Building Knowledge

International Journal of Operations & Production Management
Building knowledge integration in buyer-supplier relationships: The critical role of

strategic supply management and trust
Elena Revilla Desire Knoppen
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Elena Revilla Desire Knoppen , (2015)," Building knowledge integration in buyer-supplier
relationships The critical role of strategic supply management and trust ", International Journal of
Operations & Production Management, Vol. 35 Iss 10 pp. 1408 - 1436
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IJOPM
35,10
Building knowledge integration
in buyer-supplier relationships
The critical role of strategic supply
1408 management and trust
Received 23 January 2014 Elena Revilla
Revised 29 July 2014 Department of Operations Management,
14 October 2014
10 December 2014 IE Business School, Madrid, Spain, and
Accepted 20 December 2014
Desire Knoppen
Department of Operations Management and Information Systems,

EADA Business School, Barcelona, Spain
Abstract
Purpose There are two major objectives in the research. First, the authors investigate the impact of
knowledge integration in terms of joint decision-making and joint sense-making, on relational
performance, including operational efficiency and innovation. Second, the authors examine the key
antecedents that might facilitate knowledge integration: strategic supply management and trust. The
paper aims to discuss these issues.
Design/methodology/approach This paper expands and tests theory drawing upon survey data
from 133 buyer-supplier relationships (BSRs). The authors employed a two-step process of analysis to
evaluate first the measurement model and then the structural model. The measurement model test built
upon confirmatory factor analysis, while the structural model quality test built upon path analysis.
Findings The results suggest that both integrative mechanisms, joint decision making and joint
sense making, affect performance although in different ways. This study also finds that while trust has
multiple significant influences and consequently must be viewed as an organizing principle, strategic
supply management is required to jointly understand the dynamic and complex context but not to
jointly make ongoing decisions.
Research limitations/implications Three limitations: first, this study was cross-sectional rather
than longitudinal. Second, in line with accepted practice, the authors surveyed only one side of the
relationship. The suppliers viewpoint is thus not fully taken into account. Third, another potential
limitation of the study is that the sample stems from just one country and its size does not distinguish
subgroups in the analysis of the path model.
Practical implications Managers should be advised that: first, a trusting partnership built on
knowledge integration is a hard order, especially with a new, unknown supplier in a low-cost country,
where intellectual property protection is less obvious; second, strategic supply management may not
improve cost or operational performance, but in its absence, it is unlikely that a supplier has insight
into the exact needs of its buyer and thus, may not add considerable value to their customers; third,
building a dynamic knowledge integration capability (valuable, rare, and difficult to imitate) takes
time, as does creating reliable learning mechanisms. Joint teams, visit partners workplace, early
involve suppliers in developing new products or selection of supplier with high-learning capabilities
may help to create a knowledge integration capability.
Social implications The authors suggest that companies should move from an arm-length
relationship and turn their supplier relationships into a tool for innovating faster while cutting cost.
In order to do this, joint sense-making and joint decision should be seen as institutionalized inter-firm
routines rather than ad hoc activities. Thus, the authors recommend managers to proactively build
International Journal of Operations
certain knowledge-based capabilities that hinges heavily upon a strategic stance toward supply
& Production Management management and trustful relationships with selected suppliers.
Vol. 35 No. 10, 2015
pp. 1408-1436
Emerald Group Publishing Limited
0144-3577
Research Reported in this paper was partially funded by the Spanish Ministry of Economy and
DOI 10.1108/IJOPM-01-2014-0030 Competitiveness. Grant No. ECO2011-30364-C02-01.
Originality/value The major intent of this research is to expand understanding of knowledge Role of strategic
integration by building a more testable, complex model around its creation. While previous research
relied on a configuration approach to explore the relationship between knowledge integration and
supply
performance, the authors evaluate causal relationships at the level of the formative dimensions rather management
than higher order knowledge integration, as this has proven to be a superior analytical method. and trust
Second, although supply chain scholars have expressed great interest in trust, an in-depth examination
of prior studies in knowledge integration indicate that trust has been analyzed alone. In contrast, the
study empirically examines the simultaneous effect of trust and strategic supply management in BSRs. 1409
Keywords Survey, Empirical, Knowledge management, Supply chain management,
Resource based view (RBV)
Paper type Research paper
1. Introduction
Recent studies argue that superior value creation extends beyond the boundaries of one
organization and involves collaborative practices with suppliers (Stevens, 1989; Paulraj
et al., 2008; Mishra and Shah, 2009; Paulraj, 2011; Priem and Swink, 2012). Ever-changing
rules of market competition have led to an emphasis on knowledge-based capabilities as
a means to create value (Grant, 1996). Consequently, companies invite selected suppliers
to go beyond the exchange of materials and transactional information and engage
in collaborative relationships that support knowledge integration in a context-rich
understanding about products, processes, and markets (Huang et al., 2008). For example,
knowledge flows may create value by making buyer-supplier relationships (BSRs) more
transparent and giving suppliers a better look at customer needs and value propositions
(Myers and Cheung, 2008). Likewise, suppliers are excellent sources of new ideas about
products and processes (Walter et al., 2001). Their expertise and comprehensive
knowledge regarding parts and components of customer products enables them to
anticipate, early in the design process, potential problems such as contradictory
specifications or unrealistic designs (Mishra and Shah, 2009).
Although knowledge integration has been proven to have a significant impact on
performance in the supply chain, the lack of complex theoretical models that explain
how to deploy knowledge-based capabilities to foster innovation and build and maintain
high performance is notable (Priem and Swink, 2012). Additionally, there is relatively
little rigorous empirical research identifying the managerial actions that promote this
collaborative capability (Mishra and Shah, 2009). It is therefore especially important for
buyers and suppliers to develop a systematic approach to knowledge integration that
allows them to continuously improve performance; neither ad hoc problem solving nor
unsystematic information sharing is sufficient to provide the performance required in
this situation (Gardner et al., 2012).
In this paper, we address the gap in the literature from a buyers perspective by
examining how two key antecedents, strategic supply management and trust, might
facilitate knowledge integration in BSRs. Research proposing a capabilities perspective
of knowledge integration defines two distinct mechanisms or learning processes behind
knowledge integration in BSRs that positively affect relationship performance of
the partners: joint sense-making and joint decision-making (Revilla and Villena, 2012).
The rst focusses on the interpretation and sense-making of shared information about
critical, strategic issues in BSRs. The latter emphasizes joint decision-making related
to inter-rm activities. Building on this research, our main objective is to study how
strategic supply management and trust shape knowledge integration through joint
sense-making and joint decision-making, which is necessary to reach and sustain high
levels of performance.
IJOPM Strategic supply management is an important antecedent of knowledge integration.
35,10 Companies that view their supply base as an important source of new knowledge
actively seek to leverage their supply chain function (Chen et al., 2004; Yeung, 2008).
Supply management increasingly assumes the responsibility to channel knowledge flows
inside out and outside in (Hult et al., 2000; Zhang et al., 2011), which is a relatively new
and proactive role compared to the traditionally more clerical and passive role (Cousins
1410 et al., 2006). In that sense, companies that emphasize the strategic role of supply
management are better prepared to work with their suppliers to solve significant
problems and achieve performance enhancements (Barney, 2012; Mishra et al., 2013).
Previous research has found that a lack of trust refrains companies from cooperating
with their supply chain partners (Fawcett and Magnan, 2002). Trust may diminish when
buyers and suppliers have different interests and engage in behaviors that are explicitly
or implicitly prohibited, such as taking advantage of specific, critical knowledge
gained within the BSR (Choi and Krause, 2006). Knowledge integration entails high
appropriability hazards, i.e., the risk of opportunism based on inadequate uses or
modifications of the knowledge transferred, not intended in the contract, and injurious
to the transferor (Oxley, 1997). Although trust is recognized as carrying potential risk
(Villena et al., 2012), evidence shows that, on average, trust between buyers and suppliers
plays a crucial role in learning and in developing the knowledge integration capability
(Dodgson, 1993; Handfield and Bechtel, 2002; Selnes and Sallis, 2003; Ireland and Webb,
2007; Zhao et al., 2008; Cai et al., 2013). In fact, trust is considered the single most
important variable inuencing inter-organizational behavior (Kiessling et al., 2004). It has
even been referred to as a general organizing principle (McEvily et al., 2003) with
the potential to influence performance through knowledge integration directly (Dyer and
Singh, 1998; Zaheer et al., 1998; Dyer and Chu, 2003) and indirectly (Dodgson, 1993;
Selnes and Sallis, 2003).
Our theoretical model allows us to answer two important questions. The first relates
to why BSRs differ in their capability to convert supplier knowledge into performance.
The second question examines to what extent strategic supply management and trust
foster development of the knowledge integration capability in BSRs. In answering these
questions this research contributes to the theory in several ways. First, knowledge
integrations outcomes have been largely explored in supply chain research, but its
antecedents have not (Priem and Swink, 2012). The major intent of this research is to
expand understanding of knowledge integration by building a more testable, complex
model around its creation. While Revilla and Villena (2012) relied on a configuration
approach to explore the relationship between knowledge integration and performance,
we use a reductionist method, treating an organization as decomposable into independent
elements (Sinha et al., 2005). In so doing, we simultaneously evaluate causal relationships
of both knowledge integration mechanisms with antecedent as well as outcome variables.
In other words, we evaluate causal relationships at the level of the formative dimensions
rather than higher order knowledge integration, as this has proven to be a superior
analytical method (Edwards and Bagozzi, 2000; Williams et al., 2009).
Second, although several studies have focussed on linking strategic supply
management to supply integration (Murphy and Heberling, 1996; Carr and Smeltzer,
1999; Pearson, 1999) or organizational performance ( Johnston et al., 2004; McCarter and
Northcraft, 2007; Yeung, 2008), analysis of the relationship between strategic supply
management and knowledge integration is scarce. Moreover, there is little empirical
evidence on the current situation of supply management within organizations (Cousins
et al., 2006). Therefore, we expect to extend this stream of research and empirically
establish the impact of strategic supply management on the knowledge integration Role of strategic
capability of BSRs. supply
Finally, although supply chain scholars have expressed great interest in trust,
an in-depth examination of prior studies in knowledge integration indicates that trust has
management
been analyzed alone (Dodgson, 1993; Zaheer et al., 1998; Selnes and Sallis, 2003; and trust
MacDuffie and Helper, 2006; Ireland and Webb, 2007). In contrast, our study empirically
examines the simultaneous effect of trust and strategic supply management in BSRs. 1411
The rest of this paper is organized as follows: in Section 2, we present the theoretical
basis of the study and develop the hypotheses. In Section 3, we explain how survey
data from 133 BSRs was collected and analyzed with structural equation modeling
(SEM). In Section 4 we present the results, which are then discussed in Section 5.
Managerial implications, limitations, and future research directions are also covered in
that final section.
2. Theory and hypotheses

