Effective purchasing reallocation to suppliers: insights from productivity dynamics and real options theory

Continuous supplier selection, evaluation and reselection are among buying firms' key processes to improve their overall performance. This paper aims at increasing knowledge on effective dynamic management by answering the following research question: Do performance decomposition technique real option theory represent appropriate mechanisms understand structural change in supply chain subsequent improvements? By taking insights from productivity dynamics economics literature options strategic investment context, we apply a method measure firm's through reallocation of purchases exiting, surviving, entering suppliers based past The is tested illustrated with case Finnish contractor its 535 269 construction projects during 2013–2016. study provides new into business relationships large buyer an uncertain environment where improved continuous changes network. novelty this lies adopting concepts microeconomics context selection quantify development all suppliers, break it down components as well survivors. Furthermore, helps interpreting entering, exiting groups exercised, maintained, abandoned, respectively.