To insource or outsource the sourcing? A behavioral investigation of the multi-tier sourcing decision

Abstract

Purpose The purpose of this paper is to investigate the behavioral tendencies of supply managers when they are faced with uncertainty in making multi-tier sourcing decisions. Design/methodology/approach This paper uses the literature on multi-tier supply chains and behavioral decision making to develop a theoretical framework for examining factors influencing a supply manager’s decision to retain control over sourcing in the multi-tier context. An experimental vignette methodology is used to gather data from 259 supply managers. Findings Results suggest that supply managers choose to exert less multi-tier control when they have high levels of interpersonal trust in the tier-1 supplier’s sales representative. This effect is accentuated by a high level of familiarity with potential lower-tier suppliers. Under high levels of familiarity with potential lower-tier suppliers, supply managers will exert greater levels of multi-tier sourcing control as the behavioral uncertainty of the tier-1 supplier increases. Practical implications Buying firms can enhance their understanding of supply managers’ multi-tier sourcing decision making and the potential biases associated with it. Suggestions for a more effective use of multi-tier sourcing are provided in the Discussion section. Originality/value Multi-tier sourcing is an increasingly important area of research, and this paper is the first to examine individual supply managers’ behavioral decision making in the multi-tier context. This paper also contributes to the outsourcing literature by investigating behavioral factors influencing the outsourcing of sourcing activities.