Our investigation focusses on the knowledge resource, the most critical competitive
resource that a firm can possess (Grant, 1996). Using a knowledge-based view (KBV)
and capability-building perspective, and using the BSR as our unit analysis, we define
knowledge integration capability as a dynamic capability that represents the rms
ability to integrate, build, and recongure internal and external competences to address
rapidly changing environments (Teece et al., 1997, p. 516). Certainly, integrating
knowledge is a challenge in coordination and communication which is not a static
activity. As stated by Iansiti and Clark (1994), Dynamic capability links capacity for
action to the evolution of the associated knowledge base through the effective
execution of problem-solving processes (p. 563).
Resources and capabilities have been explored together in a limited number
of studies (e.g. Brandon-Jones et al., 2014). Organizational capabilities are a higher order
construct required to exploit existing resources. Knowledge may not provide value
on its own but instead need to be processed or utilized in bundles in order to drive
performance (Newbert, 2007). In our specific context, bundling refers to the integration
of knowledge to allow capability development (Sirmon et al., 2008). This bundling
process is a potential source of advantage for several reasons: first, it is socially
complex since it is built upon both continua of cooperative relationship forms and
sociological strength-of-ties; second, it resides in processes rather than resources
themselves, making observation difcult until processes are put into use; third, it is
tailored to a BSRs specific needs, impeding its transfer to other relationships; and
fourth, given the cumulative nature of knowledge, it is guided by path-dependent
learning processes and therefore takes time to develop.
Consistent with the extant literature, we recognize that two mechanisms are
necessary for developing knowledge integration within BSRs: joint sense-making and
joint decision-making (Revilla and Villena, 2012). In joint sense-making, members must
scan, notice, and develop meaning for environmental changes. Buyers and suppliers
must share information that is relevant, objective, and clear so that they can see the
validity of their own contributions, allowing them to discuss and evaluate ideas
(Bunderson and Sutcliffe, 2002). Once knowledge is assembled, it must be converted
into a valuable capability, by using and implementing it through joint problem solving.
During this progression, the parties experiment with new processes, tasks, and
technological characteristics and convert the combined knowledge into action that
eventually propels superior performance. While the first integrative process exposes
IJOPM the firm to the knowledge assets of its partners, recognizing and merging their value
35,10 with the firms internal knowledge, the second process applies the combined knowledge
toward problem solving and thus the creation of new knowledge. Both mechanisms
occur simultaneously by BSRs that seek to integrate knowledge, and thus jointly cause
a higher order construct, knowledge integration.
1412 2.1 Relationship performance

The primary purpose of the synergistic efforts of inter-firm knowledge integration is to
enhance performance. In this study, we define relationship performance as the benefits
resulting from collaborative activities between buyers and suppliers (teamwork
between both parties) (Villena et al., 2012). Previous research has documented that
through knowledge integration, both parties in BSRs may develop common plans and
forecasts in order to synchronize production with shipment and delivery schedules
(Greis and Kasarda, 1997; Cachon and Fisher, 2000). The efficiency dimension of
performance is well documented in the literature. Empirical literature shows how
learning routines facilitate operational efciency (Okhuysen and Eisenhardt, 2002), cost
cutting (Malhotra et al., 2005), or the effective implementation of time-based
manufacturing practices (Tu et al., 2006). These studies found that the initial focus of
BSRs has been improvement in day-to-day inter-firm operational processes. However,
value creation is not limited to traditional operational improvements but also includes
strategic benets, such as innovation through the development of new products and
markets (Im and Rai, 2008; Sanders, 2008). Companies having access to knowledge
and capabilities not found in their domain deal more effectively with technological and
market uncertainty (Modi and Mabert, 2007). Recent literature (Hung et al., 2008; Feller
et al., 2009) has suggested that sharing knowledge signicantly improves the processes
and speed to introduce new products. Indeed, innovation requires integration of
dissimilar knowledge (Cohen and Levinthal, 1990). We include both types of benefits
that buyers and suppliers aim to achieve within their BSRs.
2.2 Knowledge integration and relationship performance

