Supplier Development: A Knowledge Management Perspective

• DOI: http://doi.org/10.1002/kpm.1478
• Published date: 01 October 2015
• Author: Clyde Holsapple,Liang Chen,Scott Ellis
• Date: 01 October 2015

■Research Article

Supplier Development: A Knowledge

Management Perspective

Liang Chen

1

*, Scott Ellis

2

and Clyde Holsapple

2

1

Department of Information Systems & Analytics, Miami University, Oxford, Ohio, USA

2

Gatton College of Business and Economics, University of Kentucky, Kentucky, USA

As a key supply chain management practice, supplier development has been found to yield positive performance and

capability consequences. However, it remains unclear why these consequences are achieved. Even though supplier

development is predicated on knowledge management activities, it is rarely studied from a knowledge management

perspective. In order to bring greater clarity to the connections between supplier development and its consequences,

we leverage the knowledge chain theory to capture buyers’and suppliers’knowledge management activities in

supplier development. Through an extensive review and systematic classification of supplier development activities

in the literature, this study generates a reliable catalog of supplier development activities, finds support for the

knowledge management perspective, and reveals the extent to which supplier development activities are knowledge-

based activities. In addition, we generate an integrated definition, a meaningful taxonomy, and a comprehensive

implementation approach for supplier development. Further, we illuminate how positive performance and capability

consequences of supplier development can be achieved through the design and execution of knowledge activities

embedded within supplier development activities. This study contributes to extant research by articulating the

important role of knowledge and knowledge management in supplier development and advancing a comprehensive,

unified, organized foundation for understanding supplier development and its link with performance. Copyright © 2015

John Wiley & Sons, Ltd.

INTRODUCTION

As a key supply chain management (SCM) practice,

supplier development (SD) aims to improve a

supplier’s performance or capability and, in turn,

meet the buyer’s short-term and long-term supply

needs (Krause, 1999; Scannell et al., 2000). When a

buying company (i.e., buyer) notices a need to

improve a supplier’s performance or capability, it

may implement one or more SD activities. These

range from low-involvement activities, such as

creating competitive pressure and evaluating a

supplier’s performance regularly, to high-involve-

ment activities, such as providing a supplier with

specific training programs and involving the

supplier in new product development. SD has been

recorded as a successful strategy for many compa-

nies, including Toyota (Sako, 1999; Marksberry,

2012; Langfield-Smith and Greenwood, 1998; Dyer

and Hatch, 2006; Dyer and Nobeoka, 2000). Empiri-

cal studies find that SD can upgrade a supplier’s

technical, quality, delivery, and cost capabilities

and improve its financial, operational, and market

performance (e.g., Sanchez-Rodriguez, 2009;

Wagner, 2010, 2011; Lawson et al., 2014). Further-

more, SD, in turn, fosters the buyer ’s continuous

improvements and enhances its competitive posi-

tion (Scannell et al., 2000).

While numerous empirical studies examine the

relationship between SD activities and their conse-

quences, it remains unclear why these consequences

are achieved. The main reason is that prior research

largely employs traditional economic theories, such

as transaction cost economics and resource/power

dependence theory, but these theories deal mainly

with governance choice and emphasize the struc-

tural features of inter-organizational exchange

rather than value creation processes (Zajac and

Olsen, 1993). Second, extant studies have identified

many SD initiatives, but they have inconsistent

definitions and conflicting classifications, and the

relationship among various types of SD actvities is

*Correspondence to: Liang Chen, Department of Information

Systems and Analytics, Farmer School of Business, Miami Uni-

versity, Ohio, USA.

E-mail: chenl18@miamioh.edu

Knowledge and Process Management

Volume 22 Number 4 pp 250–269 (2015)

Published online 23 July 2015 in Wiley Online Library

(www.wileyonlinelibrary.com) DOI: 10.1002/kpm.1478

Copyright © 2015 John Wiley & Sons, Ltd.

not clear (Krause et al., 2000). In fact, there is no

integrated view or meaningful classification of these

SD activities. Third, knowledge has been identified

as the most strategically significant resource of a

firm, and the management of knowledge is a key

strategy to achieve organizational success and

survival in hyper-competitive and unpredictable

environments (Grant, 1996a, 1996b). However, a

knowledge management (KM) perspective is rarely

considered in the field of supplier development,

with notable exceptions examining only a small

subset of SD activities that directly involve

knowledge sharing (Modi and Mabert, 2007;

Arroyo-López et al., 2012; Asare et al., 2013). Given

this limited treatment, the extent to which SD activ-

ities are knowledge-based or represent knowledge

activities remains unclear.

