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International Journal of Operations & Production Management Global sourcing strategy and structure: towards a conceptual framework Fu Jia, Guido Orzes, Marco Sartor, Guido Nassimbeni,

Article information: To cite this document: Fu Jia, Guido Orzes, Marco Sartor, Guido Nassimbeni, (2017) "Global sourcing strategy and structure: towards a conceptual framework", International Journal of Operations & Production Management, Vol. 37 Issue: 7, pp.840-864, https://doi.org/10.1108/IJOPM-09-2015-0549 Permanent link to this document: https://doi.org/10.1108/IJOPM-09-2015-0549

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https://doi.org/10.1108/IJOPM-09-2015-0549

Global sourcing strategy and structure: towards a

conceptual framework Fu Jia

Business School, University of Exeter, Exeter, UK Guido Orzes

Faculty of Science and Technology, Free University of Bozen-Bolzano, Bolzano, Italy, and

Marco Sartor and Guido Nassimbeni Polytechnic Department of Engineering and Architecture,

University of Udine, Udine, Italy

Abstract Purpose – The purpose of this paper is to develop a synthesised conceptual framework for global sourcing (GS) strategy and structure. Design/methodology/approach – The authors adopt a systematic literature review method and analyse through content analysis techniques 52 peer-reviewed journal articles focussed on GS strategy and structure. Based on these analyses, a conceptual model is developed. Findings – A synthesised construct of GS strategy, consisting of three dimensions, i.e., supply internationalisation, internal integration and external integration, is proposed. The GS structure construct is further broken down into structural design and control and coordination, consisting of three dimensions for each. Propositions for GS strategy, GS structure and, in particular, the relationships between them are developed for future empirical validation. Originality/value – This is the first study which synthesises various dimensions of GS strategy and GS structure and advances/extends the theory of the strategy-structure nexus to a GS context. The conceptual model provides a comprehensive framework for future empirical work and opens avenues of research on this topic. Keywords Organizational structure, Strategy development, Conceptual, Global sourcing, International sourcing Paper type Conceptual paper

Introduction Global sourcing (GS) – i.e., proactively integrating and coordinating common materials, designs, methods, processes, standards, specifications and suppliers across international locations (Trent and Monczka, 2003a) – has been a major industry trend in the past two decades (Contractor et al., 2010; Schoenherr et al., 2012; Ancarani et al., 2015) and popular topic in purchasing and supply management (P&SM) scientific research over the last three decades ( Javalgi et al., 2009; Christopher et al., 2011). An increasing number of studies have accordingly focussed on GS strategy and GS structure, respectively, the two prominent and interrelated aspects of GS practice (Quintens et al., 2006a; Hartmann et al., 2008).

The nexus of strategy and structure has been a long-debated topic in strategic management and organisational theory (e.g. Chandler, 1962; Amburgey and Dacin, 1994; Galan and Sanchez- Bueno, 2009) and the nexus of purchasing strategy and structure is similarly discussed in the P&SM literature (e.g. Cavinato, 1991; Dröge and Germain, 1998; Johnson and Leenders, 2001). However, GS strategy and structure has been considered by many scholars to be a topic that deserves separate attention (Birou and Fawcett, 1993; Bozarth et al., 1998; Trent and Monczka, 2003a). The justification for this is that sourcing on a global scale requires a more complex organisational structure to manage additional issues caused by cultural differences, long transportation distances, and inadequate cost/benefit analysis (Frear et al., 1992). Furthermore,

International Journal of Operations & Production Management Vol. 37 No. 7, 2017 pp. 840-864 © Emerald Publishing Limited 0144-3577 DOI 10.1108/IJOPM-09-2015-0549

Received 4 September 2015 Revised 5 February 2016 17 June 2016 29 September 2016 Accepted 9 January 2017

The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/0144-3577.htm

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for multinational corporations (MNCs) operating in a global environment, designing a global organisation and maintaining control of dispersed value-adding activities and far-flung subsidiaries can be considered two of the most difficult challenges for managers (Ambos and Schlegelmilch, 2007). We therefore argue that GS strategy and structure, which is an important element of and is rooted in P&SM strategy and structure, has its own characteristics and merits special attention due to the more critical challenges faced vis-à-vis domestic purchasing.

In this paper, we attempt to explore answers to the following two research questions:

RQ1. What are the main dimensions of GS strategy and GS structure?

RQ2. What are the relationships between them (if any)?

We carry out a systematic review of the relevant literature and analyse through content analysis techniques 52 peer-reviewed publications. We then develop a synthesised conceptual framework for GS strategy and structure and propose a set of propositions. Several previous studies (e.g. Contractor et al., 2003; Kotabe et al., 1998) have argued that GS of services is different from GS of manufactured components/products due to the peculiarities of services, i.e., relative intangibility, perishability, simultaneity of production and consumption, and customisation (Boddewyn et al., 1986). We have therefore decided to focus our study on GS of tangible intermediates and finished products. Furthermore, since Small and Medium Enterprises (SMEs) tend to adopt less formal strategies which are not always explicit (Kemp and Gibcus, 2003; D’Amboise, 1993), we focus on large MNCs[1].

Despite the many papers already published on GS strategy and structure, unified and operationalised constructs are lacking. Literature tends not to adequately distinguish GS strategy from GS structure, two important themes in GS research, and this prevents researchers from studying and understanding properly the relationship between the two. In addition, previous studies on GS strategy and structure (e.g. Jia et al., 2014b; Sartor et al., 2014) are focussed on one or a few aspects of GS strategy or GS structure and an overall framework is therefore missing. Our study contributes to the scientific debate of GS strategy and structure nexus by presenting the first systematic literature review on this topic and developing a comprehensive conceptual model which include constructs for GS strategy and structure and the relationships between them.

The structure of the paper is as follows. First, basic constructs of strategy and organisational structure are briefly introduced. Second, systematic literature review method and process are explained. Third, literature review findings are presented. Fourth, a synthesised model of GS strategy and structure is advanced based on the literature review. Finally, implications for theory and practice and future research directions are discussed.

Strategy, structure and their relationship Mintzberg (1987) find that there are many definitions for strategy in management field and describe strategy as unified, comprehensive and integrated plan. Chandler (1962, p. 13) states that strategy is “the determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out the goals”. Similarly, Andrews (1971, p. 107) defines strategy as “the pattern of objectives, purposes, or goals and major policies and plans for achieving these goals”. These two aspects of strategy (i.e. goals and policies and plans) form two streams of research but have rarely been adopted together by P&SM strategy definitions (e.g. Watts et al., 1992). The three aforementioned definitions of strategy are similar but Chandler’s (1962) is the most comprehensive and is therefore adopted in this paper.

Ranson et al. (1980) argue that the organisational structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organisational aims. The term “organisational design” refers to the process of assessing and

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selecting the structure of an organisation. This process includes: division of labour, authority and responsibility (Van De Ven, 1976); and formal and informal systems of control and coordination intended to facilitate the achievement of organisational goals (Mintzberg, 1979; Trent, 2004). In addition, organisational complexity is a dimension to consider designing an organisational structure according to Tate and Ellram (2012) and is defined as “the amount of differentiation that exists within different elements constituting the organisation, which may include differentiation in structure, authority and locus of control, the attributes of personnel, products and technologies” (Dooley, 2002). Complexity in organisational structure is a function of the horizontal, vertical and spatial differentiation that exists within an organisation (Hendrick, 2009). Finally, Information and Communication Technologies (ICT) have been argued to enable strengthening central control and enacting power (Yamin and Sinkovics, 2007).