Research on strategic sense-making has established that information-processing activities
shape strategic decisions and resultant performance (Meyer, 1982; Thomas et al., 1993).
A buyer and supplier committed to joint sense-making benefit from a common
understanding of critical, strategic issues for the relationship. As a result, the buyer and
supplier develop, explore, and interpret specialized knowledge that is strategic and
relevant to the relationship (Fugate et al., 2009). Organizations employ several learning
arenas to make sense of information, such as board meetings, management meetings,
or cross-functional teams (Selnes and Sallis, 2003; Cheung et al., 2011). Customer visits and
trade shows also are used to build a more general understanding between buyers
and suppliers (McQuarrie, 1993). Some companies create specific mechanisms for
communication; consider Nike, which routinely assigns employees to liaise with its
suppliers (Parmigiani and Mitchell, 2010). Toyota, for example, shares work experience
with suppliers, including attempts to solve problems together through trial and error.
These interactions between participants help to develop a shared vocabulary and shape
cognitive structures and frameworks that play key roles in integrating and reconciling
their individual understandings (Weick, 1979; Grant, 1996; Spencer and Grant, 1996).
Joint sense-making relies on a sensing capability reflected in practices that let
companies learn, sense, filter, and calibrate in order to detect new opportunities
(Teece, 2007). In the context of BSRs, this sensing capability requires a more accurate and
complete understanding of what the partner needs to move forward on a task, which, in Role of strategic
turn, allows recognition of the need for new joint developments. Specifically, sensing supply
capability requires information from the environment to determine when and how to react
to change; when that information is shared, the BSR experiences joint sense-making,
management
increasing awareness of the needs within the BSR and harnessing collective actions and trust
(Hult et al., 2004). Thus, joint sense-making increases the likelihood that knowledge
integration will be effective since it aids buyers and suppliers to understand future 1413
problems; actively detect, analyze, and draw inferences from the failures and successes of
their supply chain policies; create consistency among various decisions, generating ideas
for satisfying customer needs; and articulate strategies and goals for each partner.
Although addressing changing environments is in the forefront of this knowledge
integration mechanism, monitoring the implementation of strategic and operative plans
may be another important goal of joint sense-making, but to a lesser extent (Revilla and
Villena, 2012). Honda, for instance, not only shares with its suppliers the kinds of
products Honda intends to introduce and what types of markets it plans to cultivate in
the coming years (Liker and Choi, 2004) but also discusses improvements that may be
necessary in the quality, cost, and delivery of supplied products (Liker and Choi, 2004).
As a result, Honda develops with its key suppliers unified knowledge-based responses
to critical issues that ensure long- and short-term competitiveness. Thus, joint
sense-making is expected to reinforce innovation while monitoring how effectively the
strategic plans discussed at the top level are deployed at lower levels. Our first
hypothesis arises from this context:
H1. Joint sense-making between buyers and suppliers is positively associated with
(a) operational efficiency and (b) innovation.
As the environment changes in a BSR (e.g. the strategies and objectives of customers
and suppliers evolve), an organization should respond by allowing modifications to its
inter-firm operations. Joint decision-making refers to the application of collaboratively
acquired knowledge to jointly make decisions related to interlinked operative
processes, such as demand development, marketing programs, shared production
plans, or operative issues to improve their interdependent processes (Heide and
John, 1990; Malhotra et al., 2005). Thus, joint decision-making complements joint
sense-making to form an important constituent of knowledge integration.
Joint decision-making provides buyers and suppliers with hands-on experiences
of inter-firm operative processes so they can understand what needs to be done to ensure
a smooth flow (Revilla and Villena, 2012). As suggested by Li et al. (2012), communication
and organizational routines are necessary to coordinate product development, sourcing,
logistics, and production planning. Buyers and suppliers work together to troubleshoot
problems, negotiate mutual adaptations for solving difficulties, and achieve efficient
inter-firm operations (Frohlich and Westbrook, 2001; Sahin and Robinson, 2002; Malhotra
et al., 2005; Modi and Mabert, 2007). As a result, work gets done quickly and efficiently in
areas such as cost reduction, productivity improvement, and timely conflict resolution
(Flynn and Flynn, 1999; Frohlich and Westbrook, 2001; Sahin and Robinson, 2002). For
instance, it is broadly recognized that joint quality-improvement programs between
buyers and suppliers contribute to performance (Prajogo and Olhager, 2012). Attaran
and Attaran (2007) show that suppliers can establish more responsive production
schedules if they plan collaboratively with their buyers and utilize their partners
knowledge on demand. Similarly, Sanders (2008) suggests that operational collaboration
has a direct effect on operational benefits such as cost reduction.
IJOPM Although most studies have focussed on operational improvement, joint decision-
35,10 making in BSRs also can increase innovation. For instance, Toyota involves suppliers at
early stages of product development and expects suppliers to help improving product
design. As part of its product development program, Toyota also provides physical
spaces that facilitate the collaboration with suppliers (Aoki and Lennerfors, 2013).
Raes et al. (2011) established that operative collaboration within BSRs can provide
1414 valuable upward feedback to senior managers to adjust strategic plans designed at the
top. Workers at the more operational and technical levels also can deploy innovative
initiatives and eventually provide significant upward feedback about how to refine
and/or adjust them. As a result, joint decision-making provides meaningful input to top
managers coping with long-term changes. We expect that greater joint decision-making
between buyer and supplier will aid both operational efficiency and innovation, as stated
in our next hypothesis:
H2. Joint decision-making between buyers and suppliers is positively associated

with (a) operational efficiency and (b) innovation.
2.3 Key antecedents of knowledge integration

Despite the importance of BSRs to business performance, developing knowledge
integration between buyers and suppliers is difficult. Managing boundaries with
organizations that supply critical resources or are responsible for the disposal of their
outputs should be a strategic initiative aimed at sustaining beneficial BSRs (Yeung,
2008). We concur with Chen et al. (2004) that strategic supply management defined as
a long-term planned effort to create a capable supply base and leverage the benefit of
supply management, in line with Yeung (2008) is crucial for organizations who
consider their supply base as an important source of new knowledge. Accordingly,
we consider strategic supply management as a key initiative and a critical antecedent
of knowledge integration.
The purchasing and supply management function has evolved from a mere
transactional and passive focus to a strategic one (Ellram and Carr, 1994; Narasimham
and Das, 2001; Chen et al., 2004) and has recently been recognized as a vital functional
element of a firms strategic-planning process (Ellram and Liu, 2002; Chen et al., 2004).
When supply management is designed around the needs of the total organization,
it has the ability to support the corporate strategy (Freeman and Cavinato, 1990).
Organizations that consider supply to be strategically important will be better able to
support the firms effort to achieve its long-term goals (Carr and Pearson, 1999).
Thus, strategic supply management is aware of the rms strategic plans and is also in
a position to be proactive as opposed to reactive (Freeman and Cavinato, 1990;
Gelderman and van Weele, 2005). Examples of the strategic importance of
supply management are provided by Wal-Mart, Zara, Toyota, and Dell companies
that use their supply chains as competitive weapons to gain advantages over peers
(Hult et al., 2006).
Many scholars have stressed the importance of strategic supply management in the
effective integration of purchasing and supply activities (Ellram and Carr, 1994; Carr and
Pearson, 1999). Firms that conduct long-term planning and adopt a strategic orientation
in supply management will be more aware of the firms strategic plans and better able to
provide input of those plans to suppliers. Carr and Pearson (1999) established that
strategic supply management offers more opportunities for coordination and long-term
relationships with key suppliers. In a procurement model, Cox (1996) has emphasized the
relationship between strategic supply management and communication between Role of strategic
supply chain partners. Previous studies have found that rms adopting strategic supply
supply management are more likely to achieve information sharing (Kraljic, 1983; Carr
and Smeltzer, 1999) and implement a continuous feedback system between buyer
management
and supplier (Talluri and Narasimhan, 2004). When the parties communicate openly and and trust
frequently, they develop a common understanding of complex competitive issues
through greater discovery and disclosure of information (Chen et al., 2004). 1415
Strategic supply management also could serve as a platform to facilitate the
problem-solving process between an enterprise and its suppliers (Cagliano et al., 2003).
A conceptual re-description of supply management as the integration of internal and
external exchange functions suggests that it helps buyer and supplier plan, evaluate,
and control actions related to inter-firm operative processes (Paulraj et al., 2006).
For example, previous studies have found that rms that confer strategic importance to
supply management show an earlier supplier involvement in new product development

