Purchasing Managers' Perceived Bias in Supplier‐Selected Referrals

• Date: 01 October 2013
• Published date: 01 October 2013
• Author: Rajdeep Grewal,and Gary L. Lilien,Mahima Hada
• DOI: http://doi.org/10.1111/jscm.12007

PURCHASING MANAGERS’PERCEIVED BIAS IN

SUPPLIER-SELECTED REFERRALS

MAHIMA HADA

City University of New York

RAJDEEP GREWAL AND GARY L. LILIEN

Pennsylvania State University

In evaluating suppliers in complex purchasing decisions involving custom-

ized solutions, purchasing managers must judge the capabilities suppliers

have to provide the solutions, a judgment that often includes considerable

uncertainty. To reduce this uncertainty, suppliers often ask their existing

customers to be reference customers and give a referral to purchasing

managers —that is, suppliers and purchasing managers consider a sup-

plier-selected referral as a source of information. However, in contrast to

other information sources, reference customers are selected by suppliers,

not by purchasing managers; thus, purchasing managers may perceive a

bias in the supplier-selected referral. We study the antecedents of purchas-

ing managers’perceived bias with a mixed-design experiment with pur-

chasing managers as respondents. We find that the greater the experience

of purchasing managers, the less the bias in the referral they perceive. We

also find that reference customers can reduce purchasing managers’per-

ceived bias in the supplier-selected referral by giving a referral that has

some negative information in an otherwise positive referral.

Keywords: business-to-business marketing; purchasing processes; human judgment

and decision-making; field experiments; regression analysis; behavioral supply

management

INTRODUCTION

Buyer–supplier relationships range from arms-length

transactions to strategic sourcing relationships where

purchasing firms seek to build long-term relationships

with suppliers (McHugh, Humphreys & McLvor,

2003). To evaluate suppliers for long-term relation-

ships, purchasing managers evaluate not only the

product but also suppliers’ capabilities in implement-

ing, customizing and providing support in the future,

especially when the solutions are high in complexity

and require customization [e.g., enterprise resource

planning (ERP) solutions; Lonsdale, 2001]. Wallen-

burg (2009) finds that as solutions grow in complex-

ity, buying firms are more likely to seek suppliers’

proactive involvement in fulfilling their require-

ments from suppliers’ solution. Therefore, when eval-

uating suppliers for complex solutions, purchasing

managers seek information about suppliers’ abilities

to provide solutions that extend beyond product

attributes.

One of the ways purchasing managers evaluate sup-

pliers is by asking suppliers for a reference customer. As

Mochal (2010) advises purchasing managers: “One of

the activities that should be on your evaluation check-

list is talking to companies that currently use the prod-

uct. The purpose of checking references is to get past

the marketing and sales hype and hear some real opin-

ions.” To provide a reference, suppliers select an exist-

ing or previous customer as a reference customer and

ask the reference customer to give a referral for suppli-

ers to purchasing firms —asupplier-selected referral.

Supplier-selected referrals differ from the other infor-

mation sources purchasing managers use to evaluate

suppliers in one key aspect: most information sources

(such as consultants) are selected by buying firms, that

is, by purchasing managers, whereas reference custom-

ers are selected by suppliers. Furthermore, purchasing

managers know that suppliers have selected the refer-

ence customer, and thus, likely perceive a bias in the refer-

ral in favor of suppliers. Suppliers in the industry also

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