Organizational Structure and Purchasing Performance

What is it about?

This study contributes to the understanding of how firms should structure their purchasing or-ganization to improve their performance. While the research into structural characteristics’ im-pacts on purchasing performance is evolving, it is still incomplete, especially concerning the contingencies on different purchasing environments. Drawing on ideas from the organizational information processing and contingency approaches as well as the international business literature, the present study proposes a model in which three key organizational structure characteristics – centralization, standardization, and specialization – are associated with purchasing performance. This study posits that the relationships are contingent on a purchasing location’s formal and informal institutional context. Based on a sample of 195 German manufacturers, the model is empirically tested using structural equation modeling. The findings support the relevance of organizational structure characteristics for international purchasing and firm performance and they also support the notion that the effects are contingent on the purchasing location’s institutional context.

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Why is it important?

Practically, the article contributes to understanding how a purchasing organization needs to be structured to become successful in different purchasing environments. Theoretically, it makes use of the many conceptual models developed in previous studies and starts testing the de facto performance implications of a comprehensive set of organizational structure characteristics (centralization, standardization and specialization) in international purchasing.

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