Purchasing Policy or Purchasing Police? The Influence of Institutional Logics and Power on Responses to Purchasing Formalization

• Published date: 01 October 2016
• Date: 01 October 2016
• DOI: http://doi.org/10.1111/jscm.12112
• Author: Frida Pemer,Tale Skjølsvik

PURCHASING POLICY OR PURCHASING POLICE? THE

INFLUENCE OF INSTITUTIONAL LOGICS AND POWER

ON RESPONSES TO PURCHASING FORMALIZATION

FRIDA PEMER

Stockholm School of Economics

TALE SKJØLSVIK

Oslo and Akershus University College

Seeking to benefit from higher levels of purchasing maturity, many orga-

nizations strive to formalize their purchasing practices. Why these prac-

tices are not adopted by certain organizations or for certain types of

purchases is less well understood, however. It has been argued that the

purchasing of knowledge-intensive services is particularly difficult to for-

malize, but an in-depth understanding of the inter- and intra-organiza-

tional dynamics influencing this process is lacking. This study contributes

to the purchasing and supply management literature by providing a fine-

grained understanding of how actors respond to formalization initiatives.

Building on an exploratory interview methodology and using institutional

logic and power theory as foundations, we show that formalization initia-

tives lead to institutional complexity and conflicts. Sets of strategies and

counterstrategies for how to deal with the complexity and conflicts are

identified, and relational power is found to moderate which strategy is

used by the actors. Based on the empirical findings, a conceptual model is

developed to describe the response process.

Keywords: purchasing formalization; institutional logic; power; strategy; case stud-

ies; qualitative analysis

INTRODUCTION

Purchasing and supply management (PSM) has

developed from a clerical function into a strategic

activity and is now regarded as an important contribu-

tor to organizations’ competitive advantages, prof-

itability, and performance (Cox, Chicksand, Ireland &

Davies, 2005; Foerstl, Hartmann, Wynstra & Moser,

2013; Johnson, Leenders & Fearon, 2006; van Weele

& van Raaij, 2014; Zimmermann & Foerstl, 2014). As

part of the development toward higher levels of pur-

chasing maturity (Rozemeijer, van Weele & Wegge-

man, 2003; Schiele, 2007), initiatives have been taken

to centralize and formalize PSM activities with the

goal of enabling cross-functional integration, stan-

dardizing rules, contracts, and procedures, and

increasing cost savings and control (Dyer, 1996;

Gummesson & Gr€

onroos, 2012; Tate & Ellram, 2012).

Strategies and tools have been developed for purchas-

ing formalization, but why they are not adopted by

certain organizations or for certain categories of goods

and services is less well understood (Cox et al., 2005;

Kerkfeld & Hartmann, 2010). Understanding this is

highly relevant, because organizations wishing to ben-

efit from higher levels of purchasing maturity must

ensure that intended changes are accepted and imple-

mented. However, despite being a central idea in pur-

chasing maturity models, the existing literature has

tended to overlook the inter- and intra-organizational

dynamics involved in changing purchasing behaviors

(Foerstl et al., 2013). The aim of this study was to

provide a preliminary answer to this question and to

increase theoretical knowledge about how buyers and

sellers respond to the formalization of purchasing

activities.

Existing research has shown that, although using for-

malized PSM practices is relatively well established for

goods and simpler services such as cleaning and cater-

ing, the purchasing of complex and knowledge-

October 2016 5

intensive services proves more difficult (Pemer, Werr

& Bianchi, 2014). One explanation for this is that

indirect spend, of which knowledge-intensive services

are particularly illuminating examples (Eisenhardt &

Graebner, 2007), is characterized by fragmentation,

maverick buying, and long-term relations (Cox et al.,

2005). Traditionally, purchases of knowledge-intensive

services have been made by individual managers,

using decentralized and relational purchasing practices

(Axelsson & Wynstra, 2002) to hire professionals they

know well and trust (David, Sine & Haveman, 2013).

Recently, however, a trend toward increased formal-

ization (e.g., implementing preferred suppliers, frame

agreements, standardized purchasing procedures) of

these purchases has emerged (Cox et al., 2005; Pemer

et al., 2014; Sieweke, Birkner & Mohe, 2012). The

background to this trend is the stronger focus in orga-

nizations on short-term shareholder values, trans-

parency, and cost control (Bergh & Gibbons, 2011).