The relationship between strategy and structure of a firm is a long-debated issue. Chandler (1962) hypothesises a hierarchical relationship between strategy and structure (i.e. structure follows strategy), and a number of authors (e.g. Miller, 1987; Habib and Victor, 1991) empirically test this assumption. Other scholars (e.g. Hall and Saias, 1980; Grinyer and Yasai-Ardekani, 1981; Keats and Hitt, 1988) propose (and empirically test) whether structure is an antecedent of strategy. However, Hall and Saias (1980) further note that the relationship between strategy and structure is complex and interactive and that it is the match between the two that is of importance rather than which one precedes the other. Mintzberg et al. (2003) agree that this is a “chicken and egg” issue, i.e., that it is a reciprocal relationship, but the effect of strategy on structure is stronger (Amburgey and Dacin, 1994; Galan and Sanchez-Bueno, 2009). Linking strategy-structure nexus to performance, the strategy-structure-performance (SSP) paradigm in the strategic management literature predicts that a firm’s strategy, created in consideration of external environmental factors, drives the development of organisational structure and processes; the alignment (or fit) of strategy and structure is considered a baseline requirement for organisation performance (Miles and Snow, 1978; Galbraith and Kazanjian, 1986; Galunic and Eisenhardt, 1994).

Research methodology We undertook a systematic literature review of academic papers on GS strategy and structure (Tranfield et al., 2003). First, we performed a keyword search in the most important electronic databases, i.e., Elsevier’s “Scopus”, Thomson Reuters Web of Science, EBSCO, ProQuest, Emerald, and JSTOR. The following search string was adopted:

(“global purchasing” OR “international purchasing” OR “foreign purchasing” OR “offshore purchasing” OR “worldwide purchasing” OR “global sourcing” OR “international sourcing” OR “foreign sourcing” OR “offshore sourcing” OR “worldwide sourcing” OR “global procurement” OR “international procurement” OR “foreign procurement” OR “offshore procurement” OR “worldwide procurement” OR “global outsourcing” OR “international outsourcing” OR “foreign outsourcing” OR “offshore outsourcing” OR “worldwide outsourcing” OR “global buying” OR “international buying” OR “foreign buying” OR “offshore buying” OR “worldwide buying” OR (“Import” AND (“global” OR “international” OR “foreign” OR “offshore” OR “worldwide”))) AND (strategy OR strategies OR strategic OR centralization OR integration OR integrated OR structure OR organization OR organizational OR structure).

We considered only peer-reviewed articles in English language from scholarly business, management and accounting journals and did not put a time constrain as we are aware that some of the early papers on GS dated back to the early 1980s. The last search was carried out in September 2016. This search identified over 10,000 hits. There was a great degree of overlapping among the selected databases. This reduced the number of papers to just over 3,500 articles. Second, we read the titles and abstracts of the 3,500 papers and selected 482 papers based on a set of inclusion/exclusion criteria defined according to the goals and focus of

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our study. In particular, papers were excluded while: dealing with wages, trade and/or economic environment prevailing in the host countries; presenting an analytical technique and testing it in a global purchasing environment; and focussing on service offshore outsourcing and/or SMEs. Papers discussing any other aspects of GS were included at this stage.

Third, we carefully read the full text of these 482 papers and identified 47 papers specifically relevant to GS strategy and GS structure. To do this, two of the co-authors drew a table with all the 482 papers and a column to judge “include” or “exclude” or “unsure” with reasons independently. Then, we compared the results and reached agreements on all the items we did not agree initially. When selecting papers, we looked for whether the papers discussed in detail objectives, goals, courses of action and plans for GS strategy, and/or organisational design constructs (e.g. formal control and complexity). Fourth and finally, we checked all the references of the selected papers and found four further contributions which are qualified for final review but not identified in our search. This is because there were no “strategy and structure” related keywords in their titles and abstracts. Furthermore, we decided to add to our sample also one seminal book chapter frequently cited by the reviewed papers (i.e. Matthyssens and Faes, 1997).

The final list of papers consisted of 52 contributions published between 1989 and 2016 in a wide set of journals belonging to different disciplines, including production and operations management (OM), supply chain and logistics management (SCM), international business, marketing, and general management. OM and SCM journals published more than 60 per cent of the papers in our review, suggesting the predominant contribution of OM/SCM researchers to this field of study.

We used a content-based approach when coding (see Schiele et al., 2011). We adopted both inductive and deductive methods, beginning with the deductive approach, applying Chandler’s (1962) and Andrews’s (1971) definitions of strategy and a list of structural factors proposed in the organisation theory literature (see Table I – column “Strategy and structure”). We then compared those constructs found in the GS literature against the existing constructs (strategy and organisational theory) and refined the codes as necessary (i.e. an inductive approach). The whole coding process was performed independently by two researchers to ensure intercoder reliability (Duriau et al., 2007). A few disagreements (less than 5 per cent) were resolved through a discursive alignment of interpretation that also involved the other authors. The final codes/themes were represented by the constructs of GS strategy and structure (see Table I – column “GS strategy and structure”) and by the relationships among them (i.e. the propositions) (see Figure 1). Table AI shows the final list of reviewed papers and detailed coding of each paper, highlighting the constructs/propositions discussed, the research methodology, and the underpinning theory.

Findings We present in this section the main thematic findings of the literature on GS strategy and structure. The reasoning is organised around the three main topics/streams of studies emerging from the analysed literature: GS strategy (i.e. GS goals and GS policy and plans, see Chandler’s (1962) and Andrews’s (1971) definitions of strategy); GS structure (organisational design issues and control and coordination); and the relationships between GS strategy and structure.

GS strategy GS policies and plans. Earlier studies on GS tend to use supply internationalisation as a proxy of GS strategy (see Arnold, 1999), which is operationalised by international purchases as a percentage of total purchase spending (Birou and Fawcett, 1993; Kotabe, 1998; Servais and Jensen, 2001). More recently, Mol et al. (2004) define the degree of purchasing internationalisation as a two-dimensional concept, referring to the depth (economic value) and the scope (diversification among countries) of global purchasing.

