The influence of internal integration and supplier value on supplier resource allocation

Supplier resources are essential to a buying firm’s competitive advantage. However, supplier resources are scarce and buying firms are not treated equally in the resource allocation process. Based on SET, this research examines how supplier resource allocation is influenced by the different dimensions of internal integration, interaction and collaboration, and whether the different dimensions of supplier value, financial and non-financial, play a mediating role in this relationship. Partial least squares structural equation modeling is used to analyze the data from 54 suppliers, 16 purchasers and 33 employees with internal other functions at the two buying firms. The results show that the dimensions of internal integration affect supplier resource allocation differently. Whereas collaboration positively influences physical resource allocation and innovation resource allocation, interaction negatively affects innovation resource allocation. Internal integration seems to affect supplier resource allocation directly, without supplier value mediating these relationships. However, collaboration seems to negatively affect non-financial supplier value. The practical contributions of this study are twofold. First, when investing in internal integration, buying firms should focus on collaboration first. Second, buying firms should be aware that collaboration can be very time consuming and should try to keep the right balance between investing time in collaboration and in being of strategic importance to the supplier.