A theory of purchasing's contribution to business performance

Although the strategic importance of purchasing has been acknowledged in recent years, few studies analyze its contribution to business performance. The alignment of the purchasing function with business strategy is essential, but previous work links better performance with the implementation of specific purchasing practices. This article develops a different approach focused on purchasing capabilities rather than purchasing practices and proposes that purchasing's contribution to business performance depends on the degree to which purchasing capabilities fit with and support the business strategy. By adapting the Theory of Production Competence to the purchasing context, this article distinguishes two levels of fit: between purchasing strategic objectives and purchasing capabilities, defined as purchasing efficacy, and between business strategy and purchasing strategic objectives, which is viewed as an immediate consequence of the strategic integration of purchasing. The interaction between both levels of fit influences business commercial and financial performance, and an empirical analysis of 141 industrial companies supports this proposition. (c) 2007 Elsevier B.V. All rights reserved.