(Trent and Monczka, 1994; Pearson, 1999; Car and Pearson, 2002).
Thus, we expect that strategic supply management is an antecedent of joint
sense-making and joint decision-making between buyer and supplier and, accordingly,
offer the following hypothesis:
H3. Strategic supply management is positively associated with (a) joint sense-
making and (b) joint decision-making.
Through communication of strategic information, supply management enables a
supplier to determine how it can inuence the buying rms future purchase decisions.
For instance, rms that confer strategic importance to the supply management function
can communicate to a supplier what innovations and new technologies the buying rm
needs. In that way, supply management helps to establish shared norms and values
between buyer and supplier, increasing trust (Kiessling et al., 2004; Ireland and Webb,
2007; Paulraj et al., 2008), which in turn strengthens the overall relationship between
buyer and supplier (Perrone et al., 2003; Zhang et al., 2011). Thus, strategic supply
management and trust play a simultaneous and pivotal role for effective integration of
buyer and supplier in building a successful BSR (Dodgson, 1993; Zaheer et al., 1998;
Selnes and Sallis, 2003; MacDuffie and Helper, 2006; Ireland and Webb, 2007).
Most theoretical definitions in BSRs characterize trust as expectations of desired
actions performed by other parties in response to uncertainty (Barney and Hansen,
1994; Chiles and McMackin, 1996; Doney and Cannon, 1997; Das and Teng, 1998).
While some scholars dene trust as one partys condence in its partners reliability
and integrity (Morgan and Hunt, 1994), others emphasize the condence that another
party, not under ones control, will refrain from exploiting vulnerabilities (Nielsen
and Nielsen, 2009). Such confidence results from the buyers belief that the supplier is
competent, responsible, and fair, and therefore the buyer assumes a certain level of risk
(Villena et al., 2012).
The major role of trust in BSRs is to serve as a governance mechanism that mitigates
opportunism (Gambetta, 1988; Doney and Cannon, 1997) and reduces conflicts and
transaction costs (Zaheer et al., 1998). Trust is also a facilitator of effective cooperative
behavior in BSRs (Dwyer et al., 1987; Zaheer et al., 1998; MacDuffie and Helper, 2006)
and can help committed parties to exploit synergies within the relationship that result in
superior relationship performance (Gulati, 1995). Accordingly, trust has been viewed as
an essential requirement for achieving performance gains in BSRs (Dyer and Singh, 1998;
Zaheer et al., 1998; Dyer and Chu, 2003).
IJOPM Following this logic, many researchers claim that trust reduces a firms relational
35,10 risks because it helps to protect transaction-specific investments that entail sunk cost if
the relationship is terminated (Heide and John, 1990; Grover and Malhotra, 2003). When
trust is built through repeated transactions, information, and material flow across
the supply chain while buyer and supplier tend to be less concerned about the
opportunistic behavior of others (Blau, 1964; Jarillo, 1988) engaging in more risky
1416 interactions. As Perrone et al. (2003) suggest, trust is most relevant when risk and
uncertainties are involved in BSRs. Suppliers who do not trust their buyers are unlikely
to make long-term investments to support future business with them (Doney and
Cannon, 1997; Perrone et al., 2003). Therefore, we expect that building trust within a
BSR directly generates benefits on the cost side, in addition to fostering innovation.
Arguably, inter-firm trust invites parties to have a general sense of productivity
and creativity, timely conict resolution, and effective decision implementation and
communication. As a result, we propose the following hypothesis:

H4. Trust between buyers and suppliers is positively associated with (a) operational
efficiency and (b) innovation.
Trust also may have positive effects on knowledge integration (Heide and John, 1990;
Zaheer et al., 1998). Knowledge integration requires buyer and supplier to communicate
relevant ideas and comprehensive information, as well as to clarify problems and share
long-term goals. It involves cooperative actions in planning, forecasting, scheduling, and
operational problem solving. However, the information, know-how, and capabilities
shared at work can be valuable assets that could be used asymmetrically to gain
advantages for some team members (Eisenhardt, 1989). This suggests that only when
the parties believe that their vulnerabilities will not be exploited by the actions of the
other party are they willing to share information (Morgan and Hunt, 1994; Jap, 1999) and
participate in knowledge exchange and creation (Lee and Choi, 2003). By reducing the
fear of opportunism, trust increases partners confidence in the effectiveness of future
relational exchanges, motivating constructive dialogue around shared information and
facilitating joint learning activities to the benefit of both parties (Selnes and Sallis, 2003).
As a result, trust induces joint efforts that help buyer and supplier to align interests as
well as actions. The existence of trust allows us to assess whether team members will
act in the common interest and therefore not jeopardize the supply chain relationship.
With trust, companies will be more likely to share information and work together with
supply chain partners to coordinate their interlinked processes. Therefore, we expect that
trust facilitates knowledge integration, as shown in the following hypothesis:
H5. Trust between buyers and suppliers is positively associated with (a) joint sense-
making and (b) joint decision-making.
3. Research methodology
In this section, we describe the research model, the sample and data collection
procedure, the performed tests for the most common types of bias, the survey items,
and finally, the statistical methods employed in our analysis.
3.1 Research model

This paper expands and tests theory drawing upon survey research (Saris and Gallhofer,
2007) with an embedded design, which reduces the risk of spurious effects due to omitted
but relevant levels of analysis (Rothaermel and Hess, 2007). Figure 1 illustrates the
H4b
Role of strategic
Knowledge integration supply
Strategic
Supply
H3a Joint sense- H1b
Innovation
management
Management
H3b
making H1a
H2b
and trust
H5a
Joint
H2a Operational
1417
Trust decision-
H5b efficiency
making
Figure 1.
Research model
H4a
research model. The focal construct of knowledge integration as well as the outcome
variables and the trust antecedent operate at the level of the BSR. The critical antecedent
of strategic supply management, on the other hand, operates at the firm level.
The research model visualizes the hypothesized causal relationships but also includes
two correlations. The correlation between both outcome variables acknowledges that
firm performance is affected by many variables, not only those included in our research
model. Consequently, and in line with the literature on ambidexterity (Adler et al., 2009),
it is likely that both performance measures correlate (or, in terms of SEM, it is likely that
the disturbance terms of both performance measures correlate). The correlation between
both performance measures is in line with studies that model a general performance
construct through a broad range of reflective indicators. Selnes and Sallis (2003),
for example, operationalize relationship performance through indicators of operational
efficiency as well as innovation. The latter indicators are reflective; that is, they
correlate strongly. We also acknowledge that both independent variables may correlate
(or, in terms of SEM, the disturbance terms of both independent measures may correlate).
In other words, firms adopting a higher strategic orientation in supply management will
have a higher level of trust, and vice versa (Paulraj et al., 2008).
3.2 Sample and data collection

