National cultures can be determined and distinguished on the basis of seven single individual dimensions. To determine and distinguish corporate cultures, the authors determine a framework on the basis of two integrated dimensions; equality versus hierarchy and orientation to the person versus orientation to the task. This generates four quadrants, representing four exclusive corporate culture types. The authors stress that these four metaphors are an abstraction from reality, or so-called “ideal type cultures”. Several additional factors make that in practice, no culture is completely monolithic, as multiple types are mixed or overlaid to some extent. In some organizations the dominant culture permeates everywhere, whereas in others there may be considerable variety among functional areas. Smaller companies are more prone to what Trompenaars & Woolliams (2003) call the “incubator culture”, regardless of their national embedding. Large companies in turn tend to assume hierarchical and task-oriented cultures, with national culture playing an explanatory role as to which particular corporate culture tends to dominant the large companies of a particular nation. The purpose of the model is to provide a tool (validated questionnaires are used to quantitatively plot the values of an organization under assessment) for exploring the basis of each type of culture that is present to a more or lesser extent in any given organization. It helps in building a high-level understanding in terms of, for instance, how employees learn, reward, motivate, change, or resolve conflicts. It provides a context for understanding the role and effectiveness of norms and procedures in different types of corporate culture. According to Jones (1995, p:420), “it is likely that some

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firms, rather than having a single, unambiguous corporate morality, will have subcultures that have their own “subcorporate morality”. Situations like these will be the result of inconsistent, changing, or ambiguous morality on the part of the company’s top management.” The four-type corporate culture model thus offers useful applicability to some extent, whilst lacking the aptitude to be used in determining cultural compatibility of a supplier as the model simply was not developed for this purpose. In other words, assessing the corporate cultures of both buyer and supplier is not sufficient for yielding any dyads that can be labeled to support better supplier selection and interorganizational conflict resolution decision-making.

Empirical evidence shows that cultural ‘intensity varies’ between organizations, as some organizations exhibit strong cultures and others weak cultures. According to Mello & Stank (2005), a strong culture exerts a strong influence on its members, in what Martin (1992) terms the ‘integration’ perspective, and can also be viewed as a dominant culture across the entire organization. On the contrary, organizations with weak cultures either host various dominant subcultures, the ‘differentiation’ perspective, or lack any dominant culture, the ‘fragmentation’ perspective. Mello & Stank (2005) identified the linkages between cultural intensity and the resulting behavioral outcomes of these configurations, and argue that the integration perspective assumes organization-wide consistency in agreement on assumptions and values, thus leading to consistent norms and behaviors, thus leading to weak subcultures. The differentiation perspective assumes consistency in agreement on assumptions and values within subcultures, but not between them, thus leading to strong subcultures characterized by different norms and behaviors. The fragmentation perspective assumes weak cultures both across as well as within sublevels, leading to ad hoc and situation specific agreement on assumptions and values. These are termed organizations in flux, characterized by inconsistent norms and behaviors. The implication for the current research is that buyers and suppliers not only differ in terms of cultural assumptions, values and behaviors, but that they may also differ in terms of

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their loci of cultural dominance. Based on Trompenaars & Hampden-Turner (2012), Mello & Stank (2005) and Schein (1985), table 1 represents an integrated model of organizational culture. According to Trompenaars & Hampden-Turner (2012), norms are the mutual sense a group has of what is right and what is wrong. Values on the other hand are a group’s collective definition of what is good and what is bad. In this view, a culture is stable when the norms reflect the values of the group, whereas divergence of norms and values will most likely lead to a destabilizing tension within the culture. In line with Mello & Stank (2005), a distinction is made between a culture’s agreements and its outcomes, separating behaviors and norms from values and assumptions. Each of these cultural components are in turn linked to their ‘visible’ reflections. As was argued earlier, the current study does not discriminate prematurely between national and organizational cultures. Indeed, both have their own characteristics, despite an identical fundamental structure as represented in table 1. Where organizations of the same nationality can already differ substantially in terms of organizational culture, dyadic differences in global sourcing relations are likely to result from a complex interplay of nationality and organizational factors. As Schein (2010) explains in his most recent view on multicultural groups, the challenge nowadays is to make multicultural groups work, requiring an understanding of differences between national cultures, as group members may have different nationalities, and organizational cultures, as group members may differ in terms of the organization and the functional group they work for. In such cases, “briefing the group on where each country stands on the Hofstede dimensions would do little to foster understanding or empathy”, nor would lecturing to such a group about cultural differences between professions, as it “would only scratch the surface if the members need to collaborate constructively”. In light of the current research, a challenge for procurement is then to enable the buyer-supplier group to develop working relationships, trust, and task-relevant open communications (Schein, 2010).

