Making Processes: Politics, Intuition, and Procedural Rationality

Journal of Business Logistics, 2015, 36(2): 160–181 © Council of Supply Chain Management Professionals

doi: 10.1111/jbl.12090

Global Sourcing Decision-Making Processes: Politics, Intuition, and Procedural Rationality Alina Stanczyk1, Kai Foerstl2, Christian Busse3, and Constantin Blome4 1

EBS Universit€at f€ur Wirtschaft und Recht EBS Universit€at f€ur Wirtschaft und Recht & German Graduate School of Management & Law (GGS) 3 Swiss Federal Institute of Technology Zurich 4 University of Sussex 2

lobal sourcing (GS) is a firmly established phenomenon in modern business practice that requires specific expertise from different organizational functions, such as purchasing, production, logistics, and research and development to analyze and select sourcing alternatives effectively. In this context, global sourcing decision-making (GSDM) processes pose major challenges because two dimensions of functional politics, namely goal misalignment and power imbalance across functions, appear to influence procedural rationality in a manner not understood to date. Likewise, intuition also seems to play a role for the procedural rationality of GSDM processes. To elucidate the conditions under which procedural rationality is hampered or enhanced by politics and intuition, we studied five cross-functional GSDM processes, in front of extant strategic decision-making literature. We derive formal propositions on how functional politics and intuition influence the procedural rationality and present contingencies for the divergent role of intuition as well as functional politics in GDSM processes. Our research contributes to existing GS literature by providing a theoretical model of important microfoundations of how GSDM processes evolve. The findings also guide managers on how to structure GSDM processes such that GS projects can be conducted in a more rational fashion.

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Keywords: global sourcing; decision-making; functional politics; procedural rationality; intuition; case study

INTRODUCTION Global trade and thus global sourcing (GS) are ancient phenomena that have existed at least since the second century BC when the Silk Road was established (Xie et al. 2007). Today, GS is a firmly established phenomenon in modern business practice because it enables firms to simultaneously achieve competitive and comparative advantages (Kogut 1985; Arnold 1989; Kotabe and Murray 2004). Academic literature has paid considerable attention to GS antecedents and consequences (Birou and Fawcett 1993; Alguire and Frear 1994; Min 1994; Fawcett and Scully 1998; Leonidou 1999; Petersen et al. 2000; Quintens et al. 2006a; Kotabe and Mudambi 2009). This stream of literature has specifically focused on the benefits and applicability of low-cost country sourcing, while less focus has been placed on the study of the decision-making process as a whole. In this context, it is important to distinguish between the global sourcing decisionmaking (GSDM) process and GS as a specific outcome of this decision-making process. For instance, if a U.S. firm decides to source locally after it has considered multiple Asian and South American sources, then the decision-making process would still be a GSDM process given that alternative suppliers from around the globe were considered. GS is defined as the coordination and integration of common activities, items, processes, designs, and technologies, across buying centers and across organizational functions (Trent and Monczka 2005; Van Weele 2010). The decision-making process for a specific GS task involves gathering and analyzing diverse information concerning the technical, logistical, operational, and financial parameters provided by alternative suppliers. Sourcing Corresponding author: Kai Foerstl, German Graduate School of Management & Law (GGS), Bildungscampus 2, 74076 Heilbronn, Germany; E-mail: kai. [email protected]

teams are expected to make high-quality decisions based on precise, accurate, and timely information (Driedonks et al. 2010). In this paper, we shift the focus to procedural rationality as an antecedent of good GSDM. Procedural rationality relates to the degree to which parties involved in decision-making processes demonstrate a desire to make the best possible decision under the given circumstances (Simon 1978). Specifically, our study seeks to shed some light on when and how procedural rationality could be hampered in corporate practice. The multidimensionality of GS decisions requires manifold expertise from different functions, such as purchasing, production, logistics, and research and development (R&D) for many purchasing categories (Trent and Monczka 2003; Brodbeck et al. 2007; Van Weele 2010). Specifically, diverging functional opinions concerning the common goal of the process among team members often pose a major challenge to GSDM processes (Gelderman and Semeijn 2006; Moses and
Ahlstr€ om 2008). Such misalignment jeopardizes analytical scrutiny during the process of information gathering, analyzing solutions, and final decision making (Dean and Sharfman 1993; Smart and Dudas 2007). In addition, unequal power distribution across the functions is said to potentially hamper procedural rationality (Eisenhardt and Bourgeois 1988), particularly for complex and meaningful decision tasks (Shrivastava and Grant 1985; Dean and Sharfman 1996). However, it has also been suggested that political behavior does not necessarily cause irrationality in the decision-making processes; rather, it can also serve as an internal adoption mechanism in rapidly changing environments inside firms that ensures that all aspects of the decision are well debated (Bourgeois and Eisenhardt 1988; Elbanna 2006). Moreover, strategic decisionmaking literature (Elbanna and Child 2007) and recent research on sourcing team effectiveness (Kaufmann et al. 2014) do mention intuition and politics in decision making as preconditions to ensure procedural rationality of cross-functional decision making. Yet, similar to the impact of politics, the extant literature does

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not allow for unambiguous reasoning for intuition either (Shrivastava and Grant 1985; Papadakis et al. 1998; Elbanna 2006; Elbanna and Child 2007). Hence, the effect of functional politics and intuition on GSDM is unclear, which raised our interest in exploring how these variables can impact procedural rationality in GSDM. In corporate practice, many cross-functional teams experience conflicts between team members over goals, schedules, and budgets. Even minimal conflicts can result in collaboration costs for the firm such as delays in completing a project, lower quality or limited cost savings, which can ultimately transform into real costs for the firm (Hansen 2009). Such a lack of procedural rationality in GSDM results in more frequent product quality problems in offshore sourcing decisions compared to other sourcing alternatives, which indicates that more rigorous and rational analytic processes might cause companies to refrain from sourcing from geographically distant suppliers in the first place (Steven et al. 2014). Moreover, the recent development toward near-shoring or re-shoring of European and U.S. firms might to some extent have its origin in poor historic buying firm decisions (Ellram et al. 2013), potentially caused by intuitive and politically charged GSDM processes. Yet, the interfunctional and interpersonal dynamics occurring during the decision process in such cross-functional GSDM teams have hitherto been mostly neglected in empirical investigations (Quintens et al. 2006a; Pagano 2009). To summarize, the purpose of our research is to investigate the influences of the two behavioral aspects of decision making, namely politics and intuition, on procedural rationality of GSDM processes. Due to the lack of theory at the decision process level of analysis and because of equivocal prior findings, we relied on an inductive multiple case study approach to seek an answer to the following research question: How, when, and why do functional politics and intuition affect procedural rationality in GSDM? With our empirical study, we contribute to the extant literature by providing detailed insights into the origins and characteristics of functional politics and intuition in GSDM teams. A better understanding of these barriers should help firms create decisionmaking contexts that foster procedural rationality in GSDM, thereby also contributing to choosing the best possible GS outcomes. We specifically elaborate on the constellations under which functional politics and intuition in GSDM have a positive or a negative impact on procedural rationality. We also hope that our research opens up a new line of enquiry within GS research that acknowledges internal complexity and cross-functionality inherent to GSDM (Ellram and Siferd 1998; Smart and Dudas 2007; Moses and
Ahlstr€ om 2008). With the findings presented in

this paper we complement the extant research on how to overcome bounded rationality in supplier selection processes (Kaufmann et al. 2009) and supply management (Carter et al. 2007). The remainder of this article is structured in five sections. In the following conceptual background section, we depict our initial research framework based on a review of GS and corresponding decision-making literature. Subsequently, we describe our multiple case study methodology. Next, we present the results of our analysis and develop testable propositions amending and extending our initial conceptual framework. After discussing some empirically visible configurations pertaining to the types of functional politics and intuition, we conclude by presenting emerging areas for further research that could be elaborated on in this field. CONCEPTUAL BACKGROUND By studying the GSDM, we follow a call for more research on how cross-functional GSDM processes can be conducted effectively (Moses and
Ahlstr€ om 2008; Driedonks et al. 2010). To the best of our knowledge there are only two other publications investigating the decision process in GS, yet they do so in a prescriptive rather than empirically founded manner; these are the decision framework of Cavusgil et al. (1993) and a study of Moses and
Ahlstr€ om (2008) on problems in cross-functional decision making. Thus, we conclude that the GS literature lacks empirical insights on how the GSDM process actually takes place in corporate practice. At this point, it is important to mention that initially we focused on procedural rationality as a core interest in the GSDM process; however, throughout the research it emerged that politics and intuition are crucial elements of the process, without which understanding and capturing procedural rationality can turn out to be incomplete. In our inductive investigation, we employed conceptualizations of our core constructs from the GS and strategic decision-making literature (Figure 1). Our empirical findings yield an understanding of how, why, and when the concepts of politics and intuition affect the procedural rationality of GSDM (Whetten 1989). The GSDM process Previous academic discussion has only briefly touched on the GSDM process, thus the most recent literature reviews on GS by Quintens et al. (2006a) and Pagano (2009) do not elaborate on the topic. Conversely, sourcing literature is rich in articles about the operational aspects of GS concerning the parts of the world