843

Global sourcing

strategy and structure

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St ra te gy

an d st ru ct ur e lit er at ur e

G S st ra te gy

an d st ru ct ur e lit er at ur e

C on st ru ct

D es cr ip ti on

C on st ru ct

D es cr ip ti on

S tr at eg y

St ra te gi c go al s

L on g- te rm

or ga ni sa ti on al m is si on s e. g. ,f in an ci al

an d cu st om

er ob je ct iv es

(M in tz be rg ,1 98 7;

A nd

re w s, 19 71 )

St ra te gi c go al s

C os t re du

ct io n (B ir ou

an d F aw

ce tt ,1 99 3; Sw

am id as s, 19 93 ;S

er va is an d

Je ns en ,2 00 1; K ot ab e et al ., 20 08 ); ac ce ss

to re so ur ce s (B ir ou

an d F aw

ce tt ,1 99 3;

C av us gi l et al ., 19 93 ;S

er va is an d Je ns en ,2 00 1) ;a cc es s to

sa le s m ar ke ts

(G iu ni pe ro

an d M on cz ka ,1 99 0; B oz ar th

et al ., 19 98 ;K

ot ab e an d Z ha o, 20 02 ;

K ot ab e et al ., 20 08 )

P ol ic y an d pl an

T he

ad op tio n of co ur se s of ac tio n an d th e al lo ca tio n

of re so ur ce s ne ce ss ar y fo r ca rr yi ng

ou t th e

st ra te gi c go al s (A nd

re w s, 19 71 ;M

in tz be rg ,1 98 7)

In te rn al in te gr at io n

C en tr al is at io n,

i.e ., th e pe rc en ta ge

of ca te go ri es

pr oc ur ed

ce nt ra lly

(e .g .A

rn ol d,

19 99 ); st an da rd is at io n of

pr od uc t, i.e ., th e de gr ee

to w hi ch

ch ar ac te ri st ic s of

th e pr od uc ts

pr oc ur ed

ar e st an da rd is ed

th ro ug

ho ut

th e

or ga ni sa ti on

(e .g .Q

ui nt en s et al ., 20 06 b) ;c ol la bo ra ti on

be tw

ee n w or ld w id e

bu yi ng

un it s (e .g .F

ae s et al ., 20 00 ); an d co lla bo ra ti on

w it h ot he r fu nc ti on al

de pa rt m en ts

(e .g .G

el de rm

an et al ., 20 16 ;T

re nt

an d M on cz ka ,2 00 3a ,b )

Su pp

ly in te rn at io na lis at io n

Q ua nt it y,

co m pl ex it y an d im

po rt an ce

of th e it em

s so ur ce d in te rn at io na lly

(A rn ol d,

19 99 )

E xt er na l

in te gr at io n

In te gr at io n or

co lla bo ra ti on

w it h th e su pp

ly ba se

in a ho st co un

tr y in th e fo rm

of fo rm

in g st ra te gi c al lia nc es ,i nf or m at io n sh ar in g, in vo lv in g su pp

lie rs in ne w

pr od uc t de ve lo pm

en t, et c. (e .g .v on

H aa rt m an

an d B en gt ss on ,2 01 5; T re nt

an d

M on cz ka ,2 00 3b )

S tr uc tu re

O rg an is at io na l

co m pl ex it y

T he

am ou nt

of di ff er en tia tio n th at

ex is ts w it hi n

di ff er en t el em

en ts co ns tit ut in g th e or ga ni sa tio n

(D oo le y, 20 02 ). V er tic al co m pl ex ity

is de fin

ed as

th e

nu m be r of

hi er ar ch ic al le ve ls se pa ra tin

g th e ch ie f

ex ec ut iv e’ s po si ti on

fr om

th e jo bs

di re ct ly in vo lv ed

w ith

th e sy st em

s ou tp ut .H

or iz on ta l co m pl ex ity

re fe rs

to th e de gr ee

of de pa rt m en ta lis at io n an d jo b

sp ec ia lis at io n th at

is de si gn

ed in to

th e

or ga ni sa tio n. Sp

at ia l di sp er si on

is de fin

ed as

th e

de gr ee

to w hi ch

an or ga ni sa ti on ’s fa ci lit ie s an d

pe rs on ne l ar e di sp er se d ge og ra ph

ic al ly

fr om

th e

m ai n he ad qu ar te rs

(H en dr ic k, 20 09 )

O rg an is at io na l

co m pl ex it ya

V er ti ca l co m pl ex it y,

i.e ., th e nu

m be r of

hi er ar ch ic al

le ve ls of

th e pu

rc ha si ng

or ga ni sa ti on

of a co m pa ny

(e .g .c or po ra te

pu rc ha si ng

,B U pu

rc ha si ng

,I P O s

an d pl an t pu

rc ha si ng

de pa rt m en ts ); ho ri zo nt al

co m pl ex it y,

i.e ., th e de gr ee

of in cl us io n of

ot he r fu nc ti on al de pa rt m en ts to

fo rm

cr os s- fu nc ti on al pu

rc ha si ng

te am

s; an d (3 ) sp at ia l co m pl ex it y,

i.e ., th e ge og ra ph

ic al

di sp er si on

of th e

pu rc ha si ng

un it s

(c o n ti n u ed

)

Table I. GS strategy and structure constructs and corresponding constructs in general strategy and structure literature

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St ra te gy

an d st ru ct ur e lit er at ur e

G S st ra te gy

an d st ru ct ur e lit er at ur e

C on st ru ct

D es cr ip ti on

C on st ru ct

D es cr ip ti on

A llo ca ti on

of de ci si on -m

ak in g

po w er

C on si de rs

w he re

th e go ve rn an ce

an d po w er

lie in

th e re la ti on sh ip

(V an

D e V en

19 76 ;D

af t, 19 95 )

A llo ca ti on

of de ci si on -m

ak in g

po w er

D is tr ib ut io n of

de ci si on -m

ak in g re sp on si bi lit ie s to

ea ch

le ve l of

pu rc ha si ng

w it hi n a co m pa ny

(J ia

et al ., 20 14 b)

D iv is io n of

la bo ur

R ef er s to

th e di vi si on

of la bo ur

(K le bb

a an d

D w ye r, 19 81 )

Sp ec ia lis at io na

D iv is io n of

la bo ur

an d ta sk s de si gn

ed in to

th e fo ur

le ve ls of

pu rc ha si ng

or ga ni sa ti on

w it hi n th e co m pa ny

,w hi ch

is m ea su re d by

th e nu

m be r of

sp ec ia lis ed

ro le s as si gn

ed to

ea ch

le ve l

C oo rd in at io n

D eg re e of

m an ag in g th e in te rd ep en de nc es

be tw

ee n ta sk s an d ac to rs

(L aw

re nc e an d L or sc h,

19 67 ;J ar za bk

ow sk i et al ., 20 12 )

C oo rd in at io n

m ec ha ni sm

s N eg ot ia ti on

by th e la rg er

us er

(o r th e us er

in th e su pp lie r’s

co un tr y of

or ig in );

H Q le d ne go tia tio n; di ff er en t re gi on al pu

rc ha si ng

gr ou ps ;p ro fit -o ri en te d

pu rc ha si ng

ce nt re s se lli ng

th ei r se rv ic es

to in te rn al cu st om

er s; in cl us iv e

pa rt ic ip at io n, i.e ., a bo tt om

-u p de m oc ra tic

ap pr oa ch

to en co ur ag e cr os s- fu nc tio na l

in te rn at io na l pa rt ic ip at io n; ef fe ct iv e co m m un ic at io n, i.e ., in te rn al m ar ke ti ng

an d

re w ar di ng

of fa vo ur ab le ou tc om

es fo r im bu

in g co nf id en ce ;d el eg at in g

re sp on si bi lit ie s to

in st ill be lo ng in gn es s an d ac co un ta bi lit y (a vo id in g co nf us io n

an d re du

nd an cy ) (M

at th ys se ns

an d F ae s, 19 97 ;F

ae s et al ., 20 00 )