Consistent with previous studies (Modi and Mabert, 2007; Sanders, 2008; Villena
et al., 2009), we rely on key informant data from the buyer because it simplifies
the phenomenon under investigation and makes our study operationally feasible
(Tangpong et al., 2008). In addition, previous work has indicated that buyers
and suppliers overall have consistent perceptions regarding their exchange
relationships (Anderson and Narus, 1990; Zaheer et al., 1998).
Literature review formed the basis for a pilot survey, which was next validated with
three scholars, seven supply chain managers, and two senior consultants in supply
chain management. Their feedback permitted us to refine the survey items and develop
the final questionnaire. We also wrote a cover letter explaining the purpose of the
study, the criteria for selecting a supplier when completing the survey (i.e. a major
supplier whose operations were critical for the buying firm), and the assurance of
anonymity for respondents.
The questionnaire and cover letter were sent to Spanish manufacturing firms and
subsidiaries of multinational companies operating in Spain. A three-member panel of
experts with extensive experience in supply chain management and cognizant of the
IJOPM Spanish market selected 932 companies from a list of 5,000 large companies published
35,10 by the Spanish business periodical Actualidad Econmica. The selection criteria
required that supply management was an important part of their operations and firms
represented diverse industries. Most of these rms fell into the food and beverage,
chemical and pharmaceutical, and automotive sectors.
We used respondents in managerial positions because their understanding would
1418 reflect a larger portion of the firm and its relationship with the supplier. The most
common job titles of the respondents were corporate director of purchasing, supply chain
director, and supply chain manager. Data collection were done in the second semester of
2008, yielding 133 usable responses, with a response rate of 14.3 percent. Table I shows
the sample profile, which reflects the diversity of the participating firms, based on the
number of employees, industry sectors, and annual sales.
3.3 Tests for non-response bias and common method variance

We examined non-response bias by testing the differences between the answers of
respondents and non-respondents (Lambert and Harrington, 1990). To do this,
we collected secondary data of the responding (n 133) and non-responding companies
(n 799) reported in the 2007 Sistemas de Anlisis de Balances Ibericos database.
We then calculated t-tests between the respondent set and non-respondent set for firm
size ( p 0.192), firm age ( p 0.292), and return on assets ( p 0.092), which showed no
significant differences. Furthermore, a 2 test for industry sector ( 2 8.09, p W 0.05)
between responding and non-responding firms was found to be insignificant.
These results suggest that non-response bias is not present in the data and that the
participating firms represented the population from which they were drawn.
Frequency %
Number of employees
0-50 13 9.77
51-100 13 9.77
101-500 72 54.14
501-1,000 19 14.29
W1,000 16 12.03
Total 133 100
Industry sector
Food and beverage 31 23.31
Chemical and pharmaceutical 30 22.56
Automotive 27 20.30
Textile 15 11.28
Beauty and hygiene 6 4.51
Other 24 18.05
Total 133 100
Annual sales (million euros)
0-20 5 3.76
20-50 33 24.81
50-99 49 36.84
100-500 39 29.32
Table I. W500 7 5.26
Profile of the sample Total 133 100
Following the guidelines of Podsakoff et al. (2003), we also evaluated the extent to Role of strategic
which our findings were influenced by common method variance. First, we conducted supply
Harmans single-factor test. If common method variance were a serious problem in the
study, a single factor could be expected to emerge from a factor analysis, or one general
management
factor to account for most of the co-variance in the independent and criterion variables. and trust
Analysis of Harmans single factor procedure revealed four distinct factors with
eigenvalues above 1.0, together explaining more than 77.43 percent of the variance. 1419
The first factor accounted for only 34.61 percent of the variance. To reinforce the
previous tests conclusion, we conducted a test estimating two models: first, a multifactor
trait measurement model with the proposed latent constructs; and second, a trait
measurement model with an additional method factor that included all measurement
items (Podsakoff et al., 2003). The results indicated that the method factor accounted
for only 13 percent of the total variance, which is significantly less than the amount of
method variance (25 percent) observed by Williams et al. (1989). Results of both tests thus
indicated that common method bias would not be a concern for our analysis.
3.4 Survey items

The items used to measure this studys variables were adapted from validated scales
and fine-tuned based on feedback obtained from the pilot test. Respondents had
to formulate their answer on a five-point Likert scale ranging from 1 (strongly disagree)
to 5 (strongly agree). Table II displays the items.
Knowledge integration has two formative dimensions. In line with good practices of
SEM, we do not treat knowledge integration as an index but rather treat causal
relationships at the level of the constituting dimensions, since this has proven to be
superior (Edwards and Bagozzi, 2000; Williams et al., 2009). The studies of Malhotra
et al. (2005) and Heide and John (1990) constitute the basis for the items of joint
decision-making. This variable is mainly concerned with making decisions in a joint
fashion between the buyer and a selected supplier when analyzing response to marketing
and sales promotions, planning market creation, solving operative problems, and
analyzing demand development. The work of Hult et al. (2004) and Malhotra et al. (2005)
constitutes the basis for the items of joint sense-making. The respondents were asked in
that regard to indicate the extent to which their firms share a good understanding
with selected suppliers in relation to changes in customers needs and preferences,
experiences of success and failure in similar relationships, and changes in important
technological solutions.
The variables used to measure performance were operational efficiency and
innovation. For both variables we used a direct question, given that a well-performing
direct question is preferable to a multi-item scale with non-convergent items (Saris and
Gallhofer, 2007). In other words, it is common for later studies that build upon the
relatively novel and superior confirmatory factor analysis (CFA) (Shah and Goldstein,
2006) to conclude that earlier developed scales, which were validated with other methods,
must be narrowed down in order to converge and demonstrate predictive power (Saris
et al., 2013). Operational efficiency more precisely focusses on costs one of the most
distinct dimensions of operational capabilities (Ward et al., 1998; Safizadeh et al., 2000;
Boyer and Lewis, 2002) and the survey included one direct question on this issue,
inspired by other studies that have captured this variable (Scannell et al., 2000; Frohlich
and Westbrook, 2001; Malhotra et al., 2005; Modi and Mabert, 2007; Villena et al., 2009).
Innovation performance, on the other hand, focusses on novel strategies to compete in the
market, and, consequently, the survey included one direct question on this issue, adapted
IJOPM Construct Items Factor loading AVE CR
35,10
Joint sense- Please indicate the extent to which your firm and your collaborative supplier share a
making good understanding about
Experiences of success and failure in similar 67% 86%
relations 0.77
Changes of customers needs and preferences 1.00
1420 Changes in technology 0.65
Joint decision- Please indicate the extent to which your firm and your
making collaborative supplier make joint decisions when 84% 91%
Analyzing responses to marketing and
sales promotions (item excluded because of
cross-loadings)
Planning for new market creation 0.98
Planning for demand development 0.85