Figure 1: Initial research framework. Research scope Functional politics

Procedural rationality

Global sourcing decision outcome

Intuition Unexplored path in GS literature

Established path in GS literature

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in which different commodities can be sourced and which environmental and organizational factors drive these GS decisions (Davis et al. 1974; Giunipero and Monczka 1997; Kotabe and Mudambi 2009; Maltz et al. 2011; Ellram et al. 2013). Performance outcomes of cross-functional integration in sourcing decisions have been found to positively impact firm performance (Foerstl et al. 2013); however, the decision-making process itself has remained largely unexplored aside from general remarks and descriptive analyses. Authors admit that GSDM is complex (Nydick and Hill 1992; Smart and Dudas 2007; Moses and
Ahlstr€ om 2008) and spans across multiple functions of expertise (Cousins and Spekman 2003) as it requires recognition and analysis of sourcing alternatives from different perspectives, such as cost, quality, and logistical and technical feasibility (McIvor and Humphreys 2000). The complexity is evoked by multiple criteria and steps as well as multiple actors taking part in numerous factors affecting the process (Min 1994; Van Weele 2010). Mature GS organizations are considered to live up to this challenge. Therefore, sourcing strategies are aligned between purchasing, logistics, R&D, and operations through early purchasing involvement in the product specification phase (Trent and Monczka 2003). Cross-functional GSDM is related to decision effectiveness, which in turn is suggested to lead to superior operational and financial performance of the buying firm (Foerstl et al. 2013). GS decisions can also impact the entire supply chain (Birou and Fawcett 1993; Das and Handfield 1997) as they are considered to be strategic levers affecting quality, cost, and flexibility of operations in manufacturing firms (Narasimhan and Carter 1990). Van Weele (2010) mentioned product characteristics as a major variable affecting the buying process. The higher the product complexity and commercial uncertainty, the greater the need to aggregate the functionally segmented knowledge in a coordinated cross-disciplinary team (Fisher 1970; Monczka et al. 2009) to achieve better decision outcomes (Henke et al. 1993; Giunipero and Vogt 1997). To this aim, authors recommend that the purchasing function takes on a steering role toward cross-functional integration among the participating functions in GS (Trent and Monczka 1994, 2003; Monczka et al. 2008). Correspondingly, Moses and
Ahlstr€ om (2008) identified functional interdependence and misaligned functional goals as frequent cause of problems in GSDM processes. However, none of the investigations provides guidance on how firms can prevent tensions affecting procedural rationality or how to prevent political behavior or functional power abuse in cross-functional GSDM teams. GSDM process characteristics In our pursuit to understand the specific nature of cross-functional GSDM processes throughout the data analysis, we identified procedural rationality, functional politics, and intuition as the most prevalent characteristics of decision processes. Strategic decision-making literature considers those concepts as the most important ones as well (Shrivastava and Grant 1985). Procedural rationality in GSDM We refer to the concept of procedural rationality of Simon (1978) as the degree to which decision-making processes demonstrate a desire to make the best possible decision under the given circumstances. This definition expresses an attempt to gather information about potential alternatives and to use that informa-

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tion in arriving at the final decision. In this context, procedural rationality refers to the decision-making process as opposed to the conceptualization of rationality, considering the decision maker to be omniscient (Simon 1978). Thus, we define it as the “extent to which the decision process involves the [1] collection of information relevant to the decision, and [2] the reliance upon the analysis of this information in [3] making a choice” (Dean and Sharfman 1993, 1071). For cross-functional GSDM, procedural rationality reflects the scrutiny that all involved departments contribute to the analysis and the decision outcome (Smart and Dudas 2007). Empirical studies support the notion that procedural rationality is positively related to decision-making effectiveness and firm success (Eisenhardt and Bourgeois 1988). It is hence deemed a suitable dependent variable in our study. In sourcing, the concept of rationality has been studied from the supplier management perspective, first identifying decisionmaking biases in supply management (Carter et al. 2007) and then providing de-biasing strategies to mitigate the related problems (Kaufmann et al. 2009). Moreover, procedural rationality is elaborated on in the sourcing literature as an analytical approach toward reaching final sourcing decision (Narasimhan 1983; Nydick and Hill 1992; Min 1994). Overall, sourcing literature supports the positive impact of procedural rationality on GSDM effectiveness, so that GS decisions should be based on analytic scrutiny (Ellram and Siferd 1998). Recent research found evidence for a certain complementarity between rationality and intuition in decision making to achieve high levels of decision effectiveness (Kaufmann et al. 2014). Despite the value of the mentioned studies for the framing of this paper, existing research has not embraced the cross-functionality of the GSDM process. With this paper, we seek to narrow this research gap. Functional politics in GSDM Allen et al. (1979) defined organizational politics as “intentional acts of influence to enhance or protect the self-interest of individuals or groups” (p. 77). The political model of organizations assumes that decision processes are arenas for parties to compete to satisfy their needs, although their preferences are very often not based on organizational, but on individual or subunit goals. Hence, political behavior seems to be unavoidable (Zaleznik 1970; Dean and Sharfman 1996). This view is supported by Eisenhardt and Zbaracki (1992), who consider organizations as political systems shaped by (1) conflicting interests and (2) varying power of internal parties (i.e., functions and departments). First, organizations are formed by people with conflicting preferences and goals. “These preferences arise not only from genuine disagreements about technology and the quality of the different vendors but also from differences in the managers’ positions within the firm and their perceptions of self-interest” (Eisenhardt and Zbaracki 1992, 25). The political characteristic of a strategic decision-making process contradicts the group rational model (Eisenhardt 1997). In the political model of organization, parties are rational as individuals but not collectively rational (Eisenhardt and Zbaracki 1992). Individuals believe that they will be affected by the decision outcome, which causes them to try to influence the decision process to satisfy their personal needs (Elbanna 2006). As group members of GSDM processes are typically employed in different functional areas and possess different expertise, they may also have conflicting functional interests and needs.

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Second, the final decision is determined by preferences of powerful parties. Arndt (1970) defines power as an ability to instigate others to act according to one’s preferences. According to Bourgeois and Eisenhardt (1988), power imbalances trigger politics. In the sourcing context power is often debated with respect to buyer–supplier relationships (i.e., power distribution between firms in the marketplace) (Benton and Maloni 2005; Crook and Combs 2007; Leonidou et al. 2008). However, in this research we are interested in the relative internal power of the involved parties vis-a-vis each other and its effects (i.e., power distribution within the hierarchy of the firm) as opposed to the power a buyer has over the supplier in a specific relationship. In the internal context, we are referring to the power of a functional unit in the decision related to a particular sourcing task. Political tactics that manifest in the decision procedures comprise among others coalition formation, negotiation, information withholding, or information distortion (Bourgeois and Eisenhardt 1988; Eisenhardt and Zbaracki 1992; Dean and Sharfman 1993). Parties involved in the decision-making process can use data collection and evaluation criteria as tools to manipulate decision outcomes in their favor (Dean and Sharfman 1993). Bourgeois and Eisenhardt (1988) ascertain that politics distorts information, creates animosity and leads to poor performance. Nevertheless, politics could serve as an important internal adaptation mechanism in a quickly changing environment (Eisenhardt 1997). Furthermore, the resulting negotiations could decrease uncertainty and enhance acceptance among involved parties (Nutt 2004; Elbanna 2006). Finally, politics could ensure that all necessary aspects of the decision are evaluated (Elbanna 2006). Boddewyn and Brewer (1994) report that political behavior can occur due to other resources, such as privileged information, ability to perform a task, or a person’s time. The sourcing literature does not specifically integrate politics in the internal decision-making process, yet authors provide evidence for friction between functions in cross-functional cooperation (Gelderman and Semeijn 2006; Van Weele 2010). In particular, the arena of GSDM is potentially affected by political behavior and power influences of decision team members due to the multidimensionality of the performance outcomes and the trade-offs between dimensions (Smart and Dudas 2007; Van Weele 2010). Moses and
Ahlstr€ om (2008) described functional information interdependence, the lack of a holistic view by the individual contributors, unstructured process design, ad hoc decision making, and misaligned functional strategies as hurdles to attaining procedural rationality in GSDM. Especially misaligned functional goals and functional interdependence are well reflected in the concept of functional politics. To this date, we are unaware of GS literature that empirically explores whether such political distortions affect procedural rationality in GSDM. Intuition in GSDM Intuition in strategic decision-making literature has mainly been investigated by management theorists and psychologists, while empirical management research on the topic is lacking (Elbanna et al. 2013). Elbanna (2006) concludes that intuition is difficult to characterize because many researchers define it differently, and hence there is no unity in the description. We rely on the definition of Elbanna et al. (2013), who state that intuition is a “mental process based on gut feeling as opposed to explicit, systematic analysis, which yield an intuitive insight or judgement that is used as a basis for decision making” (p. 150). Researchers