C on tr ol

D eg re e of

en su ri ng

ea ch

un it co nt ri bu

te s to

th e

ex ec ut io n of

or ga ni sa ti on al

go al s (E is en ha rd t,

19 89 ;B

re nn

er an d A m bo s, 20 13 )

C on tr ol

m ec ha ni sm

s P er so na lis ed ,i nf or m al

co nt ro l m ec ha ni sm

s be tw

ee n cu lt ur al ly

co m pa ti bl e

he ad qu

ar te rs

an d su bs id ia ri es ;f or m al ,b

ur ea uc ra ti c pe rf or m an ce

m an ag em

en t sy st em

s (L op pa ch er

et al ., 20 10 ,2 01 1)

IC T

IC T al lo w s he ad qu

ar te rs

to pu

t su bs id ia ry

ne tw

or ks

un de r a co ns ci ou s an d pe rm

an en t

vi si bi lit y th at

st re ng

th en s ce nt ra l co nt ro l an d

en ac ts

po w er

(Y am

in an d Si nk

ov ic s, 20 07 )

IC T ca pa bi lit ie s

L ev el of

ad op ti on

an d ex te nt

of us e of

IC T (H ar tm

an n et al ., 20 08 )

N o te : a C on st ru ct

de ve lo pe d by

th e au th or s ba se d on

th e ge ne ra l st ra te gy

an d st ru ct ur e lit er at ur e

Table I.

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Quintens et al.’s (2006b) paper appears to be the first one to conceptualise and empirically test the construct of Global Purchasing Strategy, which is manifested in two fundamental facets: the degree of centralisation/configuration of purchasing; and the degree of standardisation/adaptation of purchasing processes, products, and personnel.

Loppacher et al. (2011) then refine the GS strategy construct, arguing that it consists of two dimensions, i.e., purchasing centralisation (corresponding to the centralisation/ configuration dimension proposed by Quintens et al., 2006b) and supply globalisation (literally meaning the supply internationalisation of Mol et al., 2004).

Despite not explicitly joining the debate about the conceptualisation of GS strategy, some authors propose two further constructs that may have significant strategic implications, i.e., intra-organisational and inter-organisational integration in a GS context (e.g. Bozarth et al., 1998; Faes et al., 2000; Gelderman et al., 2016; Trent and Monczka, 2002, 2005; Trautmann, Bals and Hartmann, 2009; Trautmann, Turkulainen, Hartmann and Bals, 2009; von Haartman and Bengtsson, 2015). Intra-organisational integration pertains to a seamless integration of worldwide operating units, functional departments and production units (Faes et al., 2000). Inter-organisational integration consists instead of strategic linkages with suppliers such as exchanging information with and involving them in new product design, production planning and inventory management, developing a rapid response order processing system, and creating a supplier network that assures reliable delivery (Lee et al., 1997; von Haartman and Bengtsson, 2015; Hultman et al., 2012; Subramanian et al., 2015).

GS goals. Some authors consider the strategic goals of GS as a proxy for GS strategy. This stream of studies lies within the wider debate on the motivations that may induce companies to initiate, develop, and sustain GS activities (for a detailed review see Jia et al., 2014b).

Cost reduction has been considered a prominent strategic goal of GS (Birou and Fawcett, 1993; Swamidass, 1993; Servais and Jensen, 2001; Kotabe et al., 2008). This view is supported by the Transaction Cost Economics (TCE) theory, which postulates that companies should seek to minimise the sum of production and transaction costs (Williamson, 1975). Some scholars acknowledge that companies with cost reduction purposes should carefully consider the total cost (including all of the static, dynamic and hidden costs) rather than the simple purchasing cost (e.g. Ellram, 1995).

GS STRATEGY

POLICIES AND PLANS

P2e

GS STRUCTURE

4. External integration

3. Supply Internationalization

2. Internal integration

CONTROL AND COORDINATION

STRUCTURAL DESIGN

5. Organizational complexity

6. Allocation of decision-making power

7. Specialisation

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communication technology capabilities

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9. Control mechanisms (formal

and informal)

Conceptual Supported by case study data Empirically tested (survey data)

P2e P2f

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Arrows indicate causal relationships (P1a and P3a are negative relationships; all others are positive)

Figure 1. Conceptual framework for GS strategy and structure

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A second key strategic goal of GS is access to resources, e.g., raw materials, products, and technologies, not available at home (Birou and Fawcett, 1993; Cavusgil et al., 1993; Servais and Jensen, 2001). This might be explained by referring to the Resource Dependence Theory (RDT), which states that key resources could lie outside a firm’s boundary (Pfeffer and Salancik, 1978) and extends the resource-based view (RBV) to compensate for the static nature of organisational resource deficiencies. In a recent paper, Berry and Kaul (2015) find that the best performing MNCs on obtaining knowledge from overseas tend to adopt captive offshoring instead of offshore outsourcing and knowledge seeking activities of these MNCs lead to internal integration.

A third important goal of GS is access to sales markets (Giunipero and Monczka, 1990; Bozarth et al., 1998; Kotabe and Zhao, 2002; Kotabe et al., 2008). Andersson and Servais (2010) classify internationalisation into two types, i.e., market seeking and resource seeking, and propose that the internationalisation process is pursued within a network of relationships that is characterised by trust building and knowledge creation to improve the position of the firm within the network ( Johanson and Vahlne, 2009).

In addition to identifying the three aforementioned strategic goals, some studies attempt to link them to evolving GS strategies. Giunipero and Monczka (1990) identify two stages of the GS development process (GS strategy): the transactional stage, based on minimising the sourcing cost (i.e. cost reduction goal); and the planning and management stage, wherein the focus is on aggregating international sourcing requirements and on cultivating long-term buyer-supplier relationships (i.e. access to resources goal). Similarly, Swamidass (1993) and Najafi et al. (2013) propose two GS process models whose stages are linked to GS strategic motives.

GS structure Structural design. Some authors (e.g. Jia et al., 2014b) highlight four levels of purchasing within a company: global commodity team, business unit purchasing, plant purchasing, and international purchasing offices (IPOs).

The commodity team has been defined as a “centrally coordinated team that develops and implements company-wide strategies for a given commodity” (Englyst et al., 2008, p. 16). The term “commodity” aims to classify homogeneous input materials into consolidated volumes that confer bundled negotiating power onto an organisation. Commodity teams, also labelled as “global category management teams” (Trautmann, Bals and Hartmann, 2009), might be considered part of the corporate purchasing office in practice.

Multi-division organisations are often organised into strategic business units, which were first implemented by large MNCs such as DuPont and GM in the 1920s (Govindarajan, 1986). A second level of purchasing is therefore represented by business unit purchasing teams ( Jia et al., 2014b).

The IPO, first defined by Goh and Lau (1998) and later refined by Sartor et al. (2014, p. 14) as “a buying office located abroad, either stand alone or stationed within a foreign subsidiary, that sources industrial inputs and/or services for a company’s global plants”, represents the third level of purchasing. IPOs undertaking purchasing in a geographical region on behalf of their parent companies assume multiple roles (e.g. information processing and negotiator) and exist in various forms ranging from operational IPOs (assuming basic roles) to strategic IPOs (assuming advanced roles) ( Jia et al., 2014a, b; Sartor et al., 2015).