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Cultural outcomes Overt behaviors are the actions of individuals in the organization

 (Absence of) collaboration  (Absence of) cooperation  (Absence of) opportunism  Communication styles  Rituals

Norms develop on the basis of shared values and beliefs, and guide behavior of individuals in the organization

 Formal rules as written laws  Informal rules as social control

Cultural agreements Values represent the way things ought to be, and “serve as normative or moral guides for how group members deal with such issues as how people should relate to each other or exercise power (Mello & Stank, 2005: p.545)

 Strategies  Goals  Philosophies

Assumptions are the implicit core beliefs “that actually guide behavior, that tell group members how to perceive, think about, and feel about things” (Schein, 1985: p.18)

 Relationships to the environment  The nature of reality

 The nature of human nature  The nature of human activity  The nature of human

relationships Table 1 – An integrated model of organizational culture 2.2.2 Understanding cultural compatibility in buyer-supplier relationships

Cultural diversity exists whenever two or more groups who do not share the same culture interact is some way, and is therefore omnipresent in business within and between organizations. If the procurement function were to dedicate resources to assessing the effect of cultural differences between buyer and supplier, the presence of an explicit underlying rationale is assumed. Insights are provided by Cadden et al. (2010, p: 40), who assert many organizations form supply chain relationships to assist with competitive advantage, which is in line with a more strategic role of the procurement function, but roughly one third of these relationships can be labeled outright failures. Focusing explicitly on strategic relationships with suppliers, the authors sum up incorrect governance form, lack of complementarity, lack of trust, co-operation and commitment between each supply chain partner as the various causes researched individually, and argue in line with Cartwright & Cooper (1993) that these issues all relate to the ‘cultural clash’ phenomenon. Accordingly, “shared values, beliefs, behaviors and norms of employees within and between each partner organization (i.e. the culture) are critical to successful long term supply chain relationships”. Since the authors focused specifically on

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strategic relationships, which would always represent only a small fraction of an entire supplier portfolio, and provide little extra insight regarding the degree of cultural congruence deemed critical for success, additional insights are required to build our understanding. In a more tactile representation, Klein Woolthuis et al. (2005) found that large organizational cultural differences, e.g. flexibility versus bureaucracy, made it hard for buyers and suppliers to understand and sympathize with each other’s working procedures. In common language among researchers and practitioners alike, this phenomenon would be marked as the degree of cultural fit. From the intrafirm (i.e. a single firm) perspective on organizational culture, human resource management (HRM) is the dominant practice of firms to maintain what could be regarded as the ‘fit’ of individuals with their organizational cultures. When in the early 1990s the notion of cultural fit entered the literature from the interfirm perspective, this was largely confined to descriptions of mergers, acquisitions and joint ventures (e.g. Cartwright & Cooper, 1993). Later, the notion of interfirm cultural fit was adopted in the context of buyer-supplier relationships (Lau & Goh, 2005). Where ‘cultural diversity’ seems to merely label a phenomenon, is the term ‘cultural fit’ seemingly more normative in tone, i.e. cultures can either somehow fit, or not fit at all. Though extant literature is largely ambiguous about what exactly constitutes interorganizational cultural fit, it is generally referred to as the compatibility of two integrating firms’ cultures (Cadden et al., 2013). The general proposition of cultural compatibility, i.e. that culture incongruence between buyer and supplier results in lower productivity, lower financial performance outcomes, lower relationship satisfaction and higher levels of conflict (Weber & Camerer, 2003), is widely claimed but rarely demonstrated. Challenging the proposition that cultural similarity between buyers and suppliers leads to high performing supply chains, Cadden et al. (2013: p. 95) utilize a mixed-methodology approach and find it does not hold in the supply chain studied. It appears cultural compatibility, not cultural similarity, is the dominant contributor to high supply chain performance. Based on a

Leveraging cultural diversity in buyer-supplier relations? : an empirical study on the role of the procurement function