Strategic Please indicate the extent to which your company
supply Considers the supply management function in 56% 83%
management the strategic planning of the company 0.60
Thinks that the supply management function
has good knowledge of the strategies of the
company 0.80
Measures success of the supply management
function in terms of its contribution to the
success of the company 0.78
Emphasizes the strategic role of the supply
management dept. is concentrated on elements
of the corporate strategy 0.78
Trust With regards to the confidence levels that your firm maintains with your collaborative
supplier
We trust that our collaborative supplier works 61% 82%
with integrity 0.68
We trust that our collaborative supplier
complies with what we have agreed upon 0.70
We trust that our collaborative supplier does the
correct thing 0.94
Operational As a result of joint activities with your 71% 72% (from
efficiency collaborative supplier, supply orders compared SQP)
to the average in the sector have improved in
lower total costs 0.84
Table II. Innovation Our relation with our collaborative supplier has 75% 72% (from
Measurement items helped us to develop new strategies to compete SQP)
and validation in the market 0.87
from Koufteros et al. (2007) and Sanders (2008). Moreover, the measures for performance
are perceptual, because the study focusses on that part of performance impacted by the
collaborative relationship. Perceptual measures are broadly used in empirical studies of
operations management, besides the more objective measures from secondary data
sources, because they allow inquiry into less understood, relatively unstructured and
boundary spanning topics (Roth et al., 2007).
Strategic supply management was operationalized in line with Paulraj et al. (2006),
who built upon prior studies to distill three key expressions of strategic supply
management: first, strategic focus (Pearson et al., 1996; Carr and Smeltzer, 1999; Cavinato,
1999); second, strategic involvement (Cavinato, 1999; Ferguson et al., 1996; Reck and
Long, 1988; Rozemeijer et al., 2003); and third, status and visibility of the purchasing Role of strategic
professionals (McGrath et al., 1992; Carr and Smeltzer, 1997; McIvor et al., 1997). Due to supply
space restrictions, we selected four items from the original list of 11 items used by Paulraj
et al. (2006) to be included in our survey. This was appropriate, given the reflective nature
management
of the scale (i.e. items strongly correlate, and by omitting items we do not shift the and trust
conceptual coverage of the scale (Saris et al., 2013)). Finally, the trust antecedent was
measured by a three-item scale previously validated by Morgan and Hunt (1994), Zaheer 1421
and Venkatraman (1994), Siguaw et al. (1998), and Griffith et al. (2006). The items
measured the level of confidence that the buying firm had in its suppliers integrity,
reliability, and honesty.
3.5 Statistical methods

We employed a two-step process of analysis to evaluate first the measurement model
and then the structural model (Anderson and Gerbing, 1988; Saris and Gallhofer,
2007). The measurement model test built upon CFA, while the structural model
quality test built upon path analysis. We performed both tests with Lisrel
8.72 ( Jreskog, 1969). Common practice for both kinds of tests is to base the accept/
reject decision on a range of absolute and incremental test statistics (e.g. AGFI, GFI,
SRMR, NFI, CFI, RMSEA) (Hu and Bentler, 1998), all of which have the shortcoming
of being highly dependent upon the power of the test (Saris et al., 2009). In other
words, the standard test and fit measures can only detect misspecifications for which
the test is sensitive (high power). As a consequence, rejection of the model may be
due to very small misspecifications for which the test is sensitive. Acceptance of the
model, on the other hand, does not necessarily mean that the model is correct but
may indicate a lack of power of the test. Therefore, we supplemented the standard
test statistics with an alternative procedure to iterate between evaluation of
misspecifications (i.e. relevant parameters that have been omitted from the model,
or modeled parameters that are not present in the data) and subsequent partial
modifications of the model in line with the procedure of Saris et al. (2009). The
analysis of misspecifications is supported by modification indexes and expected
parameter changes provided by Lisrel.
4. Results
We present the results in two steps, first for the measurement model, and then for the
path model as visualized in Figure 2.
0.41
(t = 3.92)
Knowledge integration
0.24 0.18
Strategic (t = 2.48) (t = 2.05)
Joint sense-
Supply Innovation
making
Management
0.31
(t = 3.27) 0.20
0.30 (t = 2.45)
(t = 3.08)
Joint
Trust decision-
Operational Figure 2.
0.22 efficiency
(t = 2.19)
making 0.28 Significant effects
(t = 2.66)
within the research
0.26 model
(t = 2.36)
IJOPM 4.1 Measurement model test
35,10 For identification purposes, the factor structures of the six constructs of our research
model were jointly analyzed, as correlated first-order constructs. The random
measurement error of the items that reflect operational efficiency and innovation
performance were estimated using the Survey Quality Prediction (SQP) program,
which is available for free at www.upf.edu/survey/ and explained in Saris and Gallhofer
1422 (2007, Chapter 13). SQP provides a specific estimate for random measurement errors,
based on a meta-analysis of MTMM-experiments. It has been referred to as
path-breaking by Alwin (2011), and has been awarded the 2014 Warren J. Mitofsky
Innovators Award by the American Association for Public Opinion Research. The random
errors were entered into the CFA model, which facilitated identification of the model.
The initial fit statistics were not satisfactory ( 2 180.20; df 78; 2/df 2.31;
RMSEA 0.096; RMR 0.082; NNFI 0.86; CFI 0.90). More importantly, an analysis
of misspecifications pointed to one item of joint decision-making (C18) that cross-loaded

on other constructs. Evaluation of the remainder of items that reflected the joint decision-
making scale showed that the theoretical coverage of the scale would not suffer if the
item was deleted. Consequently, the item was dropped from further analysis. After that,
no further misspecifications were detected. Acceptable fit statistics of the final
measurement model ( 2 119.98; df 64; 2/df 1.87; RMSEA 0.074; RMR 0.065;
NNFI 0.91; CFI 0.93) as well as significant loadings from all scale items on the
hypothesized constructs (see Table II) point to convergent validity (Anderson and
Gerbing, 1988). One item, joint sense-making, had a loading of 1.00, which could point
to correlated random measurement errors between items from different variables (Saris
et al., 2013). An analysis of these errors did not confirm this suspicion, though, and
therefore we confirm convergent validity.
Additionally, convergent validity was assessed through the average variance
extracted (AVE) (Fornell and Larcker, 1981). AVE ranged between 56 and 84 percent,
as Table II shows. To assess discriminant validity, we compared 2 for a constrained
CFA (where the interfactor correlation was set to 1, indicating they are the same
construct) with 2 for an unconstrained model (where the interfactor correlation was
free). All 2 differences were significant, providing support for discriminant validity
(Anderson and Gerbing, 1988).
After establishing validity, composite reliability was assessed in line with Fornell
and Larcker (1981). The reliability of the latent constructs measured by a single item
was estimated by the SQP-program, as previously outlined. Composite reliabilities
ranged between 72-91 percent, as Table II shows. The correlations between the first-order
constructs are shown in Table III.
Strategic supply Joint Joint Operational

