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Paper info: Agency-based supplier selection: developing and testing a classification portfolio


Agency-based supplier selection: developing and testing a classification portfolio


Claus Steinle,
Schiele Holger
University of Twente
Schiele Holger and Tanja Ernst

Place of Publication

The paper was published at the 24th IMP-conference in Uppsala, Sweden in 2008.


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The choice of the "right" supplier becomes more crucial as firms outsource more and more activities. But despite a concentration on core competencies and thus an increasing supplier contribution to value creation, the understanding of buyer-supplier relationships remains limited. Supportive tools are missing. From a buyer's perspective, the sourcing process and especially the selection and evaluation of suppliers are characterised through information asymmetries. As a result of a misguided selection process, chosen suppliers may show unexpected and unbeneficial behaviour afterwards. Agency theory focuses on such opportunistic behaviour and raises two interesting, yet not empirically tested questions in the field of buyer-supplier relationships: 1. Do the theoretically posited effects of "hidden intention" and "hidden action" on "moral hazard" also apply for buyer-supplier-relations and 2. Does the opportunity for opportunism lead to detrimental supplier behaviour after contracting? This article addresses these shortcomings by providing a test of principal agent theory in the field of buyer-supplier relations. In our sample of about 90 suppliers a highly significant relationship between the chance of opportunism and actual opportunistic behaviour has been identified. The encouraging results of the survey could eventually be used to develop an agency-based supplier classification tool.