The final level of purchasing within a company is the plant. A plant purchasing team usually deals with the day-to-day procurement and order fulfilment of a plant ( Jia et al., 2014b).

The four levels may not all exist in a company. For example, some firms do not have a business unit purchasing team or assign them to be part of corporate purchasing, and others do not establish IPOs ( Jia et al., 2014b).

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The allocation of responsibilities and decision-making power among the four levels requires meticulous attention (Cavusgil et al., 1993; Jia et al., 2014b). An optimal GS structure is a delicate balancing act and oscillates across a continuum between centralised and decentralised; any form in between is called hybrid or matrix (Narasimhan and Carter, 1989; Cavusgil et al., 1993; Trautmann, Bals and Hartmann, 2009).

Hybrid organisations distinguish between components that are globally standardised and locally customised (Faes et al., 2000; Trautmann, Bals and Hartmann, 2009). This is because standardisation and efficiency considerations favour centralisation, whereas customisation and responsiveness require a decentralised approach (Matthyssens and Faes, 1997).

Jia et al. (2014b) further decompose hybrid GS structure into the following. Tiered decision-making: the corporate purchasing function decides upon sourcing countries and purchase volumes with partial delegation of supplier selection decision to regional units (e.g. IPOs). Sourcing council: decision-making power is assigned to a council consisting of the main internal stakeholders of a specific sourcing project (the epicentre of decisions within the council cannot be clearly identified). The sourcing council model is similar to Arnold’s (1999) coordination model (internationally active companies adopting a centralised structure).

Control and coordination. While GS researchers tend not to adequately distinguish between control and coordination mechanisms, the definitions provided by the strategic management literature are adopted, i.e., coordination is aimed at managing the interdependences between tasks and actors (Lawrence and Lorsch, 1967; Jarzabkowski et al., 2012); whereas control is aimed at ensuring that each unit contributes to the execution of organisational goals (Eisenhardt, 1989; Brenner and Ambos, 2013).

Many authors (e.g. Hartmann et al., 2008) argue that corporate organisational structure and the distribution of purchasing expertise among subsidiaries determine the use of various control mechanisms, which in turn improves the information processing capabilities of firms. Personalised, informal control mechanisms between culturally compatible headquarters and subsidiaries in nascent MNCs are complemented by formal, bureaucratic performance management systems commonly followed by large MNCs (Loppacher et al., 2010, 2011). The use of formal and bureaucratic control systems such as equity control (Kotabe and Zhao, 2002) hinders excessive autonomy of local operating units (Ashayeri and Selen, 2008).

Matthyssens and Faes (1997) acknowledge that four possible types of coordination mechanisms exist in practice: negotiation by the larger user (or the user in the supplier’s country of origin); headquarters led negotiation; different regional purchasing groups; profit-oriented purchasing centres selling their services to internal customers. Faes et al. (2000) highlight other coordination mechanisms: inclusive participation, i.e., a bottom-up democratic approach to encourage cross-functional international participation; effective communication, i.e., internal marketing and rewarding of favourable outcomes for imbuing confidence; and delegating responsibilities to instil belongingness and accountability (avoiding confusion and redundancy).

ICT are vital tools for achieving uninterrupted real-time information and communication flows between upstream and downstream supply chain participants (Spekman et al., 1999; Chung et al., 2004). The centralised repository assimilates, integrates, processes and disseminates knowledge across latitudinal (intra-firm) and longitudinal (inter-firm) dimensions to minimise the bullwhip effect (Lee et al., 1997). This is consistent with the information processing perspective, which holds that varying organisational information processing requirements and capacities determine the choice of integration mechanisms and outcomes (Galbraith, 1973; Tushman and Nadler, 1978).

Relationship between GS strategy and GS structure Four studies address the link between GS strategy (supply internationalisation and internal integration) and control and coordination mechanisms, adopting the headquarters’ point of view.

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Monczka and Trent (1992) argue that companies at advanced GS stages make extensive use of organisational coordination/control mechanisms such as centralised coordinated commodity teams, integration of purchasing, manufacturing and technology groups and establishment of IPOs. Kotabe and Zhao (2002) link GS strategy to control mechanisms and argue that subsidiaries following a complex sourcing strategy are more likely to opt for majority control (i.e. control the majority of the shares of the foreign operation) for coordination and control purposes than other sourcing strategic types. Trautmann, Turkulainen, Hartmann and Bals (2009) propose a positive link between internal integration and formal control mechanisms. Finally, Loppacher et al. (2010, 2011) find that when companies pursue a centralised GS strategy, they tend to favour a more formal and bureaucratic headquarters-subsidiary control system. Conversely, when opting for more decentralised strategies, MNCs prefer a more personalised relationship towards joint and democratic decision-making.

Two studies (Cavusgil et al., 1993; Jia et al., 2014b) highlight a link between the internal integration and the distribution of decision-making power among the four levels of purchasing. Arnold (1999) proposes instead a link between supply internationalisation and the distribution of decision-making power.

Finally, Jia et al. (2014b) alone claim that the choice of organisational structure is determined by the GS strategy but that GS structure could back influence GS strategy through a construct of IPO followership.

Discussion and model development Research gaps The systematic literature review on GS strategy and structure allows us to identify a set of gaps and areas that deserve future research.

First, although most of the papers on GS strategy adopt one or two theoretical frameworks (e.g. TCE and/or RBV), there is a lack of integrated framework for GS strategy. This is aligned with the finding of Walker et al. (2015), who state that OM as a discipline lacks a strong theoretical base and the most commonly adopted theory in OM articles is RBV theory followed by TCE. There is also a lack of consensus in terms of measurements for GS strategy.

Second, one major weakness for GS structure literature lies in the fact that the majority of the findings were drawn from headquarters’ perspective discussing around the trio (centralisation, decentralisation and/or hybrid structure), commodity teams and control mechanisms from the centralised headquarters’ standpoint and neglecting some of the important dimensions discussed in the general organisational theory but relevant to GS (Arnold, 1999; Trent and Monczka, 2002; Quintens et al., 2006a). Only a handful of articles (e.g. Jia et al., 2014a, b) deal with units of analyses other than the corporate purchasing, i.e., at other levels (plant, geographical region/IPO and business unit-level), which are under-researched. More attention should be given to the other types and their role in the GS strategy and structure. There is also a lack of a complete set of measurement for GS structure.

Third, existing literature tends not to distinguish GS strategy and structure, so the relationship between the two cannot be studied and understood properly. For example, Quintens et al. (2006a) argue that the “degree of centralisation” is one dimension of GS strategy, whereas Trautmann, Bals and Hartmann (2009) consider centralisation/decentralisation a structural design issue. Furthermore, Mol et al. (2004) claim that purchasing internationalisation, a GS strategy construct, has two dimensions: depth and scope. However, the scope dimension (i.e. dispersion of purchasing units) is in our view a structural design feature. We therefore argue that there is a need to delineate GS strategy and structure in order to investigate the relationship between them. We also have found that papers covering both GS strategy and structure are few. Existing studies tend to link GS strategy with control mechanisms studying from a headquarters perspective but no more. Future research should

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study the nexus between GS strategy and structure with greater details. This is crucial because the alignment (or fit) of GS strategy and structure significantly affects GS performance (see the SSP paradigm proposed by the strategic management literature).