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generally perceive intuition as an information-processing act that differs from cognitive processes (Dayan and Elbanna 2011) as it is associated with relying on hunch (Miller and Ireland 2005) or gut feeling (Hayashi 2001). Most decision-making literature assumes that rational processes result in better outcomes than intuitive ones (Elbanna 2006). However, intuitive processes help to speed up decision processes and are useful in solving less complex problems (Dayan and Elbanna 2011). Moreover, Miller and Ireland (2005) assert that intuition is often an effective approach in decision making in today’s business environment, as decision makers usually do not have timely, accurate, and complete information to make strategic decisions. In the sourcing literature, research on the topic is scarce and limited to some noteworthy exceptions such as Kaufmann et al. (2014) who provide empirical evidence that some intuitive evaluations of sourcing alternatives still lead to decision-making effectiveness. At the same time, it is suggested that the higher the number of rational team members, the better the sourcing decision. In the context of cross-functional GSDM processes, intuition has not yet been investigated, especially not in relation to functional politics at the decision process level. METHODOLOGY Research design We opted for the multiple case study method because of the exploratory nature of our research. In a nascent stage of research, case studies provide a strong means for exploration and theory development purposes (Quintens et al. 2006a,b; Dubois and Araujo 2007). The use of case studies is a recent method of choice for studying complex phenomena and generating managerially relevant knowledge (Amabile et al. 2001; Boyer and Swink 2008; Dul and Hak 2008; Gibbert et al. 2008; Narasimhan 2014). Because our interest relates to the rather complex and cross-functional GSDM at the process level of analysis, the case study method provides a good methodological fit with our research objectives (Dubois and Araujo 2007). It allows us to compare and contrast decision processes and practices in individual firms to build theory on GSDM (Eisenhardt 1989; Strauss and Corbin 1998). Moreover, case study research allows us to interact with informants, thus enabling us to ask clarifying questions or to react spontaneously to emerging new themes (Pratt 2009). The measures to ensure construct, internal and external validity, as well as reliability throughout our research process are summarized in Table 1 (Gibbert et al. 2008; Yin 2009). To facilitate accumulation of empirical evidence across studies, we adopted construct conceptualizations from the extant literature and employed them throughout all stages of our research. Empirical context Our intention was to study GSDM processes in a context where the phenomena that we are most interested in, such as multifunctionality of GSDM as well as functional politics and intuition would be most strongly visible. This led to multiple requirements for the empirical context, which we derived from prior decision-making literature (Papadakis et al. 1998; Elbanna and Child 2007). First, we decided to investigate GSDM processes in mechanical engineering firms as they produce rather

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Table 1: Validity and reliability measures pursued throughout the research process Research phase Reliability/validity criteria Construct validity

Internal validity

External validity Reliability

Research design

Case selection

Building interview questions based on concepts grounded in previous literature Foundation of our investigation based on decision-making literature (e.g., Dean and Sharfman 1993) Definition of main concepts

n.a.

Comparative multiple case studies Development of a case study protocol and verification of content through informants (full transcription) Development of case database

Predefined case selection criteria Selection criteria well documented in case study protocol

Purposeful sampling criteria: (1) headquarter location, (2) firm internationalization, (3) firm size, (4) industry

complex products for which the firms source many technically demanding categories. We can thus ensure that decision-making criteria beyond price play an important role, which in turn means that the purchasing function can be expected to incorporate functional expertise other than its own. Second, we opted for studying GSDM in large organizations with revenues exceeding EUR $1 billion. This decision serves to ensure a certain level of specialization and division of labor. Large firms are also relatively more complex in terms of geographic dispersion of sales, production, and procurement operations than small firms are. Third, we decided to exclude all firms with a domestic orientation, concentrating instead on companies advanced in GS operations (Trent and Monczka 2003; Monczka et al. 2008). Fourth, we limited our sample to firms headquartered in Germany and Austria, as these countries are major industrialized economies with comparable legal systems (Hausmaninger 2011) and are culturally close (Hofstede 1983). There were also other practical reasons for selecting German-speaking countries, such as language, data access, response time, and the possibility of conducting personal interviews. Thus, we can study GSDM processes in an ideal empirical context. Our choices also ensure that none of the aforementioned sampling criteria can act as a confounder. Case selection and data collection We followed a purposeful case selection approach that employed a structured process to maximize the richness of information and to minimize the number of cases necessary for comprehensive

Data gathering

Data analysis

Multiple sources of information: questionnaires, multiple semistructured interviews, secondary data from databases and reports Multiple respondents Participants of GSDM process interviewed

Triangulation of data collected from independent sources Pattern matching Comparison of theme and axial codes (Table 3) Prior aggregation to abstract general codes (Table 4) n.a.

Gathering data at the project level Development and utilization of case study database All interviews transcribed by interviewers Verification of interview protocol through interviewees

Researchers independently coded data Documentation and discussion of coding discrepancies to reach inter-rater agreement

insights (Perry 1998; Yin 2009). Given our research framework and our decisions related to the empirical context, we chose multiple cases that were ex ante literal replications of each other because we could not judge any theoretically important concepts from the outside. We started primary data collection in September 2011 and finished in October 2012. We achieved theoretical saturation (Eisenhardt 1989; Strauss and Corbin 1998; Glaser and Strauss 2009) after completion of five cases that provide us with rich and high-contrast information. Throughout the data collection process, we modified the interview guide (which is attached in an Appendix) whenever additional interesting facets were identified, and we ensured that they were included in subsequent interviews across all case firms. Once no more new themes and patterns emerged from additional interviews, saturation was assumed to have been reached (Yin 2009). This assumption is supported by the fact that we conducted an additional two case studies that did not yield any further insights into GSDM processes. Table 2 presents case descriptions and information on interviewed informants. In each case study firm, we interviewed key informants from multiple organizational units. In total, our database comprises 19 interviews with managers involved in GSDM projects, representing the purchasing, logistics, R&D, quality, strategy, or controlling function. Semistructured interviews lasted 1 to 3 hrs and were mostly conducted by the same two authors. Each interview was recorded, transcribed and sent back to each interviewee to rule out any misunderstandings or misinterpretations. Whenever necessary, the authors revised the transcription. Overall, the interviews resulted in 350 pages of transcripts.

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Table 2: Case demographics Cases

Alpha

Beta

Gamma

Delta

Epsilon

Home Country Number of employees Motives for global sourcing

Germany ~45,000

Germany ~10,000

Austria ~5,000

Germany ~10,000

Germany ~15,000

Comparative cost advantage

Access to technology

Finding the best quality-price combination

Cost reduction Access to technology

Informants job titles

Vice President Corporate Category Management Head of Strategic Procurement Quality Manager

Head of Production Logistics Head of Trade Goods Procurement Procurement Manager R&D Managers

Head of Strategic Procurement Procurement Manager CRM Manager BU Manager

Functions involved in study

Purchasing Quality Mgmt. Production

Purchasing Production Logistics R&D

Global presence of operations

Connected global operations

Description of analyzed sourcing task (project)

Electronic circuit system for motion control system

Connected Manufacturing and R&D in Germany Lithium-ion batteries for crafts

Purchasing Product Management Country BU Management Four production sites located in Europe and the U.S. Air handling unit for the test system unit for combustion engines

Comparative advantage Economies of scale Vice President Strategy Business Unit Director Project Director Procurement Controlling Manager Business Strategy Purchasing Controlling

To substantiate emerging data patterns further, we triangulated interview data with archival data in the form of publicly available documents (e.g., annual reports, articles, and catalogs) and internal firm documents (e.g., internal reports, procedures, and handbooks) (Eisenhardt 1989; Voss et al. 2002). The resulting triangulation contributed to construct validity and enabled investigation of the phenomena from diverse perspectives, leading to a stronger substantiation of constructs and propositions (Meredith 1998; Gibbert et al. 2008). Coding procedures Once all data were collected, we started open coding procedures to structure the information provided (Strauss and Corbin 1998). In this process, we reflected upon informants’ statements to derive first-order codes and provisional codes (Pratt 2009). After the individual firm profiles were obtained from within-case coding, we conducted cross-case analysis and relied on tabular displays to detect commonalities and differences across firms (Eisenhardt and Graebner 2007; Yin 2009). Two authors discussed their coding results to ensure consistency. Coding was only considered complete when full agreement was reached. Reasons for the adjusted coding were documented in the case database. This process caused a forced inter-rater reliability of 100% (Pagell et al. 2010). We coded procedural rationality according to the three decision-making steps: (1) information search, (2) analysis, and (3) solution development, whereas politics was coded into its two dimensions of goal misalignment and power imbalance. Intuition

Eight production sites across Europe and Asia Finished machined cylinder for industrial engines

Head of Procurement Procurement Team Leader Quality Manager Head of Logistics

Purchasing Quality Mgmt. Production Logistics 15 plants worldwide Centralized R&D in U.S. & Germany Cooling element for industrial gear-motors

in turn was coded according to the following dimensions (1) reliance on gut feeling, (2) judgment, and (3) past professional experience, ultimately resulting in the differentiation between creative and justified intuition. The coding scheme of first-order codes emerged over time and resulted in the dimensions detailed in Table 3 (Ellram 1996; Pratt 2009). Through cross-case analysis, we were able to identify relationships between the first-order code variables, and firms were compared regarding their properties in the identified dimensions (Voss et al. 2002). These identified relationships were then elaborated on in light of findings in relevant literature to derive second-order codes and enfold theory (Pratt 2009). Second-order codes were depicted in Table 4. Cross-case analysis enabled us to identify commonalities and differences in GSDM patterns along the coding scheme that emerged from our initial conceptualization and definition of terms (Eisenhardt and Graebner 2007; Yin 2009). In the subsequent section, we elaborate on our findings in detail and summarize them as research propositions.