management Trust sense-making decision-making Innovation efficiency
Strategic supply
management 1.00
Trust 0.07 1.00
Joint sense-making 0.27 0.31 1.00
Table III. Joint decision-making 0.16 0.20 0.14 1.00
Correlations between Innovation 0.13 0.54 0.34 0.43 1.00
first-order constructs Operational efficiency 0.09 0.32 0.07 0.26 0.45 1.00
4.2 Path model test Role of strategic
After establishing satisfactory quality of the measurement model, we tested the path supply
model as visualized in Figure 1. The test statistics were satisfactory ( 2 120.22;
df 67; 2/df 1.80; RMSEA 0.069; RMR 0.066; NNFI 0.92; CFI 0.94), but the
management
analysis of misspecifications showed that the parameter estimates regarding two and trust
hypotheses were non-significant: the impact of strategic supply management on joint
decision-making (0.14; t 1.42); and the impact of joint sense-making on operational 1423
efficiency (0.05; t 0.44). Moreover, the correlation between the antecedents of trust
and strategic supply management was not confirmed through the data (0.07; t 0.21).
All other parameter estimates were significant and are shown in Figure 2. When
excluding the non-significant parameters from the model, the fit indices became:
2 122.22; df 70; 2/df 1.82; RMSEA 0.069; RMR 0.073; NNFI 0.92;
CFI 0.94. Put another way, the fit of the model did not decrease when rejecting
hypotheses H1a and H3b.
5. Discussion
The dynamic capabilities perspective has developed the KBV by arguing that
the continuous bundling of knowledge creates a unique capability that permits the
generation of superior value (Sirmon et al., 2008). Joint sense-making and joint
decision-making may be seen as complementary processes or mechanisms that bundle
knowledge to convert knowledge integration in a dynamic capability. Accordingly, our
empirical study of 133 BSRs simultaneously assesses the role of each mechanism in the
research model and confirms the formative nature of dimensions of knowledge
integration. This result is consistent with extant literature that, although
operationalized in diverse ways, mostly agrees upon the second-order and formative
nature of knowledge-based capabilities (Selnes and Sallis, 2003; Cheung et al., 2011;
Gardner et al., 2012).
We found that most of our hypotheses were supported or partially supported,
broadly indicating that both strategic supply management and trust are related to
knowledge integration that, in turn, is linked to performance. Specifically, our
results indicate that joint sense-making only influences innovation, while joint
decision-making significantly affects both dimensions of performance. Thus, our
research reinforces the importance of companies spending time to develop reliable
processes for joint decision-making related to inter-rm operative activities, since it lets
them excel in innovation as well as in operational efficiency. Moreover, this finding
highlights the value of creating joint teams to solve operational problems on issues
such as product development, quality, or cost of value analysis. From an innovation
perspective, we concur with other researchers (Gulati et al., 2000; Im and Rai, 2008;
Sanders, 2008) that strategic information sharing allows firms to achieve strategic
objectives. It seems valuable for companies to develop reliable routines to make sense
of a joint dynamic and complex context and to share information about critical,
strategic issues. From an operational perspective, a deep contextual understanding is
not required to optimize costs.
When we compared these results with those from studies using a configurational
approach (Revilla and Villena, 2012), we found that each dimension of knowledge
integration is related to performance, which was overlooked by the configuration
approach. Thus, it is important for research on knowledge integration to apply both
a structural equations and a configuration approach to tease out all important
relationships.
IJOPM Empirical results also confirm a significant correlation among both performance
35,10 dimensions (0.20). BSR performance is impacted by variables that were not part of the
model, and those omitted variables lead innovation performance and operational
efficiency to reinforce each other in a positive way. This result is consistent with the
growing ambidexterity literature that highlights the value of harmonizing seemingly
contradictory requirements to pursue efficiency and innovation simultaneously (Adler
1424 et al., 2009). Thus, firms seeking to become ambidextrous and to reap the benefits
thereof need to develop a knowledge integration capability.
Along with these general effects of knowledge integration on performance,
we predicted that strategic supply management significantly influences the knowledge
integration capability, especially in joint sense-making (H3a). This outcome reinforces
the argument that companies that put their supply management function in a strategic
light are better equipped to establish deep relationships with suppliers and engage in
strategic discussions with selected suppliers (Chen et al., 2004; Paulraj et al., 2006;
Yeung, 2008). On the other hand, we rejected H3b on the impact of strategic supply
management in joint decision-making, suggesting that such a strategic focus of supply
management is not required for ongoing joint decision-making.
By examining the impact of trust on knowledge integration and performance, our
findings confirm that trust has multiple significant influences and consequently must
be viewed as an organizing principle (McEvily et al., 2003). This is in accordance with
previous studies that see the lack of trust as the most significant obstacle to supply
chain integration (Forslund and Jonsson, 2009). Although some literature warns about
the hidden cost of trust (Villena et al., 2012), our findings show a direct positive effect of
trust on both dimensions of knowledge integration and both performance indicators,
thus alleviating some of the risks and dilemmas associated with trust. In our work,
the relationship between trust and innovation is superior to the relationship between
trust and operational efficiency. Thus, there is a clear theoretical justification behind
the creation of an environment that supports trust when buyers and supplier engage
in more strategic goals for the relationship. Innovation, compared with operational
performance, involves longer term issues, additional risk taking, and higher
dependence on external forces and, hence, requires more trust within the
relationship. In the same way, our results demonstrate that trust impacts more
positively in joint sense-making than in joint decision-making. This recognition puts
significant pressure on firms to build trust with selected suppliers when they want to
move beyond traditional collaboration, with a focus on operational efficiency, to pursue
a more strategic collaboration involving the sharing of strategic issues or discussing
the firms long-term plans. Managers, aware of associated risks and costly investments
in the building of this type of superior relationships, should pay attention to carefully
establish the level of trust that guarantees the transparency and collaboration required
(Dyer and Chu, 2003; Gulati and Sytch, 2007).
Although the conceptual framework in our study does not define hypotheses related
to the connection between the two dimensions of knowledge integration, we observed a
disconnection between joint sense-making and joint decision-making (the correlation
between both is 0.14; see Table III), which is characteristic of traditional transaction-
oriented forms of exchange rather than of collaboration. Absorptive capacity theory
suggests in that regard that buyers and suppliers who iterate between the joint sensing
of the environment and the implementation of new ideas through joint decision-making
are capable of achieving higher joint performance (Azadegan, 2011; Senz et al., 2013).
This would mean that BSRs, when they mature in collaboration, would show a higher
correlation between both mechanisms of knowledge integration, further increasing the Role of strategic
dynamic character of this critical capability (Flynn et al., 2010). supply
We also observed a disconnection between strategic supply management and trust
(the correlation between both is 0.07; see Table III) a surprising finding.
management
Theoretically, we would have expected a certain degree of reinforcement of these and trust
two antecedents. Strategic supply management increases the communication
between organizations and generates trust (Kiessling et al., 2004), which in turn 1425
strengthens the overall relationships between buyers and selected suppliers, affecting
this boundary spanner function (Perrone et al., 2003; Zhang et al., 2011). However,
suppliers still receive double signals: do they have to focus on short-term cost cutting,
or on medium/long-term improvements (Wolfe, 2005)? Companies where different
organizational levels/functions indicate different priorities do not foster the creation
of trust in their BSR.
Both observed disconnections point to the same overarching issue, which can
explain that H1a and H3b were not confirmed: BSRs struggle integrating strategic with
operative issues. More precisely, and regarding H1a, people that are knowledgeable
about daily business are not always involved in joint sense-making that takes place at
nice boardroom meetings or off-site fancy lunches. And they are the ones that hold
the knowledge about the implications of proposed changes in design or promise to the
customer. Consequently, these changes are translated into innovation, but without
improving efficiency. Raes et al. (2011) state in this regard: the interaction of the top
management team and middle managers is central to effective strategy formulation
and implementation, but researchers have remained notably silent on the actual nature
of this interaction (p. 102). The same finding can be explained from an operational
perspective: a deep contextual understanding is not required to optimize efficiency.
That stance is compatible with traditional exchange between buyers and suppliers,
which focusses on improving operational efficiency, with little attention to sharing
knowledge on strategic issues or the firms plans. Regarding the rejection of H3b,
Knoppen and Senz (2014) observe that companies experiment difficulties to translate a
strategic perspective into daily routines developed jointly with selected suppliers,
based on ample empirical evidence. On the other hand, it may also be possible that
buyers and suppliers have fluid daily routines, including decision-making on a broad
range of topics, without having a strategic supply vision behind such way of working
(Knoppen and Christiaanse, 2007).
5.1 Limitations and future research

