Linking Industrial Innovation Dynamics to E-Procurement Governance

This paper investigates the effect of IT on a firm’s procurement governance. While some scholars posit that IT-enabled reduction in transaction costs will lead to more electronic markets, others claim that electronic partnerships will be the predominant governance for procurement. Empirical evidence about the IT effect on procurement governance is mixed. We argue that the phase of the industrial innovation dynamics, at which suppliers are in, will affect the type of predominant governance. More specifically, when suppliers are in the phase of product/process innovation, e-markets will be the predominant governance. However, e-partnerships will become a better choice when suppliers are in the maturity phase. Additionally, we argue that e-procurement governance will keep change as industrial innovation evolves from one phase to another. Our main contribution is to put e-procurement governance into the context of industrial innovation dynamics. The research and practical implications of our framework are discussed.