CASE ANALYSIS AND PROPOSITION DEVELOPMENT Based on the analysis of each case and on cross-case analyses, we detected specific relationships between the concepts of interest. These relationships also direct decision-makers’ strategies to manage the impact of functional politics and intuition on the procedural rationality in cross-functional GSDM, which will be delineated in the conclusion as managerial implications.

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Functional politics and procedural rationality Our findings suggest that politics and procedural rationality are relevant characteristics of GSDM processes. The cross-functional character of GSDM bears the risk of political behavior of decision contributors due to their potential conflicts of interest (stemming from misaligned functional goals) and a power imbalance between participating functions (e.g., caused by their respective organizational standing). The resulting political tactics of actors are deployed in the decision-making process and frequently affect the procedural rationality of GSDM. The five cases show ample variation of goal misalignment and power imbalance in their respective decision-making processes. Our investigation suggests that three types of political behavior (none, assertive, and negotiating) occur along the two dimensions of goal misalignment (high and low) and power imbalance (high and low) between participating functions. The strength of occurrence of each of the two dimensions determines the intensity and type of political behavior to which the GSDM process is exposed. We begin by considering the intensity of politics and thereafter turn to its type, lastly analyzing its effect (positive and negative) on procedural rationality. For DELTA, its vice president of strategy concluded that their “common goal fosters cooperation among the involved parties.” They regard the total cost of ownership analysis (Ellram and Siferd, 1998) as the ideal rational backing for GS decisions. In this case, goals are aligned and politics does not occur. Contrarily, at ALPHA and BETA, goals are strongly misaligned. ALPHA’s purchasing manager reports that “it is very often about the trade-off between costs and technical capabilities of suppliers that cause political actions that can be resolved throughout the decision-making process.” At GAMMA and EPSILON, we could observe high goal misalignment, which also caused political behavior. The observed political tactics include, but are not limited to, geographically limited tendering to suppliers from lowcost countries by purchasing [EPSILON], the adjustment of the technical specification to ensure that the preferred supplier of R&D or the production function has advantages in the concept evaluation [GAMMA], and the exaggeration of logistical requirements associated with securing a continuous supply and lean management principles by the logistics function [EPSILON]. To summarize, at ALPHA, BETA, GAMMA, and EPSILON politics occurred as a result of high goal misalignment, whereas DELTA is the case where no political tactics were detected throughout the GSDM process. Based on these observations, we formulate our first proposition: Proposition 1a: Low levels of goal misalignment between functions in GSDM processes do not lead to functional politics, whereas high levels of goal misalignment do create functional politics. Our empirical findings suggest that functional politics occurs with different intensity, depending on the combination of goal misalignment and power imbalance. At DELTA the constellation of low goal misalignment and low power imbalance did not evoke functional politics. The combination of high goal misalignment and low power imbalance was represented by the cases of ALPHA and BETA, which resulted in medium intensity politics. The high intensity of politics stemming from a combination of high goal misalignment and high power imbalance was

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observable at GAMMA and EPSILON (see Figure 2). The two dimensions were coded based on individual expressions of team members and the consistency of statements across GSDM team members. The fourth configuration of low goal misalignment and high power imbalance was not empirically observed. We assume that any political tactics in this unobserved case would be pointless because all involved functions already pursue aligned goals in their segmented tasks. Hence, the exploitation of the power imbalance through the most powerful function would not lead to any additional goal achievement. Thus, we suspect that in this constellation no politics would become apparent. DELTA was the only case where no politics was visible, as goals are aligned between the functions, and none of the involved parties possesses extraordinary power to be used throughout the GSDM process. The controlling manager at DELTA stated that the overarching project goal is “to have each team member [purchasing, logistics and R&D] contribute to total cost and technical analysis.” The trade-off between technical adequacy and price is assessed based on the formal directive to present decision alternatives as opposed to subordinate metrics. At ALPHA and BETA the misaligned goals lead to debates between participating functions about the relevance of performance dimensions and the allocation of weights to the respective indicators (e.g., cost vs. logistical capabilities or technical capabilities vs. labor cost). Yet, informants in both case companies admit that power is balanced between the parties. The quality manager stresses: “it is highly important for us to have a team decision (. . .). Therefore, the issue of power plays no role for us.” The vice president of corporate category management elaborates that “for the sourcing decision process there are four (decision) criteria: quality, logistics, price and technology (. . .). Of course, the weighting of indicators needs to be agreed crossfunctionally.” The quality manager adds that “we are able to openly discuss controversial preferences and find mutually agreed solutions.” At BETA, the head of production logistics admits that politics evolves only around conflicting goals. “There are no alliances formed among team members (. . .) and all functions are equally integrated.” The development engineer at BETA adds “we need to find a compromise, that all of us can live with.” At BETA, the enabler for reaching an agreement despite misaligned goals is equally distributed power among GSDM team members. Misaligned goals are mitigated by balanced power leading to a medium intensity of politics in the GSDM process. At GAMMA and EPSILON, the political behavior caused by goal misalignment was further intensified by the attempts of one powerful function (production engineering at GAMMA and purchasing at EPSILON) to manipulate the GSDM process to attain their individual functional priorities regardless of the other team members’ goal attainment (Table 3). For example, at EPSILON, the conflicting interests between purchasing and logistics revealed imbalanced power between functions, which in turn triggered high intensity politics. The logistics manager complained that the purchasing function diminished the weight of the logistics department by assuming equal inventory levels and working capital requirements across all decision alternatives regardless of the location of the supplier. The purchasing manager deliberately neglected this effect stating that “their [the Logistics department’s] view does not fit with the purchasing reality.” GAMMA also represents high intensity of politics triggered by the technical function. The responsible business unit

Alpha





between (P), (L), and (Q) in terms of price-quality-availability trade-off ○ “The goals are of course their (departments involved) functional viewpoints, but thanks to our cross-functional procedure we have neutral evaluations as the foundation of decision making. We try to keep emotions out of the picture we get from suppliers and let the data speak” Power imbalance: ○ Balanced power between departments ○ “Sometimes purchasing tries to put pressure on the other parties and to push in the direction of cheaper suppliers, especially if the supplier provides seemingly comparable KPIs in the other dimensions. However, this is not appreciated by top management”

○ Different functional interests

Goal misalignment:

Functional politics

Table 3: Cross-case measurement of central constructs





 Information search: global supplier search, preference for having a “broad approach toward supplier search and open-minded approach toward evaluation” Analysis: ○ Use of analysis: supplier qualification tool enables cross-functional contributions and evaluations in terms of quality, logistic cost and reliability, price and technological capabilities ○ Use of GS tool (for continuous improvement of sourcing conditions): KPI guideline about how much supply risk is involved and about suppliers fit with the current supplier portfolio ○ Contribution of (P): fulfillment of target costs; conducting supplier-factor evaluation ○ Contribution of (T): ensuring fulfillment of technical requirements and innovativeness of the supplier, rating based on mixed methods ○ Contribution of (L): ensuring security of supply, delivery capacity ○ Contribution of (Q): supplier site audits and noncost performance evaluation, supplier audits jointly conducted by the purchasing and the quality department (interview, processes, production) ○ High transparency of departmental inputs; all analyses are traceable by all parties as every input is well codified Solution development: solution developed commonly by the sourcing committee, every party has one vote, “It is important that the decision is made jointly.” In case of stalemate, purchasing makes decision

Procedural rationality



○

○

○

○

Continued.

incorporates soft facts, which are codified and complementary to the basic evaluation “Only when supplier evaluation is clearly documented, knowledge about the supply base is established and experience evolves” To a large degree, experience is codified in historic data; “experience reflects the knowledge built,” personal impression is not important Relying on personal experience in making a decision is possible when all hard criteria are fulfilled to the same extent by multiple suppliers “Our processes leave no room for intuition or gut feeling, experience can be used if it is codified and traceable”

○ The overall supplier-factor evaluation also

Reliance on justified intuition:

Intuition

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Beta





Functional politics

access to the best technology, knowing global supply base for relevant products and services with regard to price, logistic, quality, security of supply ○ Priorities for (D): best quality for best price Power imbalance: ○ Equal power distribution between all involved departments ○ Coordination and moderation of the process by (P) ○ (D) and (P) perceive each other as experts in their respective domains and therefore acknowledge the decision segmentation and the complementary to the decision-making process; very consensus driven

○ Priorities of (P): transparency in costs,

between (P) and (D)

○ Different functional interests

Goal misalignment:

Table 3: (Continued)





 Information search: (P) extensive search for suppliers globally (first wave 150 potential suppliers, reduced to 50 after initial filtering) Analysis: ○ Strict use of analysis by every participating function ○ Contribution of (P): analysis of the case based on total cost; technological and logistics performance (processes), product quality, price, security of supply ○ Contribution of (D): determining supplier capabilities based on the technical performance because “our evaluation needs to be as objective as possible” ○ High transparency of particular functional analyses, functions inform each other about subanalysis results and discuss all uncertainties Solution development: solution developed commonly, final decision achieved by voting, both departments have the same number of votes, in case of stalemate negotiations take place without intervention from the top

Procedural rationality



Continued.

measured,” for example, using gut feeling when deciding how in-depth a supplier should be screened; no pure reliance on intuition, gut feeling is supported with evidence ○ (D) “We do not rely on technical gut feeling even in complex situations. We always codify our decision making drivers”

○ (P) Usage of intuition “where things cannot be

Reliance on justified intuition:

Intuition

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Gamma





Functional politics

Goal misalignment: ○ Functional goals not aligned among departments ○ “Basically, in the end they want to have the best technical solution and they do not care about the costs. Of course, the project manager understands things differently and the purchasing function has a completely different understanding” ○ Priorities of (P): achieving best price ○ Priorities of (T): ensuring best technical solution Power imbalance: ○ Unequal power distribution, local business unit manager coordinates, (P) has a supporting role and (T) is the most powerful ○ (T) is especially powerful in this project due to high complexity of the components. “If an engineer was not happy with the supplier decision, and he is still involved in the project, it is easy for him to show that the decision was wrong. With their influence on the technical specifications of the component, it is easy for them to manipulate the decision”

Table 3: (Continued)





 Information search: supplier search focuses on established European supply base; no attempts of a more global approach Analysis: ○ Limited reliance on analytical methods ○ (P+T): conduct analysis based on common sense, “everyone knows what to do” ○ Locally developed Excel file used: “we do not have standardized analysis tools” to present analyzed and collected information ○ Contribution of (T): defines the scope, provides technical specifications and discusses the technical details with suppliers ○ Contribution of (P): evaluates suppliers according to cost, risk, delivery time, and warranty conditions ○ Low transparency of certain department analyses and information input, (P) is aware that (T) can provide recommendations that are questionable and with untraceable reasoning due to the high complexity of the product Solution development: consensus is strived for, sometimes even at the expense of technical quality or price; the project manager re-evaluates the result until all parties agree

Procedural rationality



Continued.

Reliance on creative intuition: ○ “Hard facts make up 2/3 of a decision, intuition 1/3” ○ Analyses are driven by “common sense” ○ Supplier selection is based on individuals expertise and experience with suppliers; to some extent, supplier capability judgments are based on personal feeling and personal experience ○ “Personal experience and personal feelings are part of this process, but it is hard to put it into metrics. It is hard to rate personal feeling toward a supplier” ○ “If we do not have trust in a supplier’s quality and its promises, we do not sign”

Intuition

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Delta





Functional politics

Goal misalignment: ○ Functional goals are well aligned, “departments are motivated by KPIs to work in the same direction”; “Strictly purchasing decides where we source based on input from logistics” ○ Priorities of (P): ensuring that target costs are achieved ○ Priorities of (L): working capital KPIs, Kanban time goals, introducing suppliers to the system and setting performance targets for them Power imbalance: ○ Balanced power among departments ○ (P) is in the lead and has the coordinating role, but does not abuse its power; “we only move forward in the process if everyone is content”

Table 3: (Continued)





 Information search: global supplier search: 70% of RFQs go through the entire network of global purchasing units (global quotation collection) Analysis: ○ Use of analysis: (P+L) leveraging the SAP database and access decision support systems, where supplier evaluations are provided and rated according to quality, price, flexibility, delivery performance ○ Use of purchasing analytical tools such as benchmarking, life cycle cost analysis; TCO is main criterion on which GS decision is grounded ○ High transparency of the departmental analyses, information interdependency is very high and collaborating departments are aware which analyses and KPIs their partners use Solution development: solution developed commonly by all participating departments, which in sequential order provide their input

Procedural rationality



Continued.

Reliance on justified intuition: ○ Judgment cannot be accommodated in the supplier rating system ○ Only facts are communicated in a structured way, sometimes soft facts, such as a personal impression about a supplier’s trustworthiness and reliability ○ “In terms of soft facts, the buyer has to describe very clearly what his impression is, but it should not be a gut feeling. Still, it affects the decision by approximately 10%.” This is particularly the case if multiple suppliers show comparable performance, based on the analysis of hard facts

Intuition

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participating in GDSM ○ Priorities of (P): highest rationalization potential in achieving savings by increasing GS volume: lowering costs, “it’s all about money” ○ Priorities of (L): achieving advantages through shorter delivery times and low inventory levels ○ Priorities of (Q): assuring supplier flexibility, dependability, and product quality Power imbalance: ○ Unequally distributed power ○ (P) is a dominating function and holds the coordinating role (responsible for compiling data); “Logistics was confronted with savings and this is how the discussion with them finished. They have their preferences but they do not fit our purchasing reality” “Purchasing is in the lead here because we have the responsibility that everything functions well, that’s why we make the decision”

○ Conflicting goals of departments

Goal misalignment:

Functional politics





 Information search: limited in terms of geography supplier search Analysis: ○ Analytics are practiced by every decision team member ○ Contribution of (P): supplier evaluation with Excel-based tool for collection and analysis of quotations; auditing program—questionnaires for supplier prequalifications and evaluating; noncodified and nonstandardized soft facts play a large role in the evaluation ○ Contribution of (Q): classification of suppliers according to a weighted score of quality, flexibility and meeting of technical requirements ○ Contribution of (L): analysis of costs and savings with incurred holding costs in a volume trade-off calculation assesses inventory space and possible factory adjustments resulting from sourcing decisions. Analysis of parts characteristics and their inflow and consumption pattern ○ (Mutual) transparency of the information and analysis conducted by the departments is rather low, although (P) collects and channels all information, it is apparently not clear and not transparent for them how and why (L) comes to its recommendations (which conflict with (P) departmental goals); contribution of (Q) is uncomplicated, it ensures quality delivered by the supplier, is one-dimensional and therefore is easily comprehensible; analysis of (P) is also not clear for (L) as (L) is aware only of one aspect of purchasing analysis—the price Solution development: purchasing prepares the solution, inputs from other departments are selectively used

Procedural rationality



directions, follows trends when selecting sourcing country: “I cannot say why China, we followed the trend,” makes quick decisions without a good overview of the situation, relies on own personal and other companies’ past experiences ○ In the end the suppliers were chosen based on gut feeling “using nose and heart” ○ (Q) gut feeling about the trust in supplier, when considering switching to LCC supplier “it is wiser to stay with current (local, proven) one because we already know him” ○ (L) no intuition or gut feeling, instead, always pure analysis

○ (P) using shortcuts: excludes potential sourcing

Reliance on creative intuition:

Intuition

Note: P = purchasing department; L = logistics department; Q = quality department; D = development department; T = technical department; KPI, key performance indicators; LCC, low cost country; RFQ, request for quote; TCO, total cost of ownership.