Conceptual framework As an initial attempt to address aforementioned gaps in GS literature, we aim to develop a conceptual model for GS strategy and structure (Figure 1) and a number of propositions. In so doing, we identify and operationalise the most important constructs and propose some causal relationships based on: our argumentation and/or anecdotal case examples found in the reviewed papers (conceptual propositions); findings of case based studies reviewed (propositions supported by cases); or findings of survey based studies reviewed (empirically tested propositions). Table I presents the GS constructs of our model and those of the general strategy and structure literature from which they have been drawn.

GS strategy. We propose that there are three dimensions for GS policies and plans: internal integration, supply internationalisation, and external integration, considered by a number of authors (e.g. Trent and Monczka, 2002; Quintens et al., 2006b; Loppacher et al., 2011) as proxies of GS strategy.

Internal integration, also described as horizontal, worldwide or global integration by Trent and Monczka (2003a, b), can be further broken down into four dimensions: centralisation, measured in terms of percentage of categories procured centrally (e.g. Arnold, 1999); standardisation of product, defined as the degree to which characteristics of the products procured are standardised throughout the organisation, including elements of specification settings, quality standards and degree of after-sales service (e.g. Quintens et al., 2006b); collaboration between worldwide buying units (e.g. Faes et al., 2000); and collaboration with other functional departments (e.g. Gelderman et al., 2016; Trent and Monczka, 2003a, b). According to Quintens et al. (2006b), standardisation concerns three elements, i.e., “purchasing processes, products, and personnel”. However, we consider that standardisation of products pertains to GS strategy (internal integration), standardisation of process and personnel dimensions are structural design features (see for instance the similarities to the formal control construct).

Due to the increasing level of complexity of purchasing organisations, the third dimension (collaboration between worldwide buying units) of internal integration stated above is implicit in various definitions of GS (e.g. Trent and Monczka, 2003a). Such collaboration occurs between hierarchical levels and within the same level of a purchasing organisation, i.e., integration/collaboration between corporate purchasing office, business unit purchasing, IPO and plant purchasing of the same company and integration between purchasing units at the same level (e.g. IPOs) (Gelderman et al., 2016; Trautmann, Bals and Hartmann, 2009; Loppacher et al., 2011; Jia et al., 2014b).

Supply internationalisation indicates the level (depth) of GS, which is measured by the quantity, complexity and importance of the items sourced internationally (Arnold, 1999; Mol et al., 2004; Trautmann, Turkulainen, Hartmann and Bals, 2009; Loppacher et al., 2011). This implies that GS strategy should be studied at a category level (Trautmann, Bals and Hartmann, 2009; Trautmann, Turkulainen, Hartmann and Bals, 2009).

External, vertical or supplier integration indicates integration or collaboration with the supply base in a country in the form of forming strategic alliances, information sharing and involving suppliers in new product development (Trent and Monczka, 2003b; Steinle and Schiele, 2008; Andersson and Servais, 2010).

It is worth to emphasise that the constructs of internal and external integration in this paper have been drawn from previous GS literature and differ from the external integration and internal integration dimensions of supply chain integration construct proposed by

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SCM literature. Supply chain integration refers in fact to the coordination across the network of production planning, inventory management and distribution activities (Li et al., 2009) and is aimed to create “seamless” supply chains with fully integrated upward information and downward material flows (Towill, 1997). External Integration dimension represents the degree to which a manufacturer develops collaborative relationships and intimacy, exchanges information and jointly plans and coordinates supply chain activities with both suppliers and customers (Danese et al., 2013). Internal integration is the degree to which functions within a firm work together in a cooperative manner, interact and collaborate in order to solve conflicts and arrive at mutually acceptable outcomes (Danese et al., 2013).

Most GS strategy research focusses on either the policies and plans dimension of GS strategy (e.g. Quintens et al., 2006b) or the GS strategic goals (e.g. cost reduction, Ellram, 1995) but not both. However, it seems logical to integrate the organisational goals for GS and the policies and plans in the conceptual framework to fully explain GS strategy following Chandler’s (1962) and Andrews’s (1971) definitions of strategy. There are in fact intrinsic linkages between the GS strategic goals and the three dimensions of policies and plans, in which the former determine the latter (Berry and Kaul, 2015).

To design a GS strategy, we argue that MNCs need to make decisions on: what items to source globally in terms of quantity, complexity and importance to the company, i.e., the supply internationalisation dimension; what internal capabilities (e.g. information processing capabilities) to build to support the GS process, i.e., the internal integration dimension; and what external resources (including supplier relationships), i.e., capable suppliers, are needed to provide components that a firm cannot make by itself due to high costs or lack of capacity or capability, i.e., the external integration dimension. The internationalisation dimension determines the other two in the sense that the quantity, complexity and importance of the items sourced globally affect the internal and external resources needed and the required degree of internal and external collaboration (e.g. complex products require a high level of internal integration among purchasing, R&D and engineering). The increase of quantity, complexity and importance of items sourced abroad (i.e. supply internationalisation) means it is difficult to integrate internally due to for example dispersed GS units and may require a more decentralised approach. Conversely, supply internationalisation requires closer relationship with suppliers.

Hence, we propose that:

P1a. Supply internationalisation negatively affects internal integration.

P1b. Supply internationalisation positively affects external integration.

GS structure. For structural design, there are three interrelated issues: organisational complexity, allocation of decision-making power, and specialisation. These three constructs together with coordination and control are considered the key constructs and decisions to make designing an organisation (Van De Ven, 1976; Mintzberg, 1979; Robbins, 1983).

In the GS context and drawing from Doll and Vonderembse (1991) and Tate and Ellram (2012), organisational complexity is considered as the amount of differentiation that exists in different structures and authorities (Dooley, 2002) and can be measured in terms of: vertical complexity, i.e., the number of hierarchical levels of the purchasing organisation of a company (e.g. corporate purchasing, BU purchasing, IPOs and plant purchasing departments); horizontal complexity, i.e., the degree of inclusion of other functional departments to form cross-functional purchasing teams; and spatial complexity, i.e., the geographical dispersion of the purchasing units (Doll and Vonderembse, 1991). Commodity teams of some categories might be based, for instance, not only at headquarters but also at IPOs for some companies.

Allocation of decision-making power refers to the distribution of decision-making responsibilities to each level of purchasing within a company, i.e., commodity teams,

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business units, IPOs and plants (e.g. Daft, 1995; Jia et al., 2014b). This dimension is labelled “degree of centralisation” and considered a feature of GS strategy by Quintens et al. (2006a). We, however, follow the majority of GS researchers (e.g. Narasimhan and Carter, 1989; Cavusgil et al., 1993; Trautmann, Bals and Hartmann, 2009) who consider centralisation/decentralisation a structural design issue. In GS, the main decision-making power could be kept at headquarters or a business unit or delegated to local buying units (i.e. IPOs or plant purchasing teams).

