Cross‐functional integration and functional coordination in purchasing and supply management

TLDR

Enhanced PSM maturity is linked to better financial performance, but this positive impact has been largely untested until now. The study develops nine hypotheses linking four PSM practices to purchasing performance and to financial performance. The authors surveyed 148 companies worldwide, combining primary interviews and surveys with secondary firm performance data to reduce common method variance. Eight of nine hypotheses were supported, showing that cross‑functional integration and functional coordination improve purchasing performance, which in turn boosts firm performance; talent and performance management positively influence integration and coordination, with talent management also directly enhancing purchasing performance.

Abstract

Purpose The purpose of this paper is to develop a set of nine hypotheses linking four purchasing and supply management (PSM) practices directly to purchasing performance and indirectly to financial performance. Design/methodology/approach The authors collected data in a global cross‐industry survey of 148 companies, combining primary interview and survey data with secondary data on firm performance, in order to minimize the impact of common method variance. Findings Support was found for eight of the nine hypotheses. In particular, a positive impact was found of cross‐functional integration and functional coordination on purchasing performance, and of purchasing performance on firm performance. Both talent management and performance management have a positive impact on cross‐functional integration and functional coordination. Talent management also has a direct impact on purchasing performance, in contrast to performance management. Originality/value The association of enhanced PSM maturity levels with financial performance metrics collected from secondary data sources provides robust empirical support for the stated but to this point largely untested positive impact of PSMmaturity on the firm's competitive position.