Epsilon

Table 3: (Continued) Global Sourcing Decision Making 171

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Table 4: Summary of abstract codes per construct and case

Alpha Beta Gamma Delta Epsilon

Procedural rationality

Functional politics

Goal misalignment

Power imbalance

Justified intuition

Creative intuition

High High Low High Low

Medium Medium High Low High

High High High Low High

Low Low High Low High

High High Low High Low

Low Low High Low High

Figure 2: Origin and effects of functional politics. Start Goal misalignment = low

Goal misalignment = high Politics Power imbalance = low

Power imbalance = high

No politics

Negotiating politics

Assertive politics

No influence on procedural rationality

Positive influence on procedural rationality

Negative influence on procedural rationality

Delta

Alpha

Gamma

Beta

Epsilon

− Competition between functions fosters discussion and improves quality of inputs − Parties pursue their goals, but no function abuses its power

− Combination of negative effects: Powerful function pursues its own goals and pushes others to the side

− Due to relative alignment of goals, there is no reason to abuse power and therefore no politics appears

(BU) manager stated, “they [the production and R&D engineers] want to have the best technical solution, but they do not consider the costs.” If an engineer is not happy with the supplier choice of purchasing, it is easy for them to “manipulate” or change the technical requirements to rule out unwanted suppliers. In both cases, high intensity politics occurred, which was initially caused by misaligned goals and escalated by one function that dominated the others throughout the decision process. Summing up the above observations, we noticed that differing interests between functions accompanied by parties’ abuse of power escalate conflict and lead to high intensity politics [EPSILON, GAMMA], whereas highly divergent interests combined with balanced power distribution result in discussion and negotiation leading to medium intensity of politics [ALPHA, BETA]. Where goals are aligned and power is balanced between functions [DELTA], no politics emerges. Therefore, we posit:

Proposition 1b: The higher the goal misalignment and power imbalance between functions, the higher the intensity of functional politics prevalent in GSDM processes. Across each of the cases that feature politics at varying intensity [ALPHA, BETA, GAMMA, EPSILON], we found that politics affects procedural rationality of GSDM, yet the directionality of the influences varied across cases. Our data indicate that this directionality is not determined by the intensity of politics, but rather by its type. Power imbalance is decisive for determining the type of politics (Figure 2). Subsequently, we elaborate on when politics adopts which type and how it affects procedural rationality. Previous research is equivocal in its view on whether politics and procedural rationality should be considered as competing or complementary variables in attaining procedural rationality (Janis

Global Sourcing Decision Making

1989; Dean and Sharfman 1993). According to our cases (GAMMA and EPSILON), negative effects of politics on procedural rationality can be observed when goals are misaligned and power is imbalanced, which leads to power abuse by decisionmaking participants. We refer to this type of politics as assertive politics. In the cases of ALPHA and BETA, low power imbalance was visible. This constellation prevented one function from dominating the GSDM process, instead leading to negotiations between the involved representatives about the most desirable choices. Thus, this type is labeled as negotiating politics. Subsequently, we answer why assertive politics and negotiating politics have an opposing influence on the procedural rationality of GSDM. At ALPHA and BETA, politics is driven by high goal misalignment between functions (especially between purchasing and quality at ALPHA and between purchasing and development at BETA) yet low power imbalance. Different functional interests foster competition between functions, which in turn enhances the quality of inputs (see Table 3). The development manager at BETA comments: “The goal is to find technically adequate products that meet the targets of both ‘camps.’ Of course, the interests are sometimes distinct among colleagues, but we need to come together in the final decision because essentially we pursue a common goal.” To reach the common goal, negotiations between the commercial and technical functions take place. ALPHA’s quality manager illustrates a potentially conflicting situation from the decision process concerning differing interests, emphasizing how procedural rationality is fostered by a type of politics that is more “negotiation” than “power fight.” “If (. . .) a supplier has a higher price but (. . .) has more innovative ideas, or cooperates well with R&D, then the R&D function wants to protect this supplier. Purchasing then (. . .) wants to achieve their goals, from the cost perspective. That is where the discussion starts, but nothing such as a power fight, or ‘showing muscles’ occurs (. . .). The criteria sets are so well-balanced that in the best case the knockout criteria are decisive.” Evenly distributed functional power allows the decision criteria to be critical in the decision process. Thus, conflicts from goal misalignment can be resolved immediately, based on facts, or do not emerge in the first place. At BETA, the development manager indicated that “[global] sourcing for direct materials is defined to the smallest detail so that all analyses are traceable and reproducible.” Their procurement manager stresses, “[he] has clearly defined partial steps to conduct data analysis to ensure comparability across sourcing alternatives, which also fosters acceptance of the analysis among counterparts.” Furthermore, at BETA, the development manager representing the technical function elaborates: “The technology is defined by us, purchasing is specialized in scanning the market landscape. Therefore, we depend on each other.” Our findings indicate that negotiating politics leads to increased scrutiny in data collection, discussion over obtained facts as well as a deep focus on the analysis of available data. Pursuing different goals at the functional level can be resolved through fruitful debate and negotiation between the GSDM team members and through attaining high transparency in conducting analysis, as no one is in a position to manipulate or withhold information. Thus, a constellation of high goal misalignment and low power imbalance, constituting negotiating politics, has a positive impact on procedural rationality in GSDM. This finding is consistent with the literature asserting that politics foster discussion which decreases uncertainty and

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enhances acceptance, and assures that all necessary aspects of the decision are evaluated (Nutt 2004; Elbanna 2006). At GAMMA and EPSILON, assertive politics driven by a combination of high goal misalignment and high power imbalance was observed, which in turn negatively affected procedural rationality. In both cases, one dominating function was able to use its power throughout the GSDM process, which resulted in manipulation and data distortion. The dominating functions (purchasing at EPSILON and production engineering at GAMMA) sought to impose their preferred solution on the rest of the team. At EPSILON, the “mighty” purchasing function asserted itself already in the data collection phase trying to limit the number of sourcing options, and finally manipulated the solution development phase by excluding the analysis of transport cost and risks provided by the logistics function. At GAMMA, the powerful technicians also became actively involved in the data collection phase, trying to favor established suppliers in the later analysis phase by imposing a specific technical requirement on the procurement department early in their supplier search. Such occurrences influence the comprehensiveness of the decision process to a strong extent. At GAMMA, the purchasing manager reports, “this was a problem because they [the production engineers] have their favorites [suppliers]. They tend to prefer suppliers they know already, which prevents the firm from benefiting from supply market dynamics so that we forego lower prices.” Therefore, at GAMMA, “engineers are really ‘mighty’” and “can manipulate technical specifications to achieve their desired solution, which in turn can be dangerous for the company’s competitiveness” as indicated by the purchasing manager. Moreover, the regional BU manager at GAMMA noted that all functions are capable of collecting and providing relevant information in their analyses; however, the dominating function imposes its approach based on their interests. Consequently, the overall analysis is distorted. To achieve a final solution, the regional BU manager tries to balance between influences of the more powerful technical function, the suggestions of the procurement function and local commercial goals. At EPSILON, the logistics function preferred the landed cost perspective to the unit cost and savings view of purchasing. However, this analysis was not conducted prior to a decision to source from China. The procurement team leader stated, “logistics was confronted with savings and this is how the discussion with them finished. They have their preferences but they do not fit our purchasing reality.” Hence, the solution preferred by the most powerful function (procurement in the case of EPSILON) had a dominating influence on the analytical procedures throughout GSDM. The negative influence of assertive politics on procedural rationality also resonates with early contributions stating that politics creates animosity and information distortion, which causes its negative effect on performance (Bourgeois and Eisenhardt, 1988). Based on the presented findings, we conclude that the directionality of the impact on procedural rationality is not determined by the intensity of politics, but rather by its type. In GSDM where negotiating politics resulted from high goal misalignment but low power imbalance, procedural rationality was enhanced; in GSDM where assertive politics resulted from high goal misalignment and high power imbalance, procedural rationality deteriorated. In addition to the more convincing theoretical rationale laid out before for individual cases, the influences of power imbalance on the type of politics and on procedural rationality

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are also better supported by the cross-case data (Table 4). The better fit is particularly visible for cases Alpha and Beta. Hence, we propose: Proposition 1c: The intensity of politics does not determine the directionality of influence on procedural rationality. Proposition 1d: Given high goal misalignment, high (low) power imbalance gives politics an assertive (negotiating) type. Assertive (negotiating) politics influences procedural rationality negatively (positively).

Intuition and procedural rationality As noted in our literature review, similar to the impact of politics on procedural rationality, the empirical findings on the link between intuition and procedural rationality do not allow for unambiguous conclusions (cf. Khatri and Ng 2000; Elbanna 2006; Kahneman and Klein, 2009; Akinci and Sadler-Smith 2012). In our findings, we differentiate between “creative intuition” and “justified intuition” (Simon 1987) as the cases indicate that intuition plays an equivocal role and can influence procedural rationality in GSDM either negatively or positively. We use the label creative intuition to denote a usage of intuition that is based strongly on the more intrapersonal and difficult to communicate gut-feeling component of intuition. Contrarily, justified intuition identifies a usage of intuition that is based more strongly on prior experience, which can be more easily documented, shared and discussed with others and, thus be formalized to a certain extent. ALPHA, DELTA, and BETA relied on justified intuition characterized by their reliance on experience and personal judgment in the studied GSDM situations. In those cases, the grounding of judgments is made transparent so that it is traceable by all team members. At ALPHA and DELTA, subjective judgments about suppliers had to be codified so that the rationales for the judgment are documented and transparent to the team. Formalized intuitive contributions support the building up of historic knowledge of supplier performance in supplier evaluation tools. This experience is therefore not proprietary to individuals but shared among decision-making teams (see Table 3). The example of ALPHA highlights the fact that formally codified experience played an important role in their GSDM processes for the last years and hence became a justified type of intuition. For example, the quality manager stated, “When drawing from experience, we rely on historic facts.” The head of strategic purchasing confirmed: “Gut feeling is not a decision criterion, but experience is.” The professional experience of team members is certainly important so that ALPHA tries to code it in hard data concerning quality, dependability, and other performance criteria. Hence, the supplier history and experience are made available to the sourcing committee, but the experience of the individual decision maker is also shared because of the documentation. Thus, the standardized and justified track record of historic supplier performance allows the firm to objectify experience and intuition. The vice president of sourcing at ALPHA stated, “If two suppliers are comparable in their offerings and capabilities, then the coded experience helps selecting the better option.” In a similar vein, the purchasing director at DELTA highlighted: “We have our formal supplier rating system, and