Several limitations in our research provide a good starting point for future research.
First, the study was cross-sectional rather than longitudinal. Longitudinal evidence
could provide more insights into how strategic supply management and trust interact
with each other over time.
Second, while our study highlights the advantages of considering two dimensions
of knowledge integration, firms may not employ both dimensions to an equal extent to
affect BSR performance (e.g. firms seems to ignore joint sense making to improve
efficiency). The observed disconnection between joint sense-making and joint
decision-making may be the root of it. Future research efforts directed at studying
the knowledge integration in BSRs would greatly benefit by examining the nature
of the interaction between these two dimensions.
Third, as we noted previously, our results reflect only the effects of trust and
strategic supply management on knowledge integration in BSRs, yet prior research
IJOPM also indicates that strategic supply management may build trust (Kiessling et al., 2004).
35,10 Further research is required on the mechanisms that companies use to foster trust in
their supply base.
Fourth, in line with accepted practice (Tangpong et al., 2008), we surveyed only one
side of the relationship. The suppliers viewpoint is thus not fully taken into account.
And this perspective may differ, given that suppliers are simultaneously engaged in
1426 several dynamic supply chains, where they are expected to contribute to and learn with
different customers (Stjernstrm and Bengtsson, 2004). A suppliers trust in the buyer
is likely to be correlated with strategic supply management. In other words, companies
that elevate their supply management function to the board level are likely to engender
trust in their selected suppliers ( Johnston et al., 2004). Consequently, future research
may extend the antecedents to understand the key drivers of knowledge integration
from the suppliers standpoint. This also may further understanding of the empirically
established lack of correlation between the buyers trust in the supplier and strategic
supply management. Moreover, researchers increasingly acknowledge that a triadic or
network level of analysis may shed additional light on the learning that occurs between
buyers and suppliers (Dyer and Hatch, 2004).
Fifth, the sample stems from just one country, and its size does not distinguish
subgroups in the analysis of the path model. The role of trust, for example, may be very
different across Europe, Japan, and the USA (Bensaou et al., 1999). Also, a companys
stance toward collaborative and integrative activities with suppliers is likely to differ
across sectors (e.g. service sectors vs industrial sectors; Bou-Llusar et al., 2009).
Consequently, future research may focus on extending the surveyed population in
order to understand cross-industry and cross-country differences. In addition, future
research could explore other situational or contextual factors that may impact the
knowledge integration capability (e.g. environmental uncertainty).
Sixth, our performance measure was of a perceptual nature, which was required to
tap into that part of performance impacted by collaborative practices. Moreover,
we used just one indicator a direct question to tap into performance. Future research
may extend performance measurement and contrast this perceptual measure with
other detailed and more objective supply chain measures, such as order lead time,
number of faultless notes invoices, or customer query time (Gunasekaran et al., 2004).
This would require access to the participating companies ERP systems. Researchers
have to balance efforts in data collection with required sample size in that regard.
5.2 Conclusions and managerial implications

Buyers and suppliers are excellent sources of new knowledge on a variety of issues
related to markets, technology, products, and processes. Consequently, companies need
to develop reliable learning processes to share and create new knowledge with selected
partners and then integrate the newly developed knowledge into their existing
knowledge base and practice. Drawing from the KBV and capability-building
perspective, this paper suggests that BSRs can achieve high levels of performance by
building a dynamic knowledge integration capability, grounded upon two underlying
learning mechanisms: joint sense-making and joint decision-making. Taking into account
this in-depth view on knowledge integration, this study offers a theoretical model that
explains how knowledge integration influences both innovation and operational
efficiency; and identifies the key antecedents that shape knowledge integration.
Although the KBV struggles to provide tangible guidelines for managers
(Hult et al., 2000), we hope that the evidence provided in this paper helps managers
understand how to develop a knowledge integration capability. A starting point in that Role of strategic
regard is to consider supply management as a strategic function and to build trustful supply
relationships with selected suppliers. In this sense, a pure transactional base between a
buyer and supplier can convert into a kind of co-creation relationship where the supplier
management
is deeply ingrained in its customers operational and strategic systems. This may be and trust
challenging, especially with new, unknown suppliers in low-cost countries (Chick et al.,
2014), where intellectual property protection may be less obvious. 1427
We also argue that trust has multiple significant influences and consequently has
to be viewed as an organizing principle. Strategic supply management is especially
required for joint sense-making of a dynamic, complex, and ambiguous context but is
not directly necessary for ongoing joint decision-making. Strategic supply management
may not help to solve operational problems, but in its absence, it is unlikely that a
supplier has insight into the exact needs of its buyer. Managers have to be aware that
without an efficient communication and joint sense-making of strategic plans, suppliers

may not add considerable value to their companies. For example, when customers
change their product specifications, they may find that without a strategic supplier
management that integrates purchasing with product development and operations,
suppliers may be slow to respond to shifting requirements.
Although our findings reveal a weak correlation between trust and strategic supply
management, extant research suggests that the building of trust should not be limited
to the buyers actions toward the supplier; strategic supply management also has the
potential to increase the suppliers trust in the buyer. For example, BMWs strategic
supply management involves the sharing of objectives and risks with selected
suppliers. As a by-product, these suppliers have developed trust in BMW, exchanging
ideas regarding technology and, subsequently, shortening the innovation cycles.
To build a knowledge integration capability, BSRs should go beyond good
communication to establish team structures and reliable learning processes, which
allow the conversion of insights into innovative or efficient outcomes. Multiple
iterations of these learning processes, across the different projects in which BSRs are
involved, ultimately result in the valuable, rare, and difficult to imitate knowledge
integration capability. The commitment of senior supply chain managers is required to
close the gap between strategic and operational perspectives. Even though sensing
capabilities may not directly impact operational performance, they are integral to
the success of BSRs as they enable the creation and exploitation of problem-solving
capabilities. In other words, when maturing in collaboration, BSRs can further improve
joint decision-making and related performance outputs, by leveraging joint sense-
making (Flynn et al., 2010).
Finally, in terms of the supplier selection process, it is important to identify those
suppliers that have a higher learning capability. Suppliers that demonstrate a
willingness to understand the root causes of mistakes, and by doing so open up to
selected buyers, are the most likely to develop a knowledge integration capability.
Overall, our findings support a relationship between knowledge integration and
performance. We suggest that companies should move beyond arms-length
relationships and turn selected BSRs into a tool for innovating faster while cutting
cost. In order to do so, joint sense-making and joint decision-making should be
seen as institutionalized inter-firm routines rather than ad hoc activities. Thus,
we recommend managers to proactively build knowledge-based capabilities that
hinges heavily upon a strategic stance toward supply management and trustful
relationships with selected suppliers.
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Corresponding author
Professor Elena Revilla can be contacted at: elena.revilla@ie.edu
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International Journal of Operations & Production Management

Building knowledge integration in buyer-supplier relationships: The critical role of

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Department of Operations Management and Information Systems,

2. Theory and hypotheses

1412 2.1 Relationship performance

2.2 Knowledge integration and relationship performance

H2. Joint decision-making between buyers and suppliers is positively associated

2.3 Key antecedents of knowledge integration

supply management show an earlier supplier involvement in new product development

communication. As a result, we propose the following hypothesis:

3.1 Research model

3.2 Sample and data collection

3.3 Tests for non-response bias and common method variance

3.4 Survey items

Planning for demand development 0.85

3.5 Statistical methods

of misspecifications pointed to one item of joint decision-making (C18) that cross-loaded

Strategic supply Joint Joint Operational

hypotheses H1a and H3b.

5.1 Limitations and future research

5.2 Conclusions and managerial implications

without an efficient communication and joint sense-making of strategic plans, suppliers

Journal of Purchasing and Supply Management, Vol. 5 No. 2, pp. 75-83.

International Journal of Physical Distribution & Logistics Management, Vol. 32 No. 5,

Marketing, Vol. 17 No. 4, pp. 93-115.

organizations, Organization Science, Vol. 16 No. 4, pp. 389-408.

182, 73-85. [CrossRef]

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