Introduction

The interest in global purchasing and offshore outsourcing has increased significantly in recent years. This has initially been driven by expectations of cost reduction when goods and services are purchased from low-cost regions. An increasingly important rationale concerns a desire to acquire knowledge and technology from external suppliers. Accordingly, development of advanced technological products has increasingly become an interorganizational process, involving webs of geographically dispersed players and manufacturing sites. This new approach to product development becomes all the more challenging the more geographically distant the suppliers are. Facilitating such development necessitates both advanced supplier integration tools and a proficient purchasing department.

Despite these arguments, it is less known how global purchasing actually impacts performance. Studies on international and global purchasing have apparently been more interested in questions regarding what to buy and from where, rather than what the effects are. There are rather few broader empirical studies measuring the actual outcome of global purchasing, and even fewer that have been able to show a positive relationship to company performance. When comparing two cases, Steinle and Schiele typically concluded that a "high global sourcing quota does not necessarily improve a firm’s competitiveness". The studies on cost effects of global purchasing show mostly ambiguous results or fail to show any effects.

Corresponding large-scale studies on the impact of global purchasing on product innovation performance are even rarer. This link may represent a complex pattern. While global purchasing may indeed open doors to external knowledge, some studies question its effects on product innovation. Distant purchasing may cause extended lead times that have a negative effect on time-to-market (TTM) in new product development (NPD). Studies of product development further argue for the need to co-locate and integrate key activities, processes and knowledge in product and manufacturing processes, specifically in development of complex products. The product innovation outcome of global purchasing is thus interesting to analyze further. While previous studies have illuminated the role of supplier integration in global product development, this study focuses explicitly on the product innovation outcome when purchasing globally.

The overall purpose of this paper is to empirically analyze the impact of global purchasing on innovation sourced from suppliers, while taking into account how firms integrate their suppliers. More specifically, the study tests four sets of hypotheses, where the first two concern the difference between firms purchasing globally and those that do not, in terms of both innovation-related priorities for purchasing and supplier product innovation. The latter two sets of hypotheses concern the impact of supplier integration on supplier product innovation, and whether this impact differs between firms purchasing globally and those that do not.

The paper is based on a large-scale survey of purchasing managers in 679 firms in Europe and North America. Many surveys tend to focus on the firm level and thus miss the fact that different component categories are, or should be, sourced using different strategies, as was pointed out by Kraljic. Therefore, this survey focused on the component category level. The next section of the paper will review the relevant literature and formulate hypotheses. The following sections outline the methodology, results, discussion and finally conclusions.