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then the softer facts are added to this database.” He also acknowledged that “there is always a little bit of intuition, but it must be formally reasoned and presented,” meaning that they use historic supplier data and site impressions from recent audits in addition to gut feeling. Extant research has identified a firm’s ability to rely on past experiences as beneficial especially given time constraints and the complexity of the decision task (Khatri and Ng 2000; Elbanna 2006; Akinci and Sadler-Smith 2012). Thus, we conclude that the observed type of justified intuition has a positive effect on procedural rationality as it completes the picture for decision makers and helps them make a final choice. At the companies GAMMA and EPSILON, we observed that GSDM process participants tend to make decisions largely based on gut feeling and personal experience. In those two cases, creative intuition shaped the GSDM process. For example, at EPSILON the purchasing function preferred sourcing from China without investigating other options, as they wanted to follow the trend based on their gut feeling. Moreover, EPSILON’s head of procurement immediately wanted to limit the analytical inputs from other functions because of his sense that analysis of the procurement function provides the strongest case for China sourcing. The purchasing manager at EPSILON stressed that they rely strongly on creative intuition when conducting the commercial analysis: “We have different scenarios, where everything counts: data, gut feeling, nose, and heart.” At GAMMA, supplier trustworthiness is evaluated based on personal judgment of decision group members instead of a historic supplier performance record to this point. For both GS tasks in which the analysis was grounded in creative intuition, lower levels of procedural rationality were present. At GAMMA, due to the creative intuition of a decision team member, it was decided to refrain from further analyzing potentially suitable GS alternatives. As a result, no data on any of these alternatives was collected. At EPSILON, creative intuition entailed limiting analytical inputs from other parties or limiting the disclosure of own analytical scrutiny or lack of scrutiny. Literature in the field suggests that relying on specific factors due to their availability in managers’ mental schema, rather than their substantiation for the decision situation at hand has a negative effect on analytical transparency and the resulting outcome (Sulsky and Day 1992; Harris 1994). Hence, we propose: Proposition 2: Justified intuition (creative intuition) has a positive (negative) impact on the procedural rationality of GSDM processes.

DISCUSSION Considering our research design, we studied the GSDM processes with the primary focus on procedural rationality as a dependent variable. Throughout the research, it turned out that procedural rationality could not be captured without investigating politics and intuition. Our findings suggest that both notions occur simultaneously with varying intensities and different types; in Figure 3 we show that assertive politics pairs with creative intuition (GAMMA, EPSILPON) and negotiating politics with justified intuition (ALPHA, BETA). At DELTA no politics and justified intuition was observed in decision processes. Subsequently, we discuss the respective combinations of intuition and politics types jointly, together with their influences on procedural rationality in GSDM as depicted and summarized in Figure 4.

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Figure 3: Joint view on politics and intuition.

Figure 4: Concluding model.

Note: aAlternatively to a correlation between the concepts, the data would also support a causal influence of power imbalance on the form of intuition, as portrayed in the discussion section. Negotiating politics and justified intuition In the case of ALPHA and BETA, the respective functional goals are misaligned, although power is evenly distributed, ensuring that all involved departments provide their analytical

inputs, while justified intuition complements rational analysis. For example, when two suppliers receive similar scores in the analytical supplier rating, justified personal impressions help in making a final choice. The head of strategic procurement at ALPHA describes it as follows: “Yes, of course we have con-

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flicting goals with our counterparts in terms of costs, quality, and availability.” The same informant states, “solving conflicts means to bring about objectivity, data, and facts.” Similarly, the vice president for corporate category management mentions, “under certain conditions it is possible to reach out to historic experiences as additional decision support.” The quality manager confirms the role of experience: “Experience plays a significant role, whereas gut feeling does not. Thus, as a first thing we rely on facts and facts are supported by proven historic facts and experiences.” At BETA, similarly, conflicting goals and a balanced power distribution shape the GSDM process, if required, to reach a final decision. Moreover, for both cases (ALPHA and BETA) the power balance is secured by the equal vote distribution. In stalemate situations, discussions and negotiations bring the GSDM team to a mutually agreed solution and final decision. Hence, in such a case experience and gut feeling also need to be justified to stand the test of discussion and negotiations with functional counterparts who have opposing opinions or alternative preferred options. Moreover, deploying justified intuitive analysis requires transparency to enable an open and informed debate. Hence, the need to at least formally comment and reflect on intuition leads to a “quasi”-fact based discussion between conflicting actors. Therefore, our findings suggest that under the condition of negotiating politics, the need to justify intuition as a result of low power imbalance inside the GSDM team enhances procedural rationality. We regard this insight as a hint that low power imbalance may lead to justified intuition. The co-existence of justified intuition and negotiating politics appears to be mutually supportive of procedural rationality in GSDM. This finding enables top management to guide the decision-making team based on formalized rules as to how a final recommendation has to be developed and presented to the superordinate committee. As illustrated by ALPHA and BETA, such formal guidance seems to lead to functionally balanced and factbased analytics throughout GSDM procedures.

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the technician it is very easy to say that he cannot accomplish his task because the stuff [the component] you bought for me is rubbish. So please explain this to my department head. – No purchasing guy would do that.” Consequently, the solution development is heavily influenced by the respective powerful managers responsible for the sourcing project (Chief Procurement Officer at EPSILON and BU Head at GAMMA). Moreover, they involve their counterparts only when necessary and have considerable freedom with regard to collecting decision input parameters. Due to the latitude in contributing analytical inputs from different functions, the procedural dominance of the one powerful function in combining these inputs is enabled. Therefore, one could argue that the powerful functions can get away with applying creative intuition precisely because of their power position. Hence, the data suggest that the use of power manifests in their reliance on creative intuition and information distortion as a political tactic to make the case for their preferred GS alternative. Given the corresponding influence in the previous configuration of negotiating politics and justified intuition, the findings presented here may actually result from a causal influence of power imbalance on the type of intuition. In the cases where assertive politics and creative intuition are visible jointly, both influences simultaneously jeopardize procedural rationality in GSDM (Figure 3). For the sake of precaution, we refrain from positing such an influence formally, yet recommend it as a topic for future research. This finding first cautions top management teams to strive to balance power between functions, as power imbalance is the root cause of these negative influences. In the short term, when power distribution cannot be changed, calls for formalizing GSDM procedures can be expected to mitigate the negative influences of asymmetric power distributions. Thus, our findings on GAMMA and EPSILON provide evidence that assertive politics correlates with the reliance on creative intuition imposed by the powerful function of the decision process. Both states were observed to negatively affect procedural rationality in GSDM (Figure 4).

Assertive politics and creative intuition CONCLUSIONS The assertive type of politics at GAMMA and EPSILON has a strong impact on the decision-making procedures. In both cases, the process is dominated, even manipulated, by the most powerful function; consequently, analytical scrutiny is low (see Figure 3). This in turn is assumed to result in lower levels of procedural rationality (Propositions 1d and 2) (see Figure 4). For example, at EPSILON, the department in charge of coordinating the analytical process (purchasing) relied on creative intuition to a large extent because of their pre-inclination to source from China. This is illustrated by the fact that the total cost analysis that was preferred by the logistics function was not conducted, which might have resulted in the choice of an alternative sourcing option. At GAMMA, it is claimed that the “process is based on common sense [. . .], and everyone basically knows what to do,” which indicates reliance on creative intuition. The regional BU manager responsible for the final solution confirms that the analysis relies “2/3 on facts and 1/3 on intuition.” Additionally, as previously discussed, the engineering function does not show openness toward new sourcing options. The purchasing manager observed, “if engineers are unhappy with a potential switch of suppliers, it is easy for them to manipulate based on technical alterations.” The regional BU manager affirms this point: “For

Contributions to research In this paper, we present findings from five organizations that performed GS projects. In particular, we examine how, why, and when the procedural rationality in their decision making is affected by functional politics and intuition. The contribution of the paper is threefold. First, as the study of cross-functional GSDM was thus far limited to recent notable exceptions (Moses and
Ahlstr€ om 2008; Kaufmann et al. 2014), we elaborate on GSDM at the process level, expounding upon the presence and divergent types of functional politics and intuition in GSDM processes. By doing so, we follow a call for more information on how cross-functional GSDM processes can be conducted effectively (Kotabe and Murray 2004; Moses and
Ahlstr€ om 2008). Moreover, we went into more detail and decomposed core facets of functional politics and intuition, thereby offering differentiated findings of their impact on procedural rationality (Figure 3; Table 4). We fill the depicted research gap in an inductive reasoning approach and derive a series of testable propositions (see Figure 3). Thus, we responded to the plea for theory building research on this subject.