To address this gap in extant research, we lever-

age the knowledge chain theory (KCT; Holsapple

and Singh, 2001) to understand the nature of

buyers’and suppliers’KM activities that are embed-

ded within SD practices. KCT explains why nine

KM activities from two distinct classes enable a firm

to leverage its knowledge for competitive advan-

tage (Wu and Holsapple, 2013; Holsapple and Wu,

2011). Therefore, it is suitable for theoretically

explaining why consequences of SD are achieved.

In order to further support our application of KCT,

we review 92 empirical studies of SD, identifying

over 500 variations of SD activities, which we subse-

quently condense into 30 types. Examining the

relationships among the 30 types of SD activities

and specific KM activities identified in the KCT

(Holsapple and Jones, 2004, 2005), this study reveals

the extent to which SD activities are knowledge-

based or represent knowledge activities. In addi-

tion, based on this theory and an extensive review

of existing SD definitions and activities, we generate

a KM-based definition, taxonomy, and implementa-

tion approach of SD.

Our study makes several important contribu-

tions. First, the application of the KCT helps illumi-

nate why positive performance and capability

consequences of SD can be achieved through the

design and implementation of knowledge activities

inherent within the 30 SD activity types identified

by our research. Complementing prior SD research,

this study adds a valuable component to the SD

literature by revealing the important role of knowl-

edge and KM in SD. More generally, our application

of a KM perspective caters to a growing interest in

the intertwined linkage between KM and SCM

(Marra et al., 2012); it motivates the use of KM

perspectives, such as KCT, to examine SD or even

a broad range of SCM phenomena.

Second, this study offers a relatively comprehen-

sive view of KM in SD activities and develops an

integrated definition, taxonomy, and implementa-

tion approach. The result is a unified, organized

foundation for understanding and performing SD.

Further, it offers a framework that researchers may

use to design and guide SD explorations.

Third, the KM perspective lends new insights into

the relationship between SD implementation and

performance. We find that SD activities are heavily

knowledge-based and provide a more comprehen-

sive explanation for how KM is involved in SD than

is available in published research. SD activities that

have been studied depend primarily on knowledge

acquisition, emission, and generation, but neglect

knowledge selection (i.e., selecting appropriate

knowledge for emission, generation, and assimila-

tion) and knowledge assimilation (i.e., absorbing

the knowledge acquired or generated and making

it your own). Therefore, in order to achieve better

SD outcomes, both the buyer and the supplier need

to consider knowledge selection and assimilation in

addition to the other three first-order KM activities.

This is a key finding.

The remainder of this paper is organized as fol-

lows. The SD: definitions, approach, and taxonomy

section provides a critical review of SD definitions,

approaches, and taxonomies. KM and KCT section

describes the elements of KM and KCT that provide

conceptual underpinnings for the development of

our framework. The fourth section describes our

research methodology, and the fifth section presents

our results. The final section discusses various

theoretical and managerial implications of utilizing

KCT to facilitate SD.

SD: DEFINITIONS, APPROACH, AND

TAXONOMY

Definitions and approaches of SD

The term “SD”was first defined by Leenders (1966)

as the creation of a new source of supply by the

purchaser and is synonymous with “reverse

marketing”(Leenders and Blenkhorn, 1988).

Because it represents a narrow perspective of SD

(Hahn et al., 1990; Watts and Hahn, 1993), this

view has not been adopted in most studies of SD

(e.g., Krause, 1997). Following this tradition, we

refer to SD as developing existing suppliers, rather

than creating new ones.

Supplier development is concerned with estab-

lishing and sustaining a firm’s competitive advan-

tage through its supply side. In order t o achieve

this ultimate goal, SD involves systematic and

bilateral efforts for improving the supplier’s

performance and /or capability ( Hahn et al., 1990;

Sako, 2004). Therefore, performance improvement

and capability development are perceived as two

intermediate goals and underlie the conceptual

approaches to SD advanced in the literature. Table 1

lists sample definitions for the capability, perfor-

mance, and integrated capability–performance

approaches to SD.

Supplier Development: A KM Perspective 251

Copyright © 2015 John Wiley & Sons, Ltd. Know. Process Mgmt. 22, 250–269 (2015)

DOI: 10.1002/kpm