As a consequence of this trend, the traditionally dya-

dic relationship between client managers and suppli-

ers of knowledge-intensive services is increasingly

being replaced by a triadic relationship between client

managers, suppliers, and purchasing professionals

(Bals, Hartmann & Ritter, 2009; Werr & Pemer,

2007). The introduction of an additional internal

party in the purchasing process creates new inter- and

intra-organizational challenges, especially as regards

the division of roles, power, and responsibility

between the involved actors (Bastl, Johnson & Choi,

2013; Wynstra, Spring & Schoenherr, 2015). What

strategies the involved actors use to deal with these

challenges is less well understood, however (Yang &

Su, 2014).

Against this background, this study seeks to answer

the question of how actors respond to initiatives to

formalize purchasing practices. In doing so, we build

on an interview study of actors involved in purchasing

knowledge-intensive services. Importantly, our inten-

tion is not to take a stand for or against formaliza-

tion. That, we believe, is up to the individual

organization after careful analysis and assessment of

its unique situation and needs. Rather, our intention

is to illustrate how formalization of purchasing prac-

tices is perceived by the actors involved, what they

regard as appropriate purchasing approaches, and

what actions they take to implement or resist the for-

malization. We thereby seek to advance theoretical

knowledge about responses to formalization and pro-

vide important insights that can be taken into consid-

eration by organizations contemplating change

initiatives.

As a theoretical foundation, we draw on theories of

institutional logics and power. Institutional logics

have recently attracted strong academic attention in

organizational studies (Greenwood, Hinings &

Whetten, 2014). In short, institutional logics provide

sets of ideas and practices that guide actors’ actions

and perceptions of what is appropriate (Thornton &

Ocasio, 1999). They thus help to explain the informal

norms and practices that influence actors’ behaviors,

and how conflicts can arise when actors following dif-

ferent institutional logics meet and interact.

Using the lens of institutional logics, the purchasing

of knowledge-intensive services can be regarded as an

arena where actors following different institutional

logics meet and struggle to agree on which purchasing

practices to use. It is an illuminating example of how

actors deal with conflicting institutional demands,

and it provides new insights into actors’ responses to

increased purchasing formalization (Eisenhardt &

Graebner, 2007). Existing studies have tended to focus

on the state, firm, or supply chain level (Saldanha,

Mello, Knemeyer & Vijayaraghavan, 2015), but less is

known about how actors at the microlevel cope with

conflicting institutional demands (Palmer, Simmons,

Robinson & Fearne, 2015; Yang & Su, 2014). It has

also been pointed out that conflicting institutional

demands lead to an increase in political games in

organizations (Jarzabkowski, Matthiesen & Van de

Ven, 2009) and that the outcome of the games

depends on the power distribution between those

involved (Bjerregaard & Jonasson, 2014). But despite

this, power is still only dealt with in the institutional

logics literature to a limited extent (Cloutier & Lang-

ley, 2013). By combining theories of institutional log-

ics and power, we thus bring a fresh perspective to

the PSM literature.

We make several contributions based on our empiri-

cal findings. First, we identify what institutional logics

actors involved in the purchasing of knowledge-inten-

sive services follow. Second, we provide a fine-grained

understanding of the sets of strategies and counter-

strategies these actors use to respond to formalization

initiatives. Third, we show empirically the moderating

role of relational power in the selection of strategy.

Lastly, we develop a conceptual model describing how

actors respond to formalization initiatives in organiza-

tions. Together, these contributions illustrate that, if

we are to understand how actors will respond to for-

malization initiatives, it is central to first understand

what institutional logics they are guided by and what

relational power they possess.

THEORETICAL FOUNDATION

Initiatives to formalize relational purchases break

the flow of stability (Weick, 1995) in organizations,

because they challenge well-established practices and

norms. The actors involved need to make sense of the

new situation and decide on an appropriate response.

As previous research has illustrated, perceptions of

Volume 52, Number 4

Journal of Supply Chain Management

6