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Second, we contribute to existing GS literature by providing theoretical explanations for our empirical findings, drawing on the strategic decision-making literature. Our findings suggest that despite the prevalence of functional politics and intuition in GSDM teams, firms can still organize for effective and rational GSDM by controlling the level of functional politics and making intuition justified and transparent. Moreover, we provide a firminternal perspective on why GS may have failed in the past, which is a valuable knowledge extension of the primarily supplier and sourcing location-focused view on GS failure. Hence, the currently discussed trend of reshoring and in-sourcing U.S. and European manufacturing (Ellram et al. 2013) may, at least partly, have internal causes associated with historically flawed internal GSDM processes. Third, we believe that our study has some merit for research on cross-functional decision making in general. Our results indicate that the ongoing controversial debate on the effects of politics on procedural rationality may be enriched, possibly even resolved, when due attention is paid not only to the intensity of politics that results from goal misalignment and power imbalance but also to its context and type. Our findings indicate that without a dominant player, political behavior may be channeled into cross-functional negotiation processes for the best solution (negotiating politics), leveraged by a justified type of intuition, which results in enhanced procedural rationality. In contrast, when a single party dominates the decision-making process, political behavior seems to become an instrument for enforcing the will of this party (assertive politics), accompanied by creative intuition practices, thereby decreasing procedural rationality. Contributions to GS practice Based on our empirical case study findings we can advise managers responsible for the organization of GS to be more aware of the types of functional politics and intuition to attain the deserved quality of the GSDM process. Our findings provide initial indication that goal misalignment in itself is not a problem as long as there is no powerful player dominating a sourcing team (assertive politics). Therefore, controlling the power balance between functions allows firms to create beneficial effects on the decision process even when goals among the participating functions are misaligned (negotiating politics). Moreover, misaligned goals appear to be a necessary condition for functional politics to occur and affect procedural rationality. Additionally, we found support for the notion that participants in GS rely on intuition in their analysis of sourcing alternatives. We observed the prevalence of creative intuition and justified intuition. Our findings suggest that discussion increases the need for decision team members to provide objective reasons for their experience-based judgment of supplier capabilities. Hence, the need to objectify past experience based on hard (i.e., explicated and formalized) data prevents creative (i.e., somewhat speculative and difficult to communicate) intuition, which in turn positively affects procedural rationality in GSDM teams. Thus, embedding historic data such as formal supplier evaluations into the analytical procedures of GS prevents creative judgment from dominating the decision-making procedures. Over time, the pool of analyzed and documented sourcing alternatives will grow, which increases the amount of documented experience available to future GS tasks. Without such need for formalized reasoning, creative intuition poses a threat to the

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information-gathering phase, the scrutiny of analytical techniques, the solution development phase and ultimately final choice. A high reliance on creative intuition is especially dangerous for procedural rationality in GSDM. In particular, extant powerful functions can leverage their position through assertive political behavior, ruling out otherwise viable GS alternatives through creative intuition; this in turn leads to low analytical scrutiny. Limitations and future research In light of our research questions and research design, we found case study research well-suited to investigate how firms configure GSDM processes, as well as when and why politics and intuition affect procedural rationality in GSDM (Dubois and Araujo 2007). As with any inductive case-based research, despite a methodologically rigorous approach, our findings need to be externally validated because they could be specific to the mechanical engineering firms in the empirical context that we investigated (cf. Figure 4). Therefore, we encourage future research to deductively test our derived propositions, for example in a survey research design or in another qualitative research design across a larger number of sourcing projects from different supply chain and industry settings. In doing so, future research may contribute to our understanding of how companies could effectively control for the level of politics in cross-functional sourcing teams. For example, there may be important differences depending on the technical complexity of the sourcing category (task), its relative importance, and associated supply market complexity that require further attention (Kraljic 1983). To develop our research path further, we also encourage experimental research where multiple members of a sourcing team have to make a sourcing decision under different levels of information asymmetry. Although these limitations need to be addressed in future research, they do not seem to question our findings substantially concerning how companies can attain procedural rationality in cross-functional GSDM teams. APPENDIX SEMISTRUCTURED INTERVIEW GUIDELINE Authors’ note: We depict typical prompts that we applied whenever it was necessary. However, we sought to begin with open questions and let respondents speak freely. Questions were sometimes only addressed if relevant in the specific context.

INTRODUCTION We would like to speak about how global sourcing works at your firm. Please think about the sourcing of an important complex product in a direct spend category. During the interview, please always refer to this particular product. General 1 What is your understanding of global sourcing? How is it defined and implemented/lived in your organization?

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Decision situation Please explain the background of this particular global sourcing decision. 2 What were your motives for global sourcing? For example cost reduction, expansion, improved quality, availability, etc.? 3 Had you already used the product before the global sourcing decision was made? Who produced it then and where? What was the level of purchasing novelty of the particular product? 4 How important was that decision for your company? Can you back up this level of importance with quantitative data? 5 How often do you make such decisions? Decision-making process Please describe in detail how the decision process evolved and what happened. 6 Can you outline the decision-making process in general? Which steps were involved? 7 Do you have any preplanned procedure that guides you through the process of deciding? Are there any formal documents accompanying that process? Was an action plan agreed upon? 8 What are the decision committees for global sourcing decision making in your firm? Who are members of these committees? Who makes the final decision? 9 Was there a need (or requirement) to coordinate among different functions? Which functions/departments were involved? Which corporate functions were involved and which hierarchical levels did they belong to? 10 Which goals do the involved departments have? Can you elaborate on the goal coherence of individual departments/ functions? Which are shared and which are individual goals? 11 How powerful are the functions/departments participating in the decision? 12 What roles did the participants play? How is the interaction among the departments and functions organized? 13 How did the interaction between them occur? How did they communicate? 14 Do you distribute certain tasks among departments and functions, for example, commercial and financial evaluation is done by purchasing and the technical evaluation is done by R&D and production? 15 Could you say if there were any partial decisions taken to achieve the final one (e.g., departmental decisions)? Who has the power to decide upon what? What did these parties decide upon? 16 How long before the final decision did the team members meet for the first time to talk about the specific global sourcing case? How often did you meet? What is the level of proximity? 17 To what extent was either the decision process as a whole or partial decisions influenced by judgments, gut feelings, or personal experiences? 18 What information did you use in making such decisions and where did it come from? Are there any specific tools that you use for the analysis? Are there joint tools between the functions or are they stand-alone and autonomous?

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19 On which criteria did you base your decision? What was the most important factor for you to be able to make a decision on sourcing that product? What are the decisionmaking criteria for global sourcing decisions in your company? Which performance criteria are the most important and why? 20 How did you evaluate the relevant performance criteria throughout the global sourcing process? How were the other departments/functions involved in the evaluation of the criteria? 21 Could you describe in detail how the decision process with its partial decisions took place? Please elaborate on the order of actions and who did what. 22 Were there any coalitions formed in the discussions? Who formed groups and why? Were negotiations conducted among the participants? Was there external resistance regarding the global sourcing decision? 23 How would you assess the level of agreement or disagreement of the outcome of the global sourcing decision? Decision outcome 24 What was the outcome of the decision making? Please elaborate. 25 Do you assess the outcome of this decision as beneficial? What are the key performance indicators you use for evaluation? Can you name any clear benefits?

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SHORT BIOGRAPHIES Alina Stanczyk (MA Warsaw School of Economics) is a Doctoral Candidate at EBS Business School in Wiesbaden, Germany. Prior to her doctoral studies she worked as an Analyst at McKinsey & Company in Warsaw. Her research interests include global sourcing and decision making. Her most recent research focuses on costs, challenges, and risks associated with global sourcing. Kai Foerstl (Dr. rer. pol., EBS Business School) is Professor of Supply Chain Management at the German Graduate School of Management and Law (GGS), Heilbronn. His research and teaching activities relate to global sourcing, reshoring/insourcing, and sustainable supply chain management. His research has been published in Journal of Business Logistics, Journals of Supply Chain Management, International Journal of Operations and Production Management, International Journal of Production Research, and other outlets. Christian Busse (Dr. rer. pol. WHU—Otto Beisheim School of Management) is a Senior Researcher and Lecturer at the Swiss Federal Institute of Technology Zurich. His research interests relate to sustainability in global supply chains, the research-practice gap, as well as research methodology. His research has been published in International Journal of Physical Distribution and Logistics Management, Journal of Business Logistics, Journal of Supply Chain Management, Organizational Research Methods, and other journals. Constantin Blome (Dr. rer. pol. TU Berlin) is Full Professor of Operations Management at University of Sussex, UK and GlaxoSmithKline Chaired Professor in Strategic Sourcing and Procurement at Universite catholique de Louvain, Belgium. His research interests include sustainable supply chains, innovation in supply networks, as well as supply chain risk management.