Finally, specialisation refers to the division of labour and tasks designed into the four levels of purchasing organisation within the company (Klebba and Dwyer, 1981), which is measured by the number of specialised roles assigned to each level. In GS practice, for example, commodity teams might be allocated the tasks of spending analysis and category management, whereas IPOs might be responsible for negotiation and other commercial issues and for quality assurance and supplier-development issues. When a subsidiary purchasing unit or GS unit (we use these two terms interchangeably thereafter) hosts representatives from other functional department for some large sourcing projects because there is a need for the purchasing unit to specialise themselves on other functional areas within the unit (e.g. R&D and quality management), the level of specialisation within the unit increases.

In the control and coordination box, there are three constructs: control mechanisms (i.e. formal and informal control) (e.g. Loppacher et al., 2010, 2011), coordination mechanisms (e.g. Matthyssens and Faes, 1997), and ICT capabilities. Although the first two constructs have been discussed in detail in the previous section, note that ICT is a sine qua non for coordination and coherent aggregation of the sourcing requirements of an organisation’s internationally dispersed production units. Here, the construct of ICT capabilities, which refers to adoption and extent of use of ICT (Peña et al., 2014; Hartmann et al., 2008), is adopted. A list of the operationalised constructs for GS structure is presented in Table I.

Hartmann et al. (2008) establish the correlation between organisational structure and the use of various control mechanisms but provide no further detailed analysis concerning the constructs listed on the left-hand side (i.e. structural design) and right-hand side (i.e. control and coordination) of the GS structure box (Figure 1).

Narasimhan and Carter (1989) claim that the appropriateness of a GS organisational structure affects the control and coordination of the material acquisition and distribution activities of a firm’s international operations because without such a sound infrastructure, it is difficult to integrate those responsible for international sourcing, manufacturing and distribution decisions. When the GS units or subsidiaries are allocated more decision-making power, first it is highly likely that additional hierarchical levels are created because the responsibilities may need to be further distributed within the GS units (vertical complexity). More GS units may be set up to share responsibilities (spatial complexity), and collaboration between GS units and other functional departments (horizontal complexity) increases. Second, more skills (specialisation) are required to perform the extra responsibilities assigned (Hartmann et al., 2008). Third, corporate headquarters have less control over the subsidiary from a distance, which is more autonomous. Instead, a more informal control system and more personalised and democratic coordination mechanisms tend to be used to influence subsidiaries (Loppacher et al., 2010, 2011). Thus, there is a need for both formal and informal control and more-complex coordination mechanisms, depending on the situation.

We therefore propose the following:

P2a. Additional decision-making power delegated to subsidiaries (e.g. IPOs or plants) increases the complexity of the GS structure.

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P2b. Additional decision-making power delegated to subsidiaries (e.g. IPOs or plants) increases the specialisation of the GS units.

P2c. Additional decision-making power delegated to subsidiaries (e.g. IPOs or plants) increases the need for a combination of formal and informal control systems and more-complex coordination mechanisms.

When GS structure becomes more complex, i.e., more hierarchies, higher degree of inclusion of other functional departments and more dispersed purchasing units globally, it would be difficult for corporate headquarters to implement only formal control of the dispersed purchasing units from a distance. Instead, a more informal control system and more personalised and democratic coordination mechanism tend to be used to influence subsidiaries together with formal control (Narasimhan and Carter, 1989; Hartmann et al., 2008):

P2d. Higher complexity in the GS organisational structure of a firm increases the need for a combination of formal and informal control systems and more-complex coordination mechanisms.

When more tasks are designed for a GS organisation (specialisation increases), it is highly likely that the headquarters must use more-complex coordination mechanisms, e.g., incremental implementation and inclusive participation, and how headquarters controls subsidiary units may be more complex. For example, if an IPO only carries out basic sourcing activities identifying suppliers and collecting supply market intelligence, formal control may be sufficient and the coordination should be less complex because the subsidiary does not have leeway but follows instructions from headquarters. Instead, if the IPO perform additional activities such as facilitation of NPD process, development of strategic suppliers and involvement in the supply policy, there is a greater need to coordinate with the corresponding departments or teams at headquarters (e.g. engineering, R&D, commodity team, and strategic sourcing):

P2e. As GS units become more specialised, there is an increasing need for a combination of formal and informal control systems and more-complex coordination mechanisms.

In the general SCM literature, ICT capabilities are considered an enabler to coordination (see Tang and Zimmerman, 2013). In a GS context, ICT capabilities are considered crucial to coordination and control (Hartmann et al., 2008). The following is proposed:

P2f. ICT capabilities are an enabler of GS coordination and control mechanisms.

Relationship between GS strategy and GS structure. When there is a need to integrate internally (i.e. pooling common purchase items, standardisation of products, collaboration among worldwide buying units and with other functions), then: the decision-making power is likely to be taken back to the headquarters ( Jia et al., 2014b; Cavusgil et al., 1993); the complexity of the GS structure will decrease because there is simply no need to keep many hierarchical levels and IPOs may be cut for head counts or even closed down ( Jia et al., 2014b; Cavusgil et al., 1993.); and the specialisation of the GS subsidiary units will decrease because there is less need for assigning new tasks to local units ( Jia et al., 2014b; Cavusgil et al., 1993):

P3a. As a firm’s GS strategy becomes more internally integrated (1) its GS structure decreases in complexity (2) less decision-making power is delegated to subsidiaries (3) the GS units become less specialised.

If a firm becomes more international in terms of supply (i.e. quantity, complexity and importance of items sourced), then it is likely that: more decision-making power is allocated to GS units (depending on the organisational structure that a firm adopts) to support the process (Arnold, 1999); more hierarchical levels are created because the responsibilities may

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need to be further distributed within the GS units (vertical complexity); more GS units are set up to share the responsibilities (spatial complexity); and GS units collaborate more with other functional departments (horizontal complexity) (Arnold, 1999); and more skills (e.g. foreign supplier development, cultural knowledge and quality assurance) are needed to support the process:

P3b. Increased internationalisation of a firm’s GS strategy increases (1) delegation of decision-making power to subsidiaries (e.g. IPOs or plants) (2) the complexity of its GS structure and (3) the specialisation of its GS units.

When there is a need for external integration with suppliers, then it is likely that: the organisational structure of GS reflects this need and shows increasing involvement in foreign supply bases (e.g. investing in IPOs or increasing foreign direct investments or attributing to the plant purchasing team some roles usually played by IPOs) to manage and develop supply bases; more decision-making power is given to the subsidiary purchasing units; and the specialisation within the subsidiary purchasing units increases due to the additional expertise required to perform supplier development. Jia et al. (2014a) provide a case example of Mothercare (a UK-based mother and baby product retailer): Mothercare adopted a supply internationalisation and external integration strategy in 2007 when, to obtain access to Asia’s sales and supply markets, it formed a joint venture with a Chinese baby products manufacturer, Goodbaby. The company gradually delegated more and more decision-making power to the IPO in China and eventually relocated the Corporate Purchasing Organisation (CPO) from UK to Hong Kong in 2012:

P3c. As a firm’s GS strategy becomes more externally integrated (1) its GS structure becomes more complex (2) more decision-making power is delegated to its subsidiary purchasing units (e.g. IPOs or plants) and (3) its subsidiary purchasing units become more specialised.

Loppacher et al. (2011) conclude that highly centralised (a measure of internal integration) GS strategies usually develop more formal and bureaucratic monitoring and control systems to manage their subsidiaries, allowing for greater consistency in worldwide control standards and criteria and, at the same time, ensuring deeper GS strategy alignment and coordination. The following is therefore proposed:

P3d. As a firm’s GS strategy becomes more internally integrated, its control system becomes more formal and bureaucratic; as a firm’s GS strategy becomes less internally integrated, its control system becomes more informal and democratic.

Kotabe and Zhao (2002) link GS strategy to control mechanisms and argue that subsidiaries following a complex sourcing strategy (i.e. characterised by high supply internationalisation) are more likely to opt for majority control (i.e. control a majority of the shares of the foreign operation) for coordination and control purposes. Loppacher et al. (2010) claim that the choices of formal or informal administrative mechanisms and control systems depend on the degree of internationalisation, i.e., quantity, importance and complexity of the sourced items. This means both formal and informal control should be adopted when a firm internationalise its supply. We argue that the same apply to coordination mechanisms, i.e., internationalisation strategy requires more complex coordination mechanisms and therefore propose the following:

P3e. As a firm’s GS strategy becomes more internationalised, there is an increasing need for a combination of formal and informal control systems and more-complex coordination mechanisms.

A conceptual framework of GS strategy and GS structure is presented below including all the operationalised constructs and propositions discussed.

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Conclusion At the onset of the paper, we set out to address two research questions:

RQ1. What are the main dimensions of GS strategy and GS structure?

RQ2. What are the relationships between them (if any)?

We have addressed them by conducting a systematic literature review and developing a comprehensive and synthesised conceptual model (Figure 1).

Theoretical implications Our study contributes to the GS strategy and structure literature in four significant ways.

First, our conceptual model advances current understanding of GS strategy by putting together fragmented constructs (i.e. GS strategic goals, internal integration, external integration, and supply internationalisation) and provides clear operationalised definitions for them. Although GS studies have considered either strategic goals or policies/plans, we follow strategic management scholars (e.g. Chandler, 1962; Andrews, 1971) and propose that only through the integration of the two dimensions is it possible to fully explain GS strategy.

Second, carefully selecting constructs from organisational theory which are relevant to GS and adopting constructs already existing in the GS structure literature, we propose two groups of three constructs each for GS structure, i.e., structural design and control and coordination. We then develop a number of causal relationships between these constructs for further empirical validation. This is probably one of the first studies that identifies a comprehensive list of constructs for GS structure.

Third, the conceptual model proposes a number of propositions regarding the relationships between GS strategy and structure. The existing GS literature fails to adequately distinguish GS strategy from GS structure (e.g. centralisation is considered a dimension of GS strategy by Quintens et al. (2006a) but a dimension of GS structure by Trautmann, Bals and Hartmann (2009). We identify instead two separate sets of constructs for GS strategy and GS structure (following formal definitions from the strategic management literature and organisation theory) and propose a number of relationships between them. Overall, these relationships indicate that – in line with the SSP paradigm of the strategic management literature – there is a need for a fit between GS strategy and structure for companies to achieve GS and/or purchasing performance.

Finally, our model supports the statement laid out in the introduction that, despite their links with P&SM strategy and structure, GS strategy and structure have their own characteristics and deserve special attention. For instances, while the supply chain integration construct proposed in the P&SM literature is focussed on cross-functional collaboration only, our internal integration construct of GS strategy consists of four dimensions, i.e., centralisation of decision-making, standardisation of product, collaboration among worldwide buying units, and collaboration with other functional departments. Furthermore, as far as GS structure is concerned, spatial complexity dimension is specific to GS, and coordination and control are more-important issues than are those in a domestic context due to the geographical distance among worldwide subsidiary purchasing units for an MNC.

In sum, our conceptual framework is one of the first attempts towards building a more complete theory of GS strategy and structure and has significant implications for a purchasing strategy and structure in general.

Practical implications In practice, managers feel it challenging to make decisions on the GS organisational structure and sometimes companies changes from a more centralised to a more decentralised and vice versa following the fads at the time. The paper provides purchasing and supply managers

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with a detailed framework for designing GS strategy and structure and promotes a fit between the two, an important factor for achieving GS and/or purchasing performance. Specifically, our model suggests that managers be clear about the goals for GS and not only follow what competitors do. The GS goals will then guide them to select appropriate GS policies and plans, which in turn will lead to decisions related to the GS structure.

During the fieldwork conducted by the authors for a previous research project, a purchasing executive of Philips argued that the challenge for his company, as well as for other MNCs, is to develop purchasing strategies that are not depending on the specific decision makers but are based on long-term goals. We believe the model proposed in this paper provides some guidelines for them.

Similarly, one of the purchasing managers of Mothercare said that when they decided to relocate the CPO from UK to Hong Kong, they subsequently faced the organisational design issues such as allocation of decision-making power, specialisation of CPO, coordination between CPO and headquarters and complexity of the whole purchasing organisation. Our model would provide them all the needed dimensions they should consider in GS decision making.

Future research directions In terms of GS strategy, more empirical research is needed to test the proposed construct of GS strategy. Due to the growth of regional markets (e.g. China), a regional strategy consisting of both international marketing and GS deserve deeper investigation. For example, how a regional strategy is formed; how marketing and GS strategy influence each other and how they can be better coordinated?

Second, in terms of GS structure, more empirical research on the unit of analysis other than firm/CPO’s should be carried out. In particular, we would like to understand more how various purchasing units are integrated and coordinated to deliver GS performance i.e., the internal integration issue.

Third, the relationship between GS strategy and structure merit further investigation. This is the least understood area identified in the literature review. Some researchers start focussing on this (e.g. Ates et al., 2014), however it is still unclear what relationships between the GS strategy and GS structure in the nexus are salient ones. First all the existing links between GS strategy and structure highlighted by our conceptual model are either conceptual or developed from case studies. Large sample surveys to validate and test the causal relationships are lacking. Second, there are some missing links between the GS strategy and structure, such as those between external integration and GS structure constructs. Third, the effects of (mis)fit between GS strategy and structure on purchasing and firm performance is another unexplored research area that deserves significant attention.

Finally, it is surprising that we could not find any paper including sustainability as a goal for GS. Similarly, Quarshie et al. (2016) find very few papers on global aspect of sustainable supply chain management and Huq et al. (2014) and Sartor et al. (2016) state that supply chain management literature on social sustainability is limited. Future GS research should give much more emphasis on sustainability issues.

Limitations The study is of course not exempted from limitations. First, our review of the empirical studies is focussed on manufacturing industry excluding service offshore outsourcing and SMEs because we consider the latter two have distinct features from GS of manufacturing goods and should be dealt with separately. Caution should therefore be given to the generalisability of our results to GS of services and SMEs. We believe however that developing a synthesised model including all is neither feasible nor necessary. Second, our study is focussed on GS strategy and structure but does not link it

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to GS performance. Future work may integrate performances into the conceptual model. Third but not the least, the paper is conceptual in nature. Empirical work is therefore needed to refine and validate the model.

Note

1. The definition of large firms proposed by the EU recommendation 2003/361/EC is